Ask the Expert - Business Start-Ups

AS more and more people look to set up their own business, Geoff Brooke-Taylor of Coventry and Warwickshire law firm Alsters Kelley offers seven simple steps to help get a new business venture off on the right foot.

WITH many people changing career direction, this can be an ideal time to set up a business and control your destiny. Careful planning at the outset will prevent problems later. There are seven simple steps that I recommend and the first is to decide on a name and protect it.

Research potential names thoroughly and make sure they don’t conflict with others or have embarrassing connotations in other languages. If the name is particularly inspired, consider registering it as a trademark - although quite technical, it basically means that no-one else can use the name for similar purposes.

Also you need to know your obligations, sole traders and partnerships do not have the same financial transparency requirements as limited companies but the owner’s or partner’s liabilities are unlimited – if something goes wrong then you could lose your house to cover the business debts. A company director, however, is not personally liable unless he has either given a personal guarantee or breached his Companies Act obligations.

You should protect your share. A shareholder or partnership agreement is vital. This covers the whole relationship, including what happens if joint owners fall out; the last thing you want to do is go to court to have the business wound up – a very expensive solution if you don’t have a procedure written down.

Try not to confuse the different roles in a company. Shareholders own the business but can also be directors and employees. Directors have legal responsibilities for the actions of their companies and can face severe consequences if they continue to trade when a business is insolvent. An employee has yet another set of rights and duties.

Every company should have terms and conditions which must be known to both sides before starting to trade. You cannot demand payment after 14 days if the other side was not aware of these terms. But you must face commercial reality. If you deal with a major high street chain, you probably have to accept their conditions or not trade with them at all. Agency arrangements, distributorships and franchises all have terms to be negotiated, too.

Also property really matters. Many people start out their businesses without paying enough attention to whether they have a lease, a licence, or use of a friend’s premises, and more importantly, what the terms of that relationship are. Getting things clear, up front, and in writing is vital so you can get on with growing the business.

Finally, a brilliant idea is just that – an idea. Patents, trademarks and design rights offer long-term protection if your idea qualifies as an invention, brand or design (intellectual property). Even if somebody thought of an idea after you did, if they patent it before you do then it locks you (and anyone else) out for up to 20 years.

Running a business is a huge adventure and the clearer your path, the fewer obstacles you will encounter.