How To Start A Small Company

Most companies start off on a small scale. As a matter of fact, small companies and businesses dominate the business landscape. It’s not the ambition of every entrepreneur to run a large, corporate powerhouse. 

Moreover, small companies are often tiny but mighty. 

It doesn’t matter if your plan is to take your small company to the next level or if you just want a small, manageable venture. Almost every company has humble beginnings, making it imperative for all entrepreneurs to understand the legal aspects of starting a small company. 

That way, no matter what future goals you have in mind for your company – you’ll be giving it the best start possible. 

What Is A Small Company? 

There’s no strict and singular definition for a small company. When determining whether a company can be considered small, a number of different aspects need to be looked at. 

In the UK, the Department for Business, Energy & Industrial Strategy defines a small company as one having fewer than 50 employees. The Financial Reporting Council (FRC) also considers companies with an annual turnover of less than £6.5 million to be small. 

What Are The Challenges Of Starting A Small Company? 

When starting a small company, it’s not unusual for company owners to run into a few hurdles. The exact challenges you will face when starting a small company will depend on a number of different factors such as your industry, location, size, and competition. 

Let’s say you plan on opening a small cafe in your local area however, zoning laws don’t allow cafes in the location you planned. Perhaps you may have trouble securing financing or there will be a few administrative hoops you need to jump through to get the right permits and approvals. 

We don’t mean to sound discouraging but there’s a huge range of potential challenges awaiting for anyone thinking of starting a small company. However, challenges shouldn’t deter you from your goals. Instead, it’s a good idea to have expert help when navigating the sometimes complex world of business. Trying to do it all on your own can be overwhelming and oftentimes, counterproductive. Chances are, a professional has found solutions to challenges like yours before and will be able to provide you with much needed clarity and guidance. For any of your legal issues, our expert legal team is here to help.   

Getting Started: Set Up A Small Company 

As we mentioned earlier in the article, most companies will start in the same way. That’s because every company needs to accomplish three basic tasks during their conception stages – research, registration, and legal protection. 

Let’s take a closer look at these below. 

Do Your Homework 

It goes without saying (but we’ll say it anyways) before starting a company it’s imperative to conduct thorough research. The more informed you are the easier it will be for you to make the right decisions. Be sure to do research on your industry, materials, competition, marketing strategies, compliance measures and much more. 

Don’t forget to compile your research into a business plan, that way it’s all in the one place whenever you need to access it. 

Register Your Small Company 

Your next step is to register your company. 

In the UK, every company is registered with Companies House. To register a company, you will need to determine matters such as who your shareholders are going to be, the directors of your company, how your company will be governed as well as what kind of company you’ll be running. Only after you have sorted out all the details, can you start the application process to register your company with Companies House. 

When registering your company, it’s a wise idea to recruit the help of a legal expert. The process to register a company can be a little complicated and it’s necessary to have someone who knows the ins-and-outs of company registration in your corner. Remember, the registration process won’t just allow your company to legally exist, it also forms the foundation for your company. Therefore, it’s imperative to ensure everything gets done right so you’re not met with any nasty, unwanted surprises down the line.  

It’s also important to note that your relationship with Companies House as the owner of a company doesn’t end once your company is registered. You’ll need to keep up with Companies House for matters like fees, annual returns, and changing your company details. Due to this, it’s important to familiarise yourself with Companies House and its requirements as not following through with their regulations could lead to fines or legal penalties. Chatting to a legal expert can help you gain a better understanding of what’s expected of you when it comes to compliance. 

We’ve written more about the process of registering a company in our article, Steps To Incorporate Your Small Business In the UK. 

Get Your Legals Sorted 

The final step in starting a small company is making sure your company has legal protection. In order to do this, you’ll need to utilise a number of legal instruments such as contracts and policies to safeguard your company from potential legal issues. 

The specific legal documents required will depend on the unique characteristics of your company. Therefore, it’s a good idea to chat with a legal expert. They can pinpoint potential risks and help draft legal agreements to address those risks.

For now, we’ve listed a few core legal instruments that are important to have when managing different aspects of a company. 

• Shareholders Agreement
• Founders Term Sheet
• Company Constitution

Business Contracts:

• Service Agreement
• Distribution Agreement
• Supply Agreement

Employment: 

• Employment Contracts
• Workplace Policy
• Staff Handbook

Data and Privacy: 

• Privacy Policy
• Website Terms and Conditions
• Data Breach Response Plan

Confused on where to start? Chat to one of our legal experts today! 

What Else Do I Need To Start A Small Company?

Aside from registering your company the right way and making sure it’s legally protected, you will also need to understand the laws that impact your small company.

Every company needs to follow certain rules and regulations to ensure legal compliance. These laws could vary from safety regulations for employees, to fair customer practices as well as data privacy controls. 

Not complying with the laws that impact your company could lead to fines, legal penalties and a bad reputation for your business. So, instead of allowing that to happen, make sure you chat with a regulatory compliance expert. They’ll be able to let you know what laws your company needs to be following and the best way to ensure your practices are in line with them. 

Next Steps

To start a small company, there’s a number of legal considerations you need to take care of each step of the way. To summarise what we’ve discussed: 

• • Most small companies begin modestly and require understanding of key legal aspects for a successful start, regardless of future growth ambitions

• • Definitions of a small company vary, with metrics like employee count or annual turnover used to determine its size

• • Starting a small company can present challenges such as zoning restrictions, financing difficulties, and the need for various permits, making expert guidance beneficial

• • Essential early steps for setting up a small company include conducting thorough industry research, registering the company with regulatory bodies like Companies House, and ensuring legal protection

• • Ongoing compliance with Companies House regulations is crucial to avoid penalties 

• • Legal protections for a small company should include contracts, policies, and agreements tailored to its specific needs to mitigate potential legal issues 

• • Understanding and adhering to relevant laws and regulations is necessary to maintain legal compliance and avoid penalties, enhancing the company’s reputation 

If you would like a consultation on starting a small company, you can reach us at 08081347754 or [email protected] for a free, no-obligations chat.

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