Setting Up a Company in the UK
Starting a new business can be a busy time for a new entrepreneur. Therefore, it’s important to understand the basics as well as finer points of policies and compliance regulations you must comply with.
You should quickly get to grips with the legal aspects of starting up after completing the setup of your business.
Determine Legal Status
First, you should select the legal status of your business whether that be a sole trader, partnership or a limited company.
The legal status determines if you need to register with Companies House, the UK’s registrar of companies.
Also, this affects the records and accounts you need to keep.
For example, this determines the amount of tax and National Insurance you are required to pay as well as the financial liabilities in case things don’t go as planned.
What Types of Business Are There in the UK?
- Sole Trader. The easiest option if you are the sole owner and can be changed later on. You also have an unlimited liability meaning you are responsible for any debts your business develops.
- Partnership. This means two or more people share the costs, risks and responsibilities. Each owner is liable to the proportion of the business they share. However, if the business goes bankrupt, you are also liable for your partner’s share of the debt.
- Limited Company. Most UK limited companies are limited by shares. Registering your business as limited means it is a legal entity that protects you financially. Company finances are separate from your personal finances. You are also required to submit accounts and annual returns in addition to maintaining books and record-keeping.
Compliance Regulations – Legislation that Affects Your Business
In addition to seeking advice from a solicitor, there are also formal legal requirements that are to be upheld by your new business.
Under UK employment law, we have the Health and Safety at Work Act of 1974 which requires the premises and machinery to be safe.
Furthermore, if you employ five or more staff you require written health and safety policies and must conduct risk assessments which need to be documented and relayed back to the employees.
The Equal Pay Act 1970 states that employees must be paid equally to those who do work of the same value regardless of their sex.
The Race Relations Act 1976 states that it is illegal to discriminate against employees because of their colour, race or ethnic group.
You should also be aware of:
- Employment Protection Act 1978. Employers must provide employees with written contracts of employment ensuring them the right to redundancy pay and protecting them from unfair dismissal.
- Employment Rights Act 1996. Decendant of the Employment Protection (Consolidation) Act 1978. Dealing with unfair dismissal, reasonable notice before dismissal, time off rights for parenting, redundancy, flexible working and more.
- Consumer Protection Rights. You must protect customers from unfair business practices.
- Sale and Supply of Goods Act. All goods must be of a decent standard as well as those agreed to and purchased by customers.
- Trade Descriptions Act. Goods and services must be as advertised and you must not provide misleading information.
- Distance Selling Act. Selling methods such as over the internet require ‘cooling off periods’ during which customers may change their mind about purchase or demand refund.
- Data Protection Act.
Creating Internal Legal Documents for Compliance Regulations
Many businesses make use of a ‘company handbook’ for employees and staff which includes a summary of how things are managed in the business.
It should also contain your company’s mission statement and more relevantly policies which are additional to any required legal extensions.
These documents should also contain further information relevant to the list of acts already stated under Legislation that affects your business.
Maintain Legal Advice
Retaining and keeping up with legal counsel can be extremely beneficial for you and your own peace of mind.
It’s also extremely handy when legal issues come up that require clarification or assistance.
Many solicitors today will also help you in developing a legal action plan. This could be for pitching to investors or applying for further funding.