Starting a new business is exciting, but it’s easy to overlook critical legal requirements while you’re focused on business plans and financing.
In this blog, we’ll walk you through the essential legal aspects every new business owner must address from day one to build a solid foundation for a successful new venture.
Choosing a name for your new business
To avoid any issues, it’s crucial that you choose a unique name for your business. Using one that is already being used by an established business, particularly if it is trademarked, can prove costly as you may be forced to change your business name and pay damages, plus spend time and money rebranding.
Choosing the legal status of your business
The legal status of your business determines:
- Whether you need to register your business with Companies House
- The records and accounts you will need to create
- How much National Insurance will you need to pay
- The level of liability – so what you would be responsible for paying if the business failed
Types of business include:
- Sole trader – the most straightforward option if you are the only owner of the business, as you don’t need to register with Companies House and can complete self-assessment tax returns. As a sole trader you would have unlimited liability, meaning you would be liable for any business debts
- Partnership – two or more people would share the business costs, risks and responsibilities, with each person’s liabilities being proportionate to their share in the business. A Limited Liability Partnership (LLP) would prevent a partner being liable for another partner’s debts
- Limited company – this offers greater financial protection as the company’s finances are separate from your personal finances. You would need to register with Companies House and adhere to their record-keeping requirements. It can be advantageous in terms of tax and obtaining financing
Paying tax and national insurance as a business owner
You must register your business with HMRC as soon as you begin trading so that you can pay tax and national insurance. This can be done online.
To complete your self-assessment, you need to keep records of your sales and expenses from day one of trading.
Paying VAT
At the time of writing this blog, you need to register for VAT if your taxable turnover (the total amount of money your business receives from the sale of goods and services – not just how much profit you make) exceeds £90,000 in 12 months.
Choosing insurance cover
Some insurance cover is a legal requirement, but some is available as optional extra protection that you may want to take out.
We recommend you consider:
- Motor insurance if you are going to be using your vehicle for work
- Professional indemnity insurance to protect you against claims for losses suffered by customers due to you making an error
- Employer’s liability insurance is required for all businesses with employees. It protects from claims an employee could make if they become ill or have an accident in the workplace
- Buildings and contents insurance to protect your premises and items kept on site
- Business interruption insurance may cover you if you are unable to operate due to external factors
- Cyber insurance can cover you to deal with costs of any cybercrime incidents and enforcements
- Income protection insurance covers a proportion of your income if you become unable to work
- Key person insurance can cover costs if an essential employee or owner dies or becomes critically ill
- Money in transit insurance can cover you against theft of money, cheques and bank drafts during transit
- Product liability insurance protects you against legal fees, compensation costs, and damages if a product you design, manufacture, supply, or sell causes injury to a person or damage to property
- Public liability insurance protects you from any costs incurred if a third party such as a customer, client, or delivery person suffers an injury or damage to property
- Shop insurance protects retailers from costs incurred due to customer injury or property damage on the premises
- Theft insurance can cover lost, damaged or stolen items and is typically combined with another policy, such as shop insurance
Insurance costs are usually classed as tax-deductible expenses.
Local authority licensing and planning permission
Some businesses, such as hairdressers and food outlets, require a licence from your local authority. You may also require planning permission if you’re changing the use of a building.
Employing staff
If you want to employ members of staff, you must comply with employment legislation. You will need to:
- Ensure any employees have a right to work in the UK
- Register as an employer with HMRC
- Pay all staff at least the national minimum wage for their age group(s)
- Enrol eligible employees on a pension scheme
- Issue a statement of employment within eight weeks of a start date to all employees who are expected to be employed by you for at least one month
- Take out employers’ liability insurance
- Have a formal health and safety policy and carry out risk assessments if you employ more than five members of staff
- Comply with employment law under various health and safety, equal pay, discrimination and protection Acts
Employment contracts
To comply with the law, you will be required to provide your employees with a contract. It will need to set out employment conditions, rights, responsibilities and duties. These are known as ‘terms’ and are legally binding.
Contracts should specify:
- You and your employee’s names
- The employment start date, job title or description of work
- Remuneration – how much and when the employee will be paid
- Hours/days of work and where it will be carried out
- Holiday entitlement
- The contract end date if it’s fixed
- Probation period and conditions
- Training and benefits such as food allowance
If an employee is expected to work abroad, you will need to include terms to cover this.
You will also need to provide information on sick pay and procedures, other paid leave such as maternity or parental leave, and notice periods. A wider written statement should also specify details about pension schemes and disciplinary and grievance procedures.
Some terms can be implied, such as employees not stealing from you or you providing a safe working environment.
Employment law is complex and constantly evolving. We strongly recommend consulting with a solicitor when drafting contracts to ensure compliance to protect you and your business. Properly structured contracts also provide crucial protection in the event of disputes or tribunal proceedings.
Consumer protection
Depending on the nature of your business, you may need to protect customers from unfair business practices through the Sale and Supply of Goods Act, Distance Selling Act and Trade Descriptions Act.
Data protection – General Data Protection Regulation (GDPR)
GDPR applies to almost all businesses, as nearly every company handles or stores personal data. These regulations require businesses to process data fairly, securely, and transparently while giving individuals enhanced rights to access, correct, and delete their personal information.
How can AGR Law help?
The legal aspects of starting a business can be overwhelming, and the consequences for getting things wrong catastrophic. We recommend seeking legal advice before you start trading, and as your business grows or develops, to ensure you’re covered in the event of any incidents or claims against you.
Please call 0116 340 0094 or email hello@agrlaw.co.uk for further information.










