Managing your own small business means that you may not be an expert in every area of business life. It makes sense to pay for the advice of experts such as web designers, accountants or solicitors. The cost of legal advice, however, can be painfully expensive if you’re just starting up. Many of the legal aspects of setting up and running a small business are straightforward and you may be able to save hundreds of pounds in legal fees by doing things yourself. This article explores some of the areas of business life that lend themselves to a DIY approach to legal services.
One of the early decisions you will need to make about your business is its legal structure. The most popular structures for businesses start-ups are straightforward and, in many cases, you can set everything up yourself.
This is the simplest of all structures: all you need to do is to register with HMRC for self-assessment and fill in a tax return each year. As soon as you’re registered you can start trading. No solicitor required.
A partnership allows two or more people to go into business together. A written partnership agreement is usually used and sets out the terms of the partnership such as how the profits are shared.
Drawing up a partnership agreement can be done without a solicitor. There are plenty of online providers of template partnership agreements: you fill in the details of your partnership and each partner signs the agreement. Once signed and witnessed the partnership has been formed. If you have very specific requirements then you may need to consult a solicitor.
Limited liability company
Setting up a limited liability company is easy and cheap and unless you have very unusual or specific requirements there is no need to involve a solicitor. A limited liability company has its own legal identity and provides limited liability to the company directors (i.e. personal assets cannot be called upon to settle company debts) and a more favourable tax structure.
There are two ways to set up your own limited liability company:
- Buy an off-the shelf company from an online company-formation supplier. Prices range from around £20 to £100 depending on what other services are included e.g. registration with HMRC, printed copies of documents etc.
- Form a limited liability company yourself by submitting the necessary paperwork directly to Companies House. If you use the online service at the Companies House website you can incorporate for as little as £15 or £40 if you submit your own Articles of Association (there are good reasons why you might want to submit your own).
You can check whether or not the name you want to use for your company is available at the Companies House website, which is also a great source of information about starting and running a limited liability company.
Growing your business to the stage where you’re ready to employ additional staff is a great achievement. A good way to help avoid legal problems relating to your employees is to understand what is required of you as an employer. A good place to start is the ACAS website which has an extensive advice section here.
There is a range of legal documents you will probably need, the main one being a contract of employment. The law does not require you to provide a written contract but it is good practice to do so. At the very least, you are obliged to provide any employee who works for you (for at least a month) a written set of ‘employment particulars’ covering the main details of the engagement.
For most start-ups, a contract of employment is a standard document and there are many template versions available online to choose from – some even free. A well-drafted employment contract template can be used for full-time, part-time or fixed-term employees. As ever, if you have very particular requirements then you may need to take legal advice and perhaps even pay a solicitor to draft a bespoke contract of employment for your business.
The other group of employment documents you will need are policy documents such as:
- Recruitment policy
- Maternity policy
- Disciplinary policy
- Equal opportunities policy
- Health and safety policy
- Redundancy policy
- Sickness and absence policy
- and more …
These documents are widely available as template documents and are easy to tailor to suit your business. As a minimum, you need to have written policies in place and available to your employees for your grievance procedure, sickness and absence procedure and disciplinary and dismissal procedure.
Taking on contract staff
An alternative to hiring employees is to engage the services of a contractor or consultant to provide specific services to your business. Hiring a consultant is a great way to bring expertise into your business without many of the responsibilities of managing permanent staff.
It’s important that you have some form of written contract between your business and the consultant or contractor. Most consultants can provide a contract ready for you to sign or but if you provide the contract then you can make sure the terms suit your business. A contract to hire a consultant is usually a fairly standard document and lends itself to a standard template.
Finding template documents and legal information
Using template legal documents, where appropriate, is a great way to reduce your legal costs. There are many online legal template document suppliers who provide all of the documents mentioned in this article (Clickdocs is one of them) as well as a wealth of information about law for small businesses. Other great sources of online information are the HMRC website and the government service and information website: www.gov.uk.