There are so many different things to consider when starting a business. In fact, many budding entrepreneurs get overwhelmed before they’ve even gotten their new business running!
When there’s more than a few things to keep track of, it helps to have some sort of guidance. That’s why we’ve compiled a list of 12 basic steps when starting a business to help get you moving in the right direction.
1. Get A Business Plan
The first step to any great business is the business plan. It’s good to have all your ideas, research and plans in one place. There is no definitive structure or length for a business plan, however, many like to include the following:
- An executive summary
- Market research
- Equipment or tools
- Notes on competition
- Sales and advertising
- Financial information
- Description of the products and services
While a business plan is not a legally binding document, it becomes an important blueprint and a way for you to map out your business journey moving forward.
It can help you set realistic goals and milestones, which will then help your business activities run smoothly and according to plan.
2. Get Funding For Your Startup
You’ll need to be clear on how your business will be funded. Will you be using your own savings? Maybe you’re planning on using investors? What about allocating shares?
Some startups choose to engage in crowdfunding, which is where you reach out to a pool of retail investors. They provide funding in exchange for ownership in the company.
Whichever path you decide to take to fund your business, it’s important to have a clear idea, back up plans and room for unexpected additional expenses.
3. Register Your Startup
Registering your business is one of the first things you should do as you will need all the relevant details to proceed with other types of official documentation.
This is a good time to think of the name you wish to give your business. Whether or not you need to register your business name with Companies House will depend on the name itself and the structure of your business.
Sole traders and partnership businesses that are using their own name do not need to register their business name.
Which Business Structure Should You Choose?
When registering your business, you should have the structure of your business sorted first. Your registration process will depend on this key factor.
For example, if you plan on undertaking a company structure, you will need to get it registered with Companies House
The registration process also involves applying for the kinds of taxes that will apply to your business which could be impacted by the structure you choose.
Your structure will also determine which documents you’ll need to have drafted. For instance, companies need to have a Company Constitution (or use the model articles of association found in the Companies Act 2006 as an alternative).
4. Hire Employees For Your Startup
Getting the right staff to help you run your startup is also something you might consider. Having employees is a big help, but it also means you will have the additional responsibilities as an employer (more on this below).
It’s best to talk to an Employment Lawyer to gain professional advice on your legal obligations towards any potential employees.
5 .Get The Right Licence And Qualifications
Depending on the industry you are in, you may need to obtain the correct qualifications or apply for a licence. For example, if you’re thinking of running a childcare business, then you will need the appropriate certification.
Likewise, if you plan on serving alcohol on your businesses premises, you will need to gain a permit for this. It’s important to research what requirements are relevant in your industry and make sure you attain them before opening to the public.
6. Sort Out Your Office Space
Many business owners like to set up from home while others require a space outside of their residence. Either way, it’s important to have a designated area for business operations.
If running your business from home is something you are considering, then think about any zoning requirements and council regulations (we’ve written more about laws on running a business from home).
For others that want to rent out an office space, you will likely require a Commercial Lease – our lawyers can chat you through your options here.
Do I Need A Commercial Lease?
Commercial leases are unique to other leases as the terms can be negotiated to suit your specific situation. Commercial lease agreements often discuss matters such as operating hours, use of the premises, rent abatement, fixtures, fittings, noise levels and termination.
It’s good to have a legal professional draft and review your lease agreement for you. This way, you can be in the best negotiating position.
7. Open A Business Bank Account
It’s also a good idea to keep your business’ finances separate from your personal ones. Depending on your business structure, it may be a requirement for the business to have its own bank account before it begins trading (i.e for a company).
For some business types, such as a sole trader, there’s no legal obligation to have a separate bank account for the business. However, setting one up regardless can help keep things a bit more organised and easier to keep track of, particularly when it comes to matters like taxes.
8. Get Your Legal Documents Sorted
The legal documents are one of the most important aspects of running a business. Legal documents generally work to protect your business and help keep it legally compliant, so you want to stay on top of this.
Let’s go through the key required documents below.
Founders Term Sheet
A Founders Term Sheet is an agreement between the founders of a business. It’s common for startup founders to craft a term sheet at the beginning of their venture as it isn’t exactly legally binding (unless it explicitly says so in the contract itself!).
Rather, it acts as a blueprint for a legally binding agreement that you’ll enter into later. It should be a rough document which sets out the key terms of the business venture.
For example, it should set out the following:
- How all founders are to be paid
- Dispute resolution
- Decision-making process
- Roles and responsibility
- Intellectual property
Shareholders have ownership in the company and therefore have considerable influence regarding company matters. In a company with multiple shareholders, it’s essential for all shareholders to follow the same rules so that everything runs smoothly. able
A Shareholders Agreement lets shareholders know what is expected of them, the rights they possess, the responsibilities they have, what happens when they want to transfer shares, dispute resolution and anything else that is relevant to their role in the company.
A Company Constitution is the governing document that sets out how important company matters are dealt with. For example, it can cover the process to follow if a director wants to resign, or how voting will take place at meetings.
The Companies Act 2006 provides that if a company does not have a constitution, the model articles of association can apply instead.
It’s important that the constitution is drafted in a way that accurately reflects the company’s internal processes and rules. It’s wise to consult an expert lawyer for this scenario – reach out to our team for help.
As we mentioned earlier, hiring employees means a few additional responsibilities such as getting the right contracts in place. If you are hiring staff, make sure you get an Employment Contract that addresses pay, time off, work hours, responsibilities, professional conduct and anything else you may need.
In other words, the Employment Agreement will set out how the employment relationship will work and specific processes to follow.
Any breach of the Employment Agreement can result in legal action, so make sure this is drafted appropriately. For example, if you dismiss an employee in a way that breaches the terms in your Employment Contract, you could be facing legal consequences under unfair dismissal.
It’s important to have a positive professional relationship with your employees – an Employment Agreement is a way to start this out.
A Simple Agreement For Future Equity (SAFE) Note is often used as an incentive for investors when companies are raising funds. The note essentially allows investors to contribute to the company’s capital now while reaping in on equity at a later, predetermined date.
Therefore, there is no need to allocate shares to the investment as soon as it’s made (this is often a bit harder when a company is still in its early days and hasn’t been property valued) and the investor is still guaranteed equity.
A supplier is someone that has been hired to provide something (such as resources or material) for your business, usually routinely. For example, a clothing manufacturer may have a supplier they purchase materials from.
It’s important to have an agreement in place with your supplier so the relationship can work for both parties. A Supply Agreement addresses:
- The goods to be supplied
- When the delivery is to be made
- Payment methods
- Dispute resolution
Rather than hiring internal employees for every task, some employers like to make use of contractors. A contractor is an external employee that is often there for a specific purpose or short-term project. For example, hiring an IT Professional to spend a few months helping code a program.
When hiring a contractor, the main thing to be careful of is ensuring that your contractor is not mistaken for an internal employee, as you could end up owing them employee benefits.
A Contractor Agreement that clearly outlines they have been hired on a contractual basis is essential here.
Terms And Conditions
Terms and Conditions let others know what is expected of them when engaging with your business. It can also give you the authority to make decisions that are right for your customers (this depends specifically on the terms).
For example, Website Terms and Conditions can let customers know the behaviour that is expected of them on public forums, like a comments section. It can also give you the authority to remove anything inappropriate posted by a visitor.
Terms and conditions can also aid with limiting your liability, so it’s worth looking into getting one.
9. Allocate Shares
When starting a company, one of the key things to ask is, “How do I allocate shares?”
There’s no singular answer to this! There are a number of different options you could assess that all depend on your company’s individual circumstances.
You will need to consider how shares will be divided, relevant agreements, shareholder rights, paying yourself as well as potential incentives for shareholders such as drag along or tag along clauses.
10. Protect Your Intellectual Property
Another key aspect of starting a business is making sure all your intellectual property (IP) is secured. Protecting your IP is important because it is valuable to your branding and other key business activities.
There are various ways you can protect your IP under the law, such as:
- Trade marks
- Copyright laws
- Trade secrets
Patents and trade marks can be secured by getting them registered with Intellectual Property Office (IPO). Once you have registered it, the trade mark or patents will be yours to use for a certain period of time. When the expiry for it approaches, you will have the option to renew it.
For copyrighted material and trade secrets, there’s no application process to get it secure. Rather, your legal agreements and internal processes can aid in keeping your IP protected.
For example, you might attach Confidentiality Clauses to your Employment Agreement, preventing employees from exposing trade secrets to people outside of the business.
Alternatively, you could have Copyright Disclaimers so that users are aware of material that is protected by copyright laws.
11. Meet Your Employer Obligations
As an employer, you will have a responsibility towards every member of staff that works at your business. This includes ensuring they are receiving all the correct entitlements and are being treated well.
Many of your employer obligations can be found in workplace health and safety measures.
Workplace Health and Safety
WHS essentially refers to the responsibility of all employers to make sure their employees are working in an environment that is free from both mental and physical harm. This responsibility extends to both employees that work in an office space as well as those that work remotely.
Implementing workplace health and safety measures can look like:
- Providing training regarding professional conduct and safe practices
- Ensuring all employees have the right equipment
- Creating a means for employees to bring forward any complaints or concerns
Making sure the physical environment is free from danger and have routine risk assessments
Every employer must take reasonable steps to ensure the health and safety of their employees at work.
12. Know Your Consumer Law Obligations
Finally, interacting with consumers is going to be a large part of running your business and it’s important to be aware of your responsibilities towards them. The Consumer Rights Act 2015 and the Competition and Markets Authority (CMA) establish and enforce the rights of consumers when they are engaging with businesses.
Essentially, it’s up to business to make sure:
- Prices and advertisements are being market correctly
- Refunds, replacements and repairs are available
- Customers aren’t misled or deceived in any way
- All products are correctly labelled
- Warranties are available
- All products and services don’t cause harm to consumers
- Receipts are provided
These consumer protection laws essentially protect consumers from unfair trading practices where they find themselves in a vulnerable or weaker negotiating position against businesses.
There’s a lot more to learn about consumer protection laws – make sure you consult a legal professional to make sure your business’ practices are aligned with the Consumer Rights Act.
It’s important to be as well informed as possible so you can survive the initial stages of starting a business! At Sprintlaw, we help new businesses everyday and we’re always here to answer any questions you may have.
To summarise what we’ve discussed:
- A business plan can help keep all your ideas on track
- Sort out funding and any licences you may need
- Get your business registered (your choice of business structure may affect what this process looks like)
- If you’re hiring employees, make considerations for your obligations as an employer
- Have a separate bank account for your business
- Make sure you have all your legal documents in place
- Decide how shares will be allocated
- Actively protect your intellectual property
- Make sure you’re meeting all your obligations as a business under consumer laws
If you would like a consultation on your options moving forward, you can reach us at 08081347754 or [email protected] for a free, no-obligations chat.
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