Today’s guest blog is brought to you from Harper James Solicitors. Toby Harper set up his full service commercial law firm in 2014, operating an innovatively flexible model with remote lawyers and a pay-monthly service. The firm has a national reach, with city-grade lawyers working from home and in-house with larger businesses throughout the UK.
Setting up your own business can be a complex venture, and legal advice is an absolute must in most cases. But do you know when to consult with a solicitor and what you can actually do for yourself? Here, you’ll find out when you genuinely need to seek legal advice in the process of setting up your company.
In the initial stages, you don’t need a solicitor’s help with anything that doesn’t require legal expertise; from developing your original idea and writing a business plan, to carrying out market research and choosing your business name. But there are specific things a business solicitor can definitely help you with.
Structuring and registering your business
Once you’ve decided on the best structure for your new business, will you still need a lawyer to help you form your company? It will all depend on the company size, complexity and goals. Here are our tips based on the main business types:
a. Sole traders
Legal advice required: Not necessarily. Sole traders run their own business without partners or shareholders. There are minimal set up and accounting responsibilities, but you have personal liability for any business debts. Most sole traders can manage their own business affairs, unless they need a licence to trade or have specific regulatory obligations or data protection principles.
More info: You don’t need to be registered with Companies House. You’ll need to register for Self-Assessment and file a tax return every year. If turnover is £85,000 or less, you don’t need to be VAT registered.
b. General partnerships
Legal advice required: You share responsibilities with another person or business. All profits are taxed as income and each partner will need to file a separate tax return. All are liable for any business debts. You’re not legally obligated to seek legal advice, but it would be beneficial to get help from a solicitor on drafting a partnership agreement. You’ll need to refer to The Partnership Act 1890, but it doesn’t cover everything related to setting up a partnership so it’s important to enter into a general partnership agreement and ensure the relationship is properly documented.
More info: All partners must be registered as self-employed. The nominated partner will need to register the partnership for Self-Assessment with HMRC. You can register the partnership online or by using form SA400. Register as a partner using form SA401.
c. Limited partnerships (LPs)
Legal advice required: LPs generally deal with the set up and administration of complex funds, and partners have different responsibilities and debt liabilities. There must be a general partner who manages the business and at least one limited partner who is only liable for debts amounting to the sum they’ve contributed to the business. It’s vital to get professional legal advice on the roles each party should take, and to have a solicitor draw up agreements, including a limited partnership agreement, to ensure the arrangement complies with the Limited Partnership Act 1907.
d. Limited liability partnerships (LLPs)
Legal advice required: LLPs must have at least two permanent designated partners. Partners’ financial liabilities for the debts of the business are minimised. It’s essential to get legal advice on the LLP agreement detailing each partner’s responsibilities, who the decision makers are, the split of profits and the process for severing ties with the business. A solicitor should draw up the documentation.
More info: After seeking legal advice, you can register your LLP yourself on form LL IN01
e. Limited companies
Legal advice required: The most common type of company is a company limited by shares (private or public). A limited company is responsible for its own debts and liabilities. Limited companies must be incorporated at Companies House and are subject to ongoing filing and disclosure obligations. If you have more than one shareholder in your company or someone else has more than a 25% share, you’ll need legal advice to ‘incorporate’ your company and enter into a shareholders’ agreement. Articles of association tailored to the specific needs of the company must be filed at Companies House, who must be notified of any subsequent changes to the articles.
Here are some useful government guides on forming and registering different types of companies:
- Register a partner and a partnership
- Register a limited partnership
- Register a limited liability partnership (LLP)
- Register a limited company
- Register a social enterprise (multiple options)
Business premises agreements
Comercial property law is very complex so it’s advisable to get legal advice from a commercial property solicitor if your business is buying or selling commercial property, acting as a landlord of commercial premises or taking over a commercial lease.
You wouldn’t require specialist legal advice if you are a sole trader running a business from home. More information can be found on gov.uk.
Licences to trade
You can apply for many licences yourself, such as those for street trading, selling alcohol, and operating food premises. You can find a complete list here.
But there are some types of licences that are very specialist, which will require advice from a licensing lawyer. These include:
- Air carriers and civil aviation
- Controlled medical drugs
- Consumer credit
- Due diligence on licensing
- Gambling and betting licences
- Licensing any intellectual property
- Overseas trading, such as importing and exporting
At-a-glance task checklist: Do you need a solicitor for these tasks?
Choosing a business name – No
Preparing partnership agreements – Yes
Preparing shareholder agreements – Yes, if you have shareholders
Preparing articles of association – Yes, if you have shareholders and want articles that are particularised
Registering at Companies House – No, providing you have all the required documentation (for which you may need a solicitor)
Selling, buying or leasing commercial property – Yes
Getting insurance – No – find the correct business insurance at ABI
Obtaining licences to trade – Depends on the industry
Registering for VAT and other relevant taxes with HMRC – No
So, many of the tasks involved in setting up your company can be done without specialist legal advice, particularly if you’re a sole trader. But if you have a more complex business structure, it’s advisable to get help from a solicitor to ensure your company is built on sound foundations.
This is an edited version of a post that originally appeared on Harper James Solicitors. Read the full version to hear what Air CEO Nick Holzherr has to say about his experiences with legal advice when first setting up businesses.