What Are the Legal Considerations for a Startup?
Founding a startup can be an exciting experience, but it comes with its own set of legal considerations that must be taken into account. Failure to do so can result in costly legal issues down the road.
43% of all small businesses are threatened with a lawsuit every year. These problems can cause a huge amount of stress to their directors, but they can be avoided with some foresight. We speak to some industry experts to outline four large considerations that startup founders should make.
Business Structure
“One of the first things to consider is the type of entity you will form for your startup,” explains Daniel Tannenbaum, the founder of finance startup, Pheabs.com.
“The most common business structures for new startups are sole traders, limited companies, and partnerships. Each type has its own advantages and disadvantages, so it can be wise to consult with an attorney to determine which one is best for your particular startup.”
“You need to consider which structure will work best for your long term plans. Each structure comes with its own legal responsibilities, which you should be clear on before you start. This includes taxes, paperwork, and your personal responsibilities in case of making a loss.”
“If you are going into business with someone else, you may want to consider a business partnership or a joint venture. These two structures, while they seem similar, describe very different things. Joint ventures have a time limit. They describe when two or more people go into business on a specific project. Business partnerships are designed to last the lifetime of the business.”
Intellectual Property
“As a new startup, you want to protect your intellectual property,” says Richard Allan, the founder of funding platform, CapitalBean.com
“This means getting clear on trademarks, patents, and copyrights. Conduct a thorough search to ensure that your proposed name, logo, and other branding elements are not already in use by another business.”
“You should also make some effort to secure any patents or trademarks as soon as possible to prevent others from using your ideas or inventions.”
Taxes
“The business structure you choose decides how you will manage your taxes,” he continues.
“For example, sole traders must register for Self Assessment. Sole traders pay income tax and Class 2/4 NICs, meaning the business and the individual behind it are treated as one entity for tax purposes.”
“Limited companies pay Corporation Tax on taxable profits (including profits from investments and sales). Most limited companies hire an accountant to complete and file their accounts. It can be worth checking which reliefs are applicable to your company. You must pay these taxes either online or at the post office, and file a Company Tax Return with HMRC.”
Employment Law
“Finally,” he says, “if you plan on having employees, you need to consider employment law.”
“You should research issues related to hiring, firing, and compensation. This includes drawing up clear policies and procedures to ensure that your startup is in compliance with the law.”
“Things to consider include:
● Discrimination
● Minimum wage
● Overtime pay
● Contracts
You must have clear and concise agreements in place to protect your startup and ensure that all parties understand their rights and obligations.”
This is a sponsored article.
