Here, we look at the fundamental procedures that entrepreneurs need to observe to ensure a strong basis to their business.
When you’re building up your business, there are a million different legal requirements to think about. Stephen Attree, managing director of MLP Law, provides a checklist of essential information for growing businesses to go through from business structure and brand ownership to securing your property and finding the right professional advisers to help you grow.
Leading a fast-growth business can be very exciting.
When you’re winning new contracts, hiring extra staff and boosting profits, it’s easy to feel as though everything is going brilliantly. However, building a company that is capable of sustaining this success is another matter altogether. As the firm grows, it’s all too easy to neglect the fundamentals of creating a legally sound business. Getting these decisions wrong can derail even the best-performing operations.
Many entrepreneurs put off long-term decisions in favour of focusing on day-to-day matters.
This is dangerous, though, because unresolved legal issues generally come back to haunt you when you least expect it. Instead the best approach is to tackle challenges head-on before they develop into business-critical problems.
Use legally watertight contracts
Businesspeople need to be extremely careful where contracts are concerned.
Before you sign any contract with suppliers or customers, you should make sure the terms of the agreement state explicitly what is expected of each party and what the consequences will be of failure to deliver. Off-the-shelf contracts are rarely sufficient.
Depending on the type of contract, moreover, you may need both sides to sign off various additional documents. These include full terms and conditions for the supply of goods or services, consultancy agreements, distribution and agency agreements, franchise agreements, confidentiality or non-disclosure agreements, and joint venture/collaboration agreements.
Get your business structure right
There are a variety of structures available to businesses in the UK and each has its own pros and cons, so you must think carefully before switching track.
Perhaps the simplest model to understand is the sole trader. Under this system, you will have complete control over the company and its profits, although the downside is that as a sole trader you also assume all liabilities, including any debts and legal claims instigated against the company.
Another option is a partnership, in which two or more people work together to run the company. As partners, you’ll share in the company’s profits but you’ll also split its liabilities, so you need to be able to trust each other implicitly.
Also worth considering is the limited liability company. In this system, the company is liable for its own debts, but it also increases administrative costs because as a director you’ll need to file both company accounts and individual tax returns.
A fourth option to weigh up, meanwhile, is the limited liability partnership (LLP). An LLP offers more flexibility than a limited company while still limiting your liability as a director, but it also has extensive filing and disclosure requirements.
Protect your intellectual property
Often a company’s most valuable asset is its intellectual property, yet this area is all too frequently overlooked by high-growth businesses.
Intellectual property covers any creation of the mind such as designs, literary works and inventions. In practice, businesses can use this area of law to protect everything from trademarks and patents to copyright and design.
If you want to properly protect your company’s brand, for example, you should look to trademark it as soon as possible. The first step is to see if any other individuals or organisations have already registered similar rights; if they have, you will need to consult a trademark lawyer to establish whether the differences are sufficient to hold up in court or whether you will have to negotiate permission with the existing rights owner.
The next step is to register your company’s trademark in all of the necessary geographical locations. And the final step is to regularly check for misuse of your trademark by other individuals or organisations – and enforce your rights if they have been infringed.
Secure your property
Property is usually a company’s second largest overhead (behind wages) and fast-growing businesses tend to find they need to upgrade premises more than most.
Some entrepreneurs prefer to buy properties outright but it is more common for companies on a high growth trajectory to lease them. After all, it is hard to predict how much space you’ll require in the distant future.
If you’re looking to agree a new lease, however, there are certain matters that you should pay particularly close attention to. With regards to contract length, for example, it is vital that the term is long enough to give the business security but short enough to allow for relocation should circumstances change. You should also consider including other clauses such as tenant-only break options, purchase options, and automatic lease renewal options. And last but not least, you must watch out for possible costs hidden away in the contract such as repair liability, reinstatement costs and stamp duty potentially payable on rent.
Find quality professional advisers
In order for your company to reach its full potential, it will inevitably need the support of professional advisers who know their areas inside out.
Nobody can be experts on everything and these people will help you to focus on what you do best – running your business. There are professional advisers who specialise in all sorts of disciplines. Lawyers are able to give you legal advice, accountants are there to keep the books in order, banks can handle day-to-day cash flow, and independent financial advisers are on hand to arrange suitable financial products. Meanwhile, surveyors can value your properties, PR advisers are experts at implementing publicity campaigns and HR advisers are best-placed to help you find and retain key employees.
Regardless of which professional advisers you need, the key is to only work with people that you trust. Ask for recommendations from your peers. Check out the credentials of prospective partners and see if they really belong to those trade associations. And search for their names online to see how they present themselves to the world.
Set your business on the road to success
It’s all too easy to overlook the basics when you’re focused on short-term goals, such as delivering products or services to customers and winning new business.
However, the entrepreneurs that really thrive in the corporate world also make time to ensure their companies are built on solid foundations. Ultimately, businesses don’t just grow by themselves. They grow because of the hard work and dedication of the people behind them.