Starting your own business can be a daunting step to take, but more people than ever before are taking the big step into their own brave new world.
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Whether you’re considering setting up with a business partner or going it alone, there are a few key points to consider right from the word “go.”
1. Select the appropriate legal structure
Do you run your business as an individual entrepreneur? With a business partner? As a limited liability company or other corporate vehicle? The most appropriate option will depend on your goals and the most tax-efficient way to achieve them. Talk to your lawyer to choose the most appropriate structure. For example, setting up a company requires more administration, but your personal assets will be protected
2. Choose your business name carefully
Make sure it’s not the same name or it doesn’t sound too similar to the name of a current business or an existing brand, as legal action may be taken against you to prevent you from using it. ‘utilize. If you are incorporating a company, check the UK Companies Registry guidelines on ‘sensitive’ words, i.e. words which may imply commercial preeminence or special status. For example, if you want to include “Scottish” in your business name, additional permissions are required. Remember to search online to see if there are any problematic company names out there.
3. How will you fund the business?
If you don’t have the resources to be self-funding, will you rely on debt or equity financing (shareholders’ money) – or perhaps crowdfunding? A bank loan will undoubtedly require you to provide some security, whether on your business assets, your home, or in the form of personal guarantees from you and your business partners. Equity financing can come from family and friends or from an outside investor, such as a business angel or private equity firm. Each of these options has advantages and disadvantages that you should consider with your advisors.
4. Keep Proper Records
Whatever form of financing you use, it is imperative that you open a separate business bank account and properly record your finances from day one. Hire an accountant or make sure you are comfortable with managing your own accounting system, many modern software packages make this process much easier. If you have incorporated a company, you are legally required to create and maintain certain company records. You must also notify Companies House of certain changes relating to the company (for example, changes to the constitution, details of directors or share capital). Professional advisers can provide a company secretariat to manage these administrative procedures for you.
5. Protect your interests
Make sure any arrangements with investors or partners are properly documented and your intentions and expectations are protected. Draft general business conditions that can be incorporated into any purchase and supply contract. This will not only put you in a better negotiating position, but will also ensure that major material risks are covered. Consult your lawyer before entering into a contract if you are unsure of the legal consequences.
6. Consider the appropriate base for your business
Do you need to rent or can you work from home? Depending on your business, you may be able to save time and money by setting up a home office, especially if you do most of your business online. If your business needs larger premises, seek legal advice before entering into any rental agreement, especially long-term ones, as it is often very difficult to terminate early. You might want to look into serviced offices, which can be more expensive but more flexible. Another option could be office space available specifically for start-ups. This can include advice, access to wi-fi, computer equipment and a chance to work alongside other entrepreneurs.
7. Protect your intellectual property
This of course depends on the nature of your business. You may need trademark registrations, a patent application, or perhaps confidentiality agreements, also known as non-disclosure agreements, with your business partners. The law in this area is complex, so it is important to take legal advice, especially if your business value is centered around intellectual property. For example, you may be surprised to learn that an invention made by an employee does not automatically belong to the employer.
8. Promote your business online
In today’s environment, most businesses need some form of online landing page, whether it’s a website, social media, or both. If you’re creating a website, it’s often worth hiring a professional designer to make sure it looks professional and works as well as possible. Even if you have the knowledge to create your own website, it’s worth testing it out with friends and colleagues before it goes live to make sure it provides the user experience you need.
Above all, you need to make sure that you own the rights to the text and images on your website, even if it was produced by a third-party designer, and that your website’s hosting arrangements are appropriate. For example, how easily can you terminate the contract and how would transferring hardware from one hosting company to another actually work in practice?
Brodies LLP is a sponsor of the Entrepreneurial Masterclasses being held in Portree, Inverness and Fort William on 7, 8 and 9 February. To register, please visit the Lochaber Chamber of Commerce website.