UK: Top Legal Tips For Start-Ups

Last Updated: 19 December 2011
Article by Carolyn Butler, Sally Britton and Andrew Peddie

Setting up your first business can be a daunting prospect. However, to help you cut through the red tape when embarking on a business venture of your own – and avoid some common legal mistakes – we explain some of the key issues entrepreneurs are likely to encounter when starting out.

1. Legal structure

One of the first legal points to consider is identifying and setting up the most appropriate legal structure for your business. Typically, small businesses start life as a sole trader business or partnership before being formally incorporated as a limited liability company or limited liability partnership. Usually, the best option for your business will depend on what you are intending to do, and the most-tax efficient way to achieve your aims.

The structure you choose will affect various aspects of how your business is run, such as the type and amount of records and accounts that you will need to keep, and your personal liability if your business runs into financial difficulties. However, even if you intend to operate as a sole trader, it is important to ensure you are registered as such for income tax and national insurance purposes at H M Revenue & Customs. As a first port of call, discuss your circumstances and intentions with an accountant for advice on the most tax-efficient structure for you.

2. Business names

Picking a name for your business is an important first task, but it can also be problematic from a legal perspective. It is important to ensure that your business's name is not the same as any others (or confusingly similar), and that it does not infringe the registered or unregistered trade marks of any third parties. As well as checking trade mark registers, telephone directories, domain name registries, trade journals and trade magazines, there are a number of online resources, such as Companies House and the National Business Register where checks should also be performed. As this is a highly specialised area, it is recommended that you use a specialist solicitor to perform these checks.

Be aware, too, that use of certain sensitive words in a business name, such as "institution", "national" and "society", are restricted by law and it is an offence to register any of those words as part of a business name without the approval of the Secretary of State. It is also an offence to carry on business under a name using an indicators of legal status to which the business is not entitled, for example, using the word "Limited" at the end of your business name when your business has not been registered as a limited liability company.

Before making your choice, run your shortlist past your solicitor so any issues are identified as early as possible.

3. The key legal agreements

Putting the right legal agreements in place to govern the arrangements between you and the other people involved in running your business, and ensuring that these are tailored to your needs, is essential to keeping your business running as smoothly as possible. The type of agreements that you need will, in part, depend on the legal structure you have selected for your business.

For instance, if you choose a limited liability company structure, a key document for your company will be its Memorandum and Articles of Association, which is essentially a 'rulebook' directing how the company operates that must be registered at Companies House (and made available for public inspection). However, you may prefer for certain arrangements between you and any other shareholders that have invested in your company to remain private, and a separate shareholders' agreement that gives certain powers or rights to certain shareholders may be appropriate (for instance, the owner-manager may require weighted voting rights to ensure they cannot be voted off the board).

If, however, you decide a partnership structure is best for your business and co-investors, then a partnership agreement setting out the rules of how the partnership operates (for example, the share of profits each partner is entitled to) is vital to displace the provisions of the Partnership Act 1890 which would otherwise apply to such arrangements by default – and which may have some undesirable consequences.

4. Terms of business

If your business will provide products or services to third parties, or purchase products or services from others, then it is fairly inevitable that you will be requested to enter into terms and conditions of business with those parties with whom you trade. If any of the terms in those contracts seem unusual or unduly onerous, then seek legal advice prior to signing.

Having your own sets of standard terms prepared, which you can then incorporate into your purchase and supply contracts wherever possible, will put your business in a more advantageous position and ensure it is dealing on the most favourable terms that it can.

You must also ensure that the terms of any contract you enter into are properly documented so that you have a record of your contractual obligations towards your customers and suppliers to refer to in the future. Similarly, if those third parties are not performing their own contractual obligations, ensuring that a copy of the contract is kept on your file will assist you and your advisors in identifying and enforcing the contractual rights available to you.

5. Funding

Broadly speaking, funding falls into two camps: debt finance, where your business borrows money from a third party via loans, mortgages, debentures or invoice discounting, and equity finance, where individuals or other companies invest in your company in return for a share in the ownership of the business.

The options available to you will depend on the circumstances of your business. For instance, in order for a bank to be willing to offer your business a loan, it may require you or your business to own assets of a certain value on which the loan may be secured.

Likewise, the options you decide to pursue will depend on the advantages of the type of financing for your business –debt finance, for example, allows you to retain ownership of your business, but repayments must normally be made on fixed dates which may cause problems if your business's income stream is unpredictable. In many cases, businesses rely on a mixture of both debt and equity finance.

In all cases, you should carefully agree and document the terms of any financial agreement you make – even (or especially) if it is an informal loan from a relative or friend.

6. Regulatory and compliance issues

The legislative obligations that may apply to your business will really depend on the activities your business undertakes. Some regulations, however, are likely to apply to many trading businesses, such as:

  • Sale of Goods Act 1979: which requires you to sell goods of satisfactory quality, that are fit for their purpose and that are as you describe them.
  • Sale of Goods and Supply of Services Act 1982: which requires you to perform the services you offer with reasonable care, skill, time and cost.
  • Trade Descriptions Act 1972: which makes it a criminal offence to knowingly make false or misleading claims about the goods or services you offer, whether written or verbal.

  • Data Protection Act 1998: imposes certain restrictions on the way personal data (such as records of the names of any individuals, including your customers) may be handled, and requires you to register with the Information Commissioner's Office if you process any personal data (unless an exemption applies).
  • Proceeds of Crime Act 2002: which creates the money laundering offences that make it a criminal offence to (amongst other things) conceal, disguise, convert or transfer any property that you know or suspect has been obtained from criminal conduct.

To help you get started, the government's Business Link website provides information on the rules and regulations that apply to particular sectors. Alternatively, contact a local trade association or representative body for advice. The Trade Association Forum's directory of UK trade associations is available here.

If you intend to engage contractors, staff or workers, in connection with your business then there will be certain legal obligations with which you must comply. Most importantly, the terms agreed between your business and any employee must be set out in a contract of employment along with certain other pieces of information, such as a job description and details of the place of work, as mandated by section 1 of the Employment Rights Act 1996. Again, the Business Link website covers the basics.

For help with more specific and/or complex regulatory issues, you should consult a solicitor.

7. Property

If you decide to run your business from home, it is important to check your planning permission to ensure that you have the required consents to operate a business from your home address. If you need to apply for additional planning permission, contact your local authority.

However, if you decide to lease or purchase business premises, you will need to agree terms with your landlord or vendor, and ensure you understand the terms on which you intend to contract. There should be a formal agreement in place, and you should seek legal advice on negotiating and documenting the terms of your occupation.

8. Intellectual property

Your intellectual property (often referred to as 'IP') comprises not only your business name, but also your confidential information (including know-how and trade secrets), trademarks, copyright, patents, goodwill (that is, the reputation and status attaching to your business, products and services), design rights, domain names... the list goes on. You will need to consider how your IP will be protected and who will own it. For example, you should be aware that IP commissioned by you or created by your employees or directors may not be automatically owned by you. You should take advice from a specialist solicitor on what IP rights you have, or are likely to acquire in the near future (such as IP in new products or know-how created by your employees) and how best to protect those rights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.