Starting up a new business involves a number of key decisions with legal implications, from buying the business itself to drawing up staff contracts.

However, many small businesses neglect to seek professional support for legal matters, seeing it as an unnecessary expense or one that can be put off to a later date. Business owners often try DIY methods of dealing with legal issues rather than seeking professional legal advice, and by the time they realise professional support is needed it is often too late.

As a result, there are a number of key problems that arise for start-up businesses avoiding legal support. These include:

• Failing to understand the importance of limiting liability and, if going into business with someone else, failing to have an appropriate shareholder or partnership agreement in place.
• Not having the right contracts in place. It is not as simple as just drawing up a document but requires an understanding of basic contract law and contractual requirements.
• Failing to get access to business finance or loans because of a refusal to seek legal advice. Not seeking legal advice can adversely impact the chance of a business getting access to finance. Lenders will assess credibility and attitude to risk, and if it appears that a business hasn’t considered potential risks or planned ahead appropriately, this can be a limiting factor for lending.

Addressing potential legal issues early on is preferential to dealing with the ongoing cost of a legal issue or, worse still, the cost of a failing business. It is better to plan ahead and find out what potential issues businesses may face, and how to head them off, before costly issues arise.

By preparing thoroughly for legal meetings, it is also possible to keep costs to a minimum. You might not know all the questions you need to ask, but by making sure you have a clear idea of what you want to get out of the meeting, it will save a great deal of consultation time. For example, you might look at the following aspects of the business:

• The ownership and legal status of the business;
• The product or service that the business is delivering and the rights implications of this;
• Who will be providing the service (employees, contractors or consultants);
• The other services you might require assistance with (e.g. developing staff contracts, policies and HR, tax and accounts).

Solicitors are increasingly aware of the potentially off-putting costs of legal services, and many now offer free initial consultations and payment plans to help fledgling businesses with cash flow. A good solicitor will develop an ongoing relationship with start-up clients, becoming a sounding board for general queries as well as an expert eye when major situations arise.

Contact our commercial team to find out how we can help you start your business.