Understanding the Law for Starting a New Business

Starting a new business can be daunting, but understanding the law is an essential part of the process.

Knowing the rules and regulations you need to abide by can help you ensure your business is compliant and successful.

In this latest Knowledge Base post, we’ll discuss the legal requirements you need to consider when setting up a new business.

Choosing Your Business Structure

The first thing you’ll need to decide is the business structure. This will determine the legal and financial obligations you’ll have, so it’s important to choose the right one. The most common structures are: sole trader, partnership, limited company and limited liability partnership (LLP).

A sole trader is a business owned and run by one person. As a sole trader, you’ll be personally liable for any debts or losses.

A partnership is a business owned by two or more people. The partners are jointly responsible for the debts and losses of the business.

A limited company is a business owned by shareholders. The company is legally separate from its owners, so the shareholders are not personally liable for the company’s debts or losses.

An LLP is similar to a partnership, but the partners are not personally liable for the debts and losses of the business.

Registering Your Business

Once you’ve chosen the right structure for your business, you’ll need to register it with the relevant authorities. In the UK, this will usually be Companies House for limited companies and limited liability partnerships, and HMRC for sole traders and partnerships.

You’ll also need to register for various taxes, including Value Added Tax (VAT) if your business is VAT registered, and Corporation Tax for limited companies.

Employing Staff

If you’re planning to employ staff, there are certain legal requirements you’ll need to meet. You’ll need to register as an employer with HMRC and obtain an Employer’s Reference Number.

You’ll also need to ensure your staff are legally allowed to work in the UK. This means checking their right to work documents, such as a passport or residence permit. You’ll also need to ensure that you’re paying them at least the minimum wage and providing them with a valid employment contract.