Ownership, strategy and management

Whether you are starting a new business or already own or manage an existing business, understanding the key legal issues is vital. Business ownership and management can involve significant responsibilities and potential liabilities. Making the right choices and complying with company law helps you avoid potentially serious mistakes.

Forming a business

When you start a business, you need to decide how to form the business: for example, setting up as a limited company, partnership or limited liability partnership (LLP). Many business owners instinctively opt for a limited company, though this can involve significant costs and administrative burdens. Other issues to consider include the tax treatment of different forms of business and to what extent you can limit your personal liability if things go wrong.

It’s important to make a positive choice of business form, particularly if you will be in business with other individuals. If you simply start trading, you might unintentionally create the wrong business relationship – for example, an equal partnership with personal liability for your partners’ business debts. You must also ensure that you notify HM Revenue & Customs.

At the same time, you should choose a business name that will help your marketing. You should check that your name is allowed and does not conflict with existing registered company names or trade marks. You may want to register your own business name as a trade mark and take steps to protect any other intellectual property, such as any designs or inventions that are central to your business.

Business strategy

You should take the opportunity to think through your business objectives, how you want to run the business and any potential problems. You can use a company’s articles of association, a shareholder agreement or a partnership agreement to cover these key issues together with a business plan setting out your business strategy.

You should aim for a board of directors or management team with the right skills and experience to develop and execute a successful business strategy. Where necessary, in-house expertise can be supplemented with specialist external advice.

Business management and administration

Effective management will include setting up good corporate governance and ensuring that the way the business is run complies with company or partnership law. Efficient company administration helps avoid unnecessary mistakes and aggravation.

It’s worth identifying and regularly reviewing your main legal responsibilities and ensuring that you have proper policies and procedures in place. Key issues can include employment law, health and safety and the various trading regulations, as well as any basic requirements such as licensing. Environmental obligations are also a growing concern for many businesses, both in terms of legal compliance and in response to customer demands.