When starting a business, it is important to ensure that all of your operations are strictly in line with the law. Doing this before you set up your company can save you a great deal of time, hassle, and money in the future. What’s more, it can ensure that you never face criminal charges.
Unfortunately, few people have a true understanding of the legal system, particularly where businesses are concerned. As such, it is quite easy to make a number of missteps when trying to get your company off the ground. If this is something that you want to avoid at all costs, take a look of the top legal elements that you need to be aware of:
Carefully Consider the Right Legal Structure
Once you are sure of the particulars of your company, it is a good idea to start focusing on the legal structure. This is something that should be done prior to making any other preparations. Understand, while you can change the legal status of your company, later on, it will be disruptive and may end up costing you quite a bit of money as well. Thus, this is something that must be handled in the early stages.
Your four options are sole trader, partnership, limited company, and limited liability partnership. A sole trader and partnership are rather similar in the sense that the owners are tied directly to their business. As a result, your company’s risks become your own. The main difference is that as a sole trader, you file Self Assessment taxes and in a partnership, you have to register with HMRC.
As a limited company or a limited liability partnership, the owners are kept separate from the company. Due to this, there is less personal risk involved. For tax purposes, an LLP will file in the same manner as a partnership. The limited company will have to file annual tax returns but there is a chance that the taxes may be slightly lower with this structure.
Getting Insurance
Are you aware of Employer’s liability insurance? If you are planning on hiring individuals for your business, then you are required, by law, to take out insurance. The policy must cover you for at least £5 million and must be issued by an authorised agency.
There are two instances where you will not be required to get such insurance. If you are hiring a family member or someone in another country, then you can skip this step. Otherwise, it is imperative that you get insured.
In addition to being insured, you need to make it a point to display your EL certificate in your place of business. Failure to do so can result in a £1000 fine. Furthermore, if an inspector asks for the certificate, you must produce one promptly. Otherwise, this can lead to a fine as well.
Understand Employee Laws
These days, it is more important than ever to have a good understanding of employee laws. This includes appropriate wages, avoiding discrimination, and ensuring that your employees are well taken care of.
In addition to this, you need to sign up employees for pension funds and to produce itemised salary slips. What’s more, you must check that the work environment strictly adheres to the most recent health and safety codes. Keep in mind, failure to do any of this can lead to fines or penalties later on.
To make sure you are on top of things, always construct a detailed employment contract for each of your staff members. Check that you and your employees are aware of exactly what is in this document. Doing so can help to avoid any confusion in the future and can help you to safeguard your assets.
Being Aware of Data Protection
Another thing that a number of business owners aren’t fully aware of is the General Data Protection Regulation (GDPR). This is largely because it only came into existence in 2018. As such, there is still a bit of confusion surrounding what this legislation actually is.
Nevertheless, you should be fully aware of what this law means for you. In short, you need to have a proper understanding of the data in your possession – both past and present. This includes information related to suppliers, business partners, customers, and others.
If you are involved in collecting or storing these details, you have to be transparent with everyone involved. You should also abstain from passing on this information to third parties, especially without the knowledge or permission of the owners.
Do You Need a Lawyer?
It is only natural to wonder if you need a lawyer once you have seen exactly which laws your business has to contend with. However, attorneys can be costly hires and are often not necessary for smaller businesses. Of course, if you feel like you need legal assistance or representation, you should certainly get it.
In most cases, though, reading up on law books and taking prep courses on sites such as TestMaxPrep may often be enough. Still, you should certainly make an effort to read up on all of the regulations and conditions that apply to you and your business. You will then be able to run your business more smoothly.
Staying Up to Date
Remember that laws can change with time. Thus, you need to make it a point to stay on top of each of these changes, as they are happening. By doing this, you will be able to restructure your business dealings before the law fully goes into effect. Not only will this keep your operations above board, but it can even help you to get a leg up on your competitors. So, while it may not always be pleasant, you should do your homework in this regard.
These are the main legal elements to understand when running a business. Paying attention to the information can help you quite a bit when you are starting out. In particular, it will aid you in avoiding all of those pitfalls that can dismantle your company rather easily.