To add to the challenges of starting a business, you have to navigate the complex legal requirements that enable your business to legitimately run without repercussions. There are several requirements that your business needs to meet, but it can be extremely confusing, overwhelming, and even frustrating, trying to figure out what your business requires to remain compliant.
Not only are there a plethora of commercial benefits from staying legally compliant, but it will also ensure your business can scale and grow, as well as ensure the wellbeing and safety of your employees. It will also protect you in the unfortunate event that you face any problems or lawsuits. Legislation that you need to be aware of ranges from the legal registration of your business, advertising standards, insurance policies and permits, safety and testing of buildings and equipment, employee wellbeing, ethical and responsible operations, avoiding criminal behaviour, and much more.
You should endeavour to learn about the rules and legislation that you must follow for your business and industry. Regulations and obligations can be a headache for anyone to follow, especially when they are regularly changing and being updated. To help small businesses keep up, there are a plethora of resources and organisations that can provide you with professional help to support you on your journey, and ensure you remain up-to-date and compliant.
If you do not have the right things in place when starting and running your business, you could face hefty penalties and fines that could impact your business, or worse, put you out of business. If you don’t have the structure, frameworks and compliance in place from the start, you could disrupt your business later down the line trying to resolve any issues that you will inevitably run into. You must understand the steps you need to take when starting your business, and how you can remain compliant.
To help you navigate the complex legal requirements and obligations that businesses face, here are some of the most important legal requirements that you should consider when starting a business.
#1 Register your business
The first and most important step when starting a new business is to identify the type of business, the legal category it falls under, and the structure of your business, and ensure that you officially register it. This gives your business a legal identity, credibility and prestige. Customers are much more likely to trust a business that is set up, can be found on companies house and is licensed. A registered business looks more legitimate and stable.
A registered business will ensure that your liability is limited and that you can comply with tax laws. This will protect you in the case of any damage or lawsuits as your personal and business finances and interests are kept separate. It also works the other way around and protects your business finances if you are individually involved in a problem.
It is extremely quick and easy to form a Public Limited Company online, as you no longer need to fill out complicated paperwork and wait weeks for a response. The Companies Act 2006 contains provisions that impact all companies and outline how they can remain compliant.
#2 Obtain the necessary insurance policies
In any line of work, you can expect a plethora of risks. Obtaining the relevant insurance policies for your business will ensure it is protected in the unfortunate event that anything goes wrong. There are also certain insurance policies that businesses need to obtain to remain compliant within their industry. Employer’s liability insurance is a policy that is required legally for all operating businesses in the UK with employees. This will ensure that you are covered in the case of an injury or illness, and compensation is sought from an employee. While this is the only one that you are required to have legally, it can benefit your business immensely if you invest in additional insurance policies to protect your business. Some of the most common insurance policies that are sought are:
- Public liability insurance
- Business contents insurance
- Professional indemnity insurance
- Directions’ and officers’ liability insurance
- Cyber liability insurance
- Product liability insurance
- Business interruption insurance
- Credit risk insurance
#3 Comply with data regulations
As a business, you are likely going to handle sensitive information, such as the personal and financial information of your employees and your customers. It is therefore vital that you follow your legal responsibility to:
- Only use data in a proper and legal way
- Only collect data for specific purposes
- Store only relevant data in a safe and secure way
- Keep the data accurate and up-to-date
- Ensure your business creates and shares a clear policy on why collecting customer and employee data is relevant to the transaction (contractual or financial), how their data will be used, and why
- Ensure it is stored with a secure software
- Not transfer it to any business or outside of the UK unless protection is in place and there is a good reason to do so
- Ensure you place a time limit on the data that only keeps it for a necessary period, that is not excessive
- Once the time limit has passed, you must have a clear procedure to destroy the data
The General Data Protection Regulation (GDPR) is a data protection law that businesses must comply with to ensure the best privacy and security requirements are implemented within the business. Compliance with GDPR ensures that both businesses and individuals are protected.
#4 Health and safety
All businesses are required to adhere to health and safety regulations. The requirements will vary depending on several factors. Here are some examples that may impact the health and safety regulations that you must follow as a business. If you:
- Have a building or office space
- Hire employees
- Interact with customers
- Develop products
- Cook food
- Operate machinery
Some of the most common health and safety requirements relate to the quality assurance on products, the safety and hygiene of food in dining establishments, reasonable working conditions that have adequate heating, lighting, toilet facilities, ventilation, hygiene and workspace within an office building, elimination of workplace hazards and unsafe environments, ensuring the correct personal protective equipment (PPE) has been provided and much more. It is important that you learn about the requirements of your business, to remain compliant.
#5 Employee requirements
If you choose to hire employees, you must cover all your bases. Firstly, you need to ensure you agree to a salary that meets the National Minimum Wage requirements. All employers are required to pay this amount, and it can easily be checked and calculated on the Government website. If you do not follow these rules and underpay your employees, you will risk being liable for a fine of up to £20,000 per individual.
Secondly, you will need to ensure that you create a legally binding written statement that sets out the terms and conditions of the employment. This should be agreed upon and signed within two months of the start date, and include all the responsibilities of the employee, and the employer. It should also include the full name and address of the company and employee, the start date of employment, the start date of the contract, the end date of the contract if an application, job title and full description of duties, agreed on salary, hours of work, holiday entitlement, notice period, sick pay, and any other relevant details.
Starting a business can be an extremely challenging time. It is therefore important that you understand what legal requirements you need to meet, to ensure you keep risks and problems to a minimum. Following legal requirements will ensure you remain compliant and can grow your business.