The legal aspects
When starting up a business there is a range of legal requirements that must be adhered to. This is a brief introduction to some of the areas of the law that need to be considered.
Legal status of the company
When starting a business one of the initial decisions you will need to make is to decide on the legal status of your company. This will affect how you run your business and will have implications for how you pay your tax and record your accounts. The two main formats are sole trader and limited company. However, there are additional options such as a Limited Liability Partnership (LLP) and a Community Interest Company (CIC).
Whilst it is possible to change the legal status of your company once you are trading, it can be very disruptive and costly. For this reason, it is important to give this some careful thought at the outset of the business.
The company name
For limited companies, the name of the company should be registered with Companies House. There is a legal requirement for the name to be displayed at the company’s registered office and on all company literature. The registration of the name at Companies House does not offer any protection against someone trading using the same trading name. It merely prevents others from registering their company in the same name. To protect your trading name and possible logo design, think about registering the name as a trademark.
For further information on this, look at the website of the Intellectual Property Office or contact the Library of Birmingham on 0121 242 4242 and book an IP advice session.
If you are a sole trader and intend to use a trading name other than your own personal name, there is a legal requirement to display that name, both at your business premises and on any company literature.
Tax, National Insurance and other financial requirements
Tax and National Insurance contributions vary according to the legal status of your business. Sole traders pay their taxes through the HRMC’s self assessment system. In limited companies, each Director is treated as an employee and pays their tax contributions through Pay As You Earn (PAYE). The company is also responsible for deducting the tax and National Insurance contributions of it’s employees.
Limited companies are legally required to submit their accounts to Companies House to be audited. Your first set of accounts needs to be submitted within 21 months of the company formation. Small companies with an annual turnover of less than £6.5 million do not have to be audited and can therefore submit abbreviated accounts. Companies may also have to register for VAT and pay Corporation Tax.
More information on tax matters can be found on the HM Revenues and Customs website, or ring the Library of Birmingham on 0121 242 4242 to obtain information about any tax workshops that we may be hosting.
Most businesses will also have to pay business rates to their local authority as a contribution to the provision of local services.
Health and safety law
All businesses, no matter how small, need to be aware of how Health and Safety legislation affects them. All businesses, regardless of size, must carry out risk assessments. If your company employs more than five people, there is a legal requirement to record theses assessments.
Employers have a legal duty to ensure that their employees work in a safe environment and this also extends to ensuring the safety and well being of their customers whilst on the company premises.
Additional Health & Safety legislation may apply to any equipment used within the context of your business, for example, handling of hazardous substances or the use of personal safety equipment.
Any business employing staff is legally required to take out employer’s liability insurance with a minimum of £5 million worth of cover. The insurance certificate must be clearly displayed on the premises.
If your business deals directly with members of the public on the premises, you will need to take out Public Liability Insurance to cover any accidents or injuries concerning members of the public.
Professional indemnity insurance covers the business for any professional errors that may result in claims against the company.
If you are a sole trader you may wish to consider some form of income protection insurance, in the event that you were unable to work due to illness or injury.
Consumer law and trading licences
All businesses selling goods and/or services must abide by the legislation concerning such areas, for example, The Sale of Goods Act 1979.
Some specific types of business will require trading licences, usually granted by the local authority. These businesses include childminders, taxi drivers and tattoo artists. In addition, any venue providing entertainment and/or serving alcohol will need to obtain the necessary licences.
If your business employs any staff you will need to comply with a range of Employment legislation including the National Minimum Wage Act, the Equality Act, the Working Time Regulations and the Employment Act.
This is just a brief outline of some of the legal considerations when starting up a business. For further business advice contact the Library of Birmingham on 0121 242 4242 or email us at email@example.com