A Legal Checklist for Startups 

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When setting up a business, you should get your legals in place as soon as possible to avoid complications later down the line. 

In this blog, we outline the legal considerations as a startup:

1) Tax 

  • You need to legally register your business with HMRC and pay the government tax from this business 
  • Click the link here to start your application today: https://www.gov.uk/set-up-business 

2) Insurance

  • Depending on the type of business you are and your legal business structure, you will need different insurances in place

A few, but not limited to, insurance policies you need to consider: 

  • Professional Indemnity Cover
  • Employee’s Liability Insurance
  • Public Liability Insurance 
  • Contents and Portable Equipment Insurance 

3) Shareholder Agreement

  • “An agreement between the shareholders of a company, which generally sets out the shareholder’s rights, privileges and obligations” 
  • You should have this in place if you are setting your business with someone else
  • This is not a legal obligation, however, if not done it will be harder to deal with disagreements between you and your business partner

4) Customer Contracts 

  • Suitable contracts with your consumers are essential just in case something goes wrong 
  • It is good to have a clear and written document of what goods and services you are providing for your customer, so they don’t claim against you 
  • You risk being sued or losing your business rights if you do not adequately protect yourself in your contracts! 

5) Data Protection Compliance 

  • Firstly, you must register your company with the Information Commissions Office, and pay the registration charges 
  • All businesses must comply with the retained EU Law Version of the General Data Protection Regulation ((EU2016/679), known as the UK GDPR, as well as the Data Protection Act 2018 (DPA 2018), and the Privacy and Electronic Communications Regulations if using such data to market to customers (PECR)
  • To comply with data protection rules, you must first comprehend them and how they affect your organisation, after which you must implement suitable policies and notices. Professional counsel can be costly, but it will save you a lot of time since Data Protection Compliance is complicated, and we have found that if you do not seek professional guidance, you are unlikely to do things correctly. If you’re working with “special category data”, as displayed here:
  • Disclosing racial or ethnic background
  • Revealing political viewpoints
  • Showing religious or philosophical beliefs 
  • Revealing trade union membership
  • Data concerning health 
  • Data concerning a person’s sex life, or data concerning a person’s sexual orientation
  • Genetic data
  • Biometric data (when used for identifying purposes)
  • Data concerning a person’s sex life
  • Data respecting a person’s sexual orientation

The ICO is more likely to come down hard on an organisation that gets things wrong when processing this kind of data, so it is sensible to seek expert guidance right away.

6) Supplier Contracts 

  • You will need to agree to your supplier’s terms and conditions of business 
  • Make sure you read and DOUBLE CHECK the contract to make sure it is fair for both you and the suppliers
  • Make sure you check the terms and conditions of your payments with them – how long do they last? – you do not want to get unintentionally tied in for the long run 

7) Companies House 

8) License to Occupy/Lease 

  • Most startups nowadays avoid committing to a long-term lease, instead opting for a serviced office with a 12-month license to occupy 
  • Be clear about payments your company will be responsible for, keeping an eye out for hidden costs now and in the future
  • The termination clauses are the other highly significant elements – look for a condition that states that unless you give proper notice to discontinue the license, it will automatically renew for another 12 months (so many businesses overlook this and end up locked in for another 12 months)
  • If you’re going to sign a lease, get it reviewed by a lawyer who specialises in this field because leases can be full of traps for the unwary

9) Staff Contracts 

  • Legally you must have suitable contracts in place with your staff 
  • Basic contracts cover if an employee leaving does not cause harm to the company by working for a competitor or stealing confidential information such as customer lists or intellectual property 
  • If the case is more complex, get an employment lawyer!
  • You might consider having a staff handbook written in addition to your employment agreement – this can contain your regulations on behaviour and standards, as well as disciplinary and grievance procedures
  • If you’re a high-growth business, you should create a staff handbook right away!
  • Offering a pension to your employees is a legal necessity, so be sure you know what you need to do for this

10) Legal Notices/Policies 

  • A privacy notice and, if your website uses cookies, a cookie notice should be shown on your website – other website notices, such as approved usage and website terms of use policies, are optional, but they are inexpensive to obtain, provide some protection, and make sure you appear professional.
  • A written health and safety policy is required if your company employs five or more individuals 
  • Although it is not required, you should implement an equal opportunity policy – if you don’t, an employee’s claim of discrimination may be used against you 
  • If there’s any chance that someone in your company or supply chain will bribe someone else, you should have a ‘Bribery and Anti-corruption’ policy in place – If you do not, it is unlikely that you will be able to show that your organisation had effective anti-bribery processes in place, and criminal penalties may be imposed.

Other Considerations 

  • Anti-bribery Compliance 
  • Non-disclosure Agreement to deliver to individuals or other businesses
  • Trademark registration 

For more on legal considerations as a startup, visit our video here: https://thefinancedepartment.co/watch/day-one-legals-for-start-up-to-sme/