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5 Top Legal Tips to Protect Your Business

Your Business’ Corporate Structure

Partnership: If you are in a partnership, then you should enter into a Partnership Agreement otherwise you will be subject to the Partnership Act 1890 which most likely not right for your business.

More than one shareholder in a Limited company: You need to enter into a Shareholders Agreement which is basically a business pre-nup agreement between you and your co-shareholder. Without an agreement you can be in a situation whereby your co-shareholder resigns but they will still own 50% of the business. This means that whenever you declare dividends, the departing shareholder would be entitled to 50% of them.

Your People

Employees: it is very important that you have any employment contracts in place and staff handbook which comprises of a list of policies that deal with variety of issues such as disciplinary procedures, redundancies, maternity leave, paternity leave, use of the Internet, adverse weather conditions, etc.

Freelancers: There are two fundamental things you should know about freelancers. First is relevant to Intellectual Property and the second to their legal status.

Freelancers & IP: If at any point in time you instruct a freelancer to make a design for you, draw your logo, set up your website, write content for you, etc. it is the freelancer who owns the intellectual property rights in the work and not you! It doesn’t matter if you commissioned the freelancer or how much money you paid. The general principle of law is that the creator automatically owns the intellectual property rights in what they’ve created. There are two exceptions to the rule: first if the creator is your employee and the second if the freelancer assigned the IP rights to you in writing either via a Freelancer Agreement or via an Assignment Agreement.

Freelancers & Legal Status: The fact that you decide that the person your business engaged to provide services is a freelancer alone, does not make them a freelancer in law. To determine whether an individual who is engaged by your business is engaged as a freelancer or as an employee (regardless as to what contract you have entered with them), the courts will carry out a number of tests such as how much control you have over the freelancer, whether the freelancer uses their own tools (as employees will use company tools), whether you pay them during absence (indication of employer-employee relationship), etc.If the freelancers are held to be employees, then they will be entitled to all the employment law rights including minimum wage and holiday pay. Also HMRC will then demand all the Income Tax & NICs that will then fall due.

Your Relationship With Third Parties

The most important third-party for every business is the clients. It is therefore of fundamental importance that you have proper Terms & Conditions of Business in place. What you must remember is that every interaction with your client (whereby they buy your products/services) is a contract, even if the transaction was not agreed in writing.

Your Property

Physical property: if you’re working from commercial premises such as an office, restaurant, workshop, etc. then you must have entered into a legal arrangement with the landlord. You may have entered into a licence or lease or you may have bought the freehold. It is fundamentally important to have these agreement looked over. Every lease can be negotiated when it comes to rent, break clauses dilapidation provisions, etc.

Intellectual property: there are a number of ways to protect your intellectual property. First and foremost is trademark. You can trademark your business name, logo, slogan, etc. Also contracts, be it with your business partners, employees, freelancers or clients, they should all include IP provisions where relevant.

Your Contentious Matters

Unfortunately it is very likely that your business will encounter contentious matters along the way which are likely to be either a debt recovery matter or litigation. Having good solid contracts in place and sound debt recovery systems, could substantially minimise your exposure to liability and disputes.

Posted by Penina Shepherd on October 15, 2015