Establishing a business: key considerations
Choosing your business structure
When starting a business, it's crucial to choose the right legal structure. Here are the main options:
- Sole Trader: You run the business alone, with no legal separation between you and the business. You own all assets and are fully responsible for liabilities.
- Partnership: Two or more people share ownership. There are general partnerships, limited partnerships and limited liability partnerships (LLP).
- Private Limited Company: This structure offers a separate legal identity, limiting your liability to the amount unpaid on shares. It's governed by the Companies Act 2006.
Pros and cons of a Private Limited Company
Advantages:
- Separate legal identity
- Governing rules can be largely self-determined
- Easy and low-cost incorporation
- Facilitates investment through shares
Considerations:
- Must maintain company registers
- Financial and non-financial disclosure requirements
- Filing obligations with Companies House
Forming a Private Limited Company
To incorporate, you'll need to file:
- Form IN01: Application to register the company
- Articles of Association: Rules for running the company
Once approved, Companies House will issue a certificate of incorporation.
Key roles
- Shareholders: Own shares and have limited liability.
- Directors: Manage the company. Must be at least 16 and not disqualified or bankrupt.
Essential business contracts
- Shareholders’ agreements: A contract between all or some of the shareholders that documents how key decisions are made.
- Terms and conditions: Set out the rules by which clients/customers purchase goods and services.
- Employment contracts: Provide an employee with written particulars of their employment.
Insurance needs
- Depending on your business, consider:
- Employer’s liability: Protects against employee injury or illness claims.
- Professional indemnity: Covers negligence claims.
- Public liability: Protects against third-party injury or property damage.
- Products liability: Covers injury or damage caused by your products.
FAQs
Do I need to register my business?
Registration is required for companies and LLPs with Companies House.
What if customers refuse to pay?
Ensure you have terms and conditions in place to handle late payments and potential contract termination.
Can I set my own employee rules?
Yes, but you must comply with core legal protections like working time regulations and anti-discrimination laws.
For help with starting your business contact Charles Danjoux or a member of the Corporate Team.