commercial law

Setting up a Business

Are you thinking of setting up a business? It is an exciting challenge.

It is also a challenge you should take great care with. Get professional help with both legal and financial aspects at an early stage.

Prevention is always better than the cure.

How a good solicitor can help

A good solicitor can offer advice on all the legal issues you may face when setting up a new business.

They can help identify possible problems and help you take the necessary steps to avoid them. Risk will be reduced and you could save a lot of money in the long run.

Hitting a major issue in the future will probably cost much more to rectify than taking a preventative route to begin with.

What you need to know

Typically new business owners will seek advice on:

Company structure and registration

When you start a new business you must decide the company structure.

Consider whether it is the right structure for your business both today and in the future, when you may want to expand. It is possible to change the structure during the life of the business, but sometimes you can pre-empt such a change.

You should decide if you are going to trade under your own name as a sole trader, through a company or as a partnership.

If you are going into business with other people you will need to protect your share of any investment and ensure you get a fair return for your efforts. You may need a shareholders’ agreement or partnership agreement.

A properly written shareholders’ or partnership agreement will clearly set up the parties’ rights and obligations. It will clarify how any disputes are dealt with and state what happens if one of you wishes to retire, dies or needs to be removed from the company or the partnership.

You will need to register your business and some types of business require a licence.

Your solicitor can advise you on the advantages and disadvantages from the legal prospective of trading as a sole trader, partnership, limited company or limited liability partnership.

Sole traders

As a sole trader you would need to register as ‘self-employed’.

Only you own the business and you can work alone or employ other people. You are solely responsible for the business, its liabilities (which are unlimited) but you also keep the profits of the business.

Limited companies

If your business is a private limited company, you will need to:

• have a name and address for the company
• register with Companies House
• have at least 1 director
• have at least 1 shareholder
• have articles of association (agreed rules about running the company).

The liability of the shareholders is limited, but the records of the company (e.g. the accounts), are available to the public.

Your accountant will explain what you need to do financially, including setting up your company for Corporation Tax.


In a partnership, you run the business as an individual but all the partners share responsibility for the business and take a share of the profits.

A partnership is not a legal entity and the partners are personally liable. The records of a partnership, unlike the records of a limited company, are not available to the public.


By entering into a franchise agreement you could be buying a ready-made, already successful business, but there are many common pitfalls that need to be avoided.

Your solicitor will help to ensure you understand the provisions of the franchise agreement.

Business premises

When choosing business premises, if you are considering taking on leasehold premises, you will need to ensure you understand the terms of the lease.

Things to consider include:

• Can your landlord increase the rent – if so, by how much and how often?
• What service charges apply and can these also be increased?
• Does the building have the correct planning permission or will you need to apply for a change of use?
• If you are running the business from home are there restrictions that need to be taken into account?

Financial issues

There are implications linked to various sources of finance. You should speak to an independent financial expert who will explain these.

For example, there are significant implications if you mortgage your family home to finance your new venture. You also need to ensure your lender’s terms are fair and you are getting a fair deal.

Good cash flow will be key to your business success.

Ensure you have the right terms of trading in place to protect you against bad debts. You may also need advice on debt collecting.

You may need to pay National Insurance if you’re self-employed, depending on how much you earn. If you have employees you need to deduct National Insurance contributions (NICs) from their wages and pay those as well.

You must register for VAT with HM Revenue & Customs (HMRC) if your business turnover is over the VAT threshold.


You should get independent advice on the risks you may need to insure against.

These may include risks relating to premises, employees, assets and visitors. For example, what if one of your employees or visitors got injured on your premises or someone was injured by one of your products?

Your solicitor can give you legal advice on how to protect your trading name, logo, ideas or products.

Goods and Services

Your solicitor can explain your legal duties relating to buying or selling goods or services.

For example, there are restrictions on what you can legally say about your products in advertising material. You may also need advice about contracts you have with your suppliers, customers or clients.

Employment issues

The law relating to employing people is complicated and constantly changing. Your solicitor can help you ensure that your contracts and procedures are correctly drafted to prevent any employment disputes.


Remember, prevention is better than cure.

Your solicitor can help you plan for a range of possibilities to help avoid disputes and disagreements.

If you do find yourself in a dispute with an employee, partner, supplier or customer your solicitor will help you resolve the issue. It will save time, stress and money if you get legal advice at an early stage in any dispute.

Contact us for further advice and information

Please get in touch with our commercial team - ask for Paul Hughes on 0121 705 7571, or email

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This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.