So you’ve had a brilliant idea for a new business and you’re beginning to put the wheels in motion to make your idea a reality. Before setting up your business, there are a number of things that you’ll need to consider.
Alex Singer, corporate solicitor at Farleys Solicitors, sets out seven key questions that you should ask yourself before setting up your new business.
What type of business are you setting up?
There are a number of different forms that your business can take. Whether you’re looking to set up as a sole trader, a partnership, a limited company or a limited liability partnership will generally be led by the advice of your accountant, your solicitor and your advisor at the Growth Hub.
Often, setting up as a limited company is the preferred choice for new businesses as this will generally ensure that your personal assets aren’t at risk.
However, your circumstances may suit a different structure so it’s important to speak to an accountant, a solicitor and your advisor at the earliest opportunity to discuss things in detail.
Are you going at it alone or will there be a number of people involved in running the business?
If you’ve decided to go into business with other people, you should consider entering into a shareholders’ agreement (or a partnership agreement if you are entering into a partnership).
A shareholders’ agreement is a private contract between the parties setting out how you intend to run and manage the business. Without it in place you may be reliant on the provisions of company law which may not deal with matters how you intend.
A shareholders’ agreement will cover matters such as: restrictions on who a shareholder can transfer their shares to, how to value your shares, dividends, how to resolve any disputes, restrictive covenants, etc.
What are you going to call your business?
What’s in a name you might ask? Well, actually quite a lot. Generally, the goodwill of the business will be in the name.
Before you commit to a name, you should research the proposed name to ensure that there are no other businesses with the same or similar names. If you don’t do this and you end up choosing a name similar or the same as another, you could run into legal difficulties down the line and be forced to change the name of your business when you’ve already spent time and money building your brand/goodwill.
Do you need terms and conditions?
If you’re going to supply goods or services, then the answer is yes.
It can be tempting to search for a ready-made set of terms and conditions on the internet to save time and costs, but it’s highly unlikely that those terms and conditions will be suited to your business.
It’s important to have a bespoke set of terms and conditions prepared, which set out the way that you intend on running YOUR business.
How will you protect confidential information?
If you’re likely to send any confidential information to a third party, it is important that you ask them to enter into a confidentiality agreement (otherwise known as a non-disclosure agreement) before you do so. Under this agreement, you’ll set out the terms upon which you’re willing to disclose any confidential information, and your rights and remedies if the recipient breaches their obligations under that agreement.
Will you be hiring any employees?
Before you take on any employees, you should have employment contracts and / or consultancy agreements in place. Not only is it important that all parties understand the terms upon which they’re being employed, having a proper agreement in place can save unnecessary disputes down the line.
Things to cover off in an employment contract include: salary, term, notice period, holidays, bonus, restrictive covenants etc.
Will you run your business from a property?
If you’re considering renting any property for the running of your business, make sure that you have a proper lease in place detailing the terms upon which you’re willing to rent the property.
If you’re entering into a lease, consider whether a schedule of condition is worthwhile in order to mitigate a dispute over a possible dilapidations claim at the end of the lease.
When looking for a property, you should consider the business’ potential to grow and whether that will have an effect on the size of the property or the length of the lease.
Where do I find more help?
There are a number of organisations that offer start-up businesses free advice and guidance, in particular for those businesses looking to grow. In addition, there are a number of free workshops and networking events to attend that can be very useful.
There are also a number of organisations that provide start-up loans or other financial advice for new businesses.