Does your business have a clear strategy including short term and long term goals? Where are these recorded? Getting your great ideas about your business down in a structured plan is an important stage in the business cycle and allows you and your team to work towards mutual goals. Having a detailed business plan and budget is especially important when the business looks for external funding.
Most entrepreneurs take advice to identify the best business structure for them. Factors may include exposure to personal liabilities and tax costs. The majority of start-up businesses incorporate as private limited companies. There are other structures that may be worth exploring, such as limited liability partnerships (“LLPs”).
Where there are shareholders/partners and investors, each will have their own views and interests. It is important for interested parties to be clear on how the business is run and how decisions should be taken. This is usually documented in a shareholders’ or investment agreement combined with dovetailed articles of association of the company. For further information please see our guides "Shareholders' agreements and articles of association for founder shareholders" and "Duties and responsibilities of a company director".
In any event, it is essential that company share issues are documented properly in accordance with the company's constitution and in a timely manner - take advice if you are in any doubt in this area.
Customers and suppliers
Commercial contracts do not have to be in writing but a lack of written terms can cause uncertainty and misunderstanding between you and your customers or suppliers, and could ultimately lead to disputes.
If you do not get the terms of your commercial agreements correct in your early contracts you may find yourself in a position of risk at a later stage. Aspects to consider include:
- Protection and licensing of intellectual property
- Timetables of performance of services and appropriate rights in the event of delay
- Clearly defining the scope of your services and obligations
- Appropriate and effective limits of liability
For further information please see our guides:
- "Standard terms of sale"
- "Is my website compliant?"
- "Standard terms of purchase"
Employees and share schemes
Do you have appropriate contracts and other documentation in place for your first employees? This should include adequate protections for the business, and policies covering key areas such as grievances, discipline, equal opportunities, absences and health & safety.
With the introduction of auto-enrolment for pensions in the workplace, you will be required to have a pension scheme and to make contributions into it. The date by which you will have to put auto-enrolment arrangements in place will depend on the size of your business. We can guide you through these requirements.
Are you thinking of offering shares to your employees as part of their remuneration? There are various tax favoured arrangements available depending on your circumstances.
In any event, make sure that all shareholding and option arrangements are properly documented and that all reporting requirements in relation to employee share interests are promptly met.
For more information, please see our free guides in these areas.
There are various compliance issues that should be considered when setting up a business, including:
- Should you register for VAT?
- How will you run your payroll?
- Are you reporting changes in employee share interests?
- Who is dealing with your computations and returns?
We can guide you through these questions and ensure you receive appropriate advice
Innovation and intellectual property
A business’s intellectual property is often its most valuable asset, particularly when first setting out. It’s important that you understand what rights you have from day one, and how you can best protect them.
Where you use third party developers or other suppliers to help to develop your products or services, it is particularly important to ensure that your business owns any intellectual property rights created - your payment for the work done may not be enough to achieve this.
The types of rights which might apply to your business can include:
- trade marks (both registered and unregistered)
- copyright (including software)
- design and database rights
- confidential information (i.e. innovative ideas and trade secrets)
For more information, please see our guide "Intellectual property - what you should know".
Investments and tax structuring
There are various types of finance which may be available to you at this stage. It is important to consider the impacts of these different options and which is most appropriate for your business.
Tax is also an important consideration in the early stages and appropriate planning can save time and costs later on.
Have you thought about your property requirements? Many businesses start in small serviced offices but some prefer their own space that they can control.
For further information, please see our guide "A practical introduction to leases".