Johnathan Rees - Do Protect: Legal advice for startups

Do Protect

Legal Advice for Startups

Johnathan Rees

Published by The Do Book Company 2014 Works in Progress Publishing Ltd thedobook.co

Text Johnathan Rees 2014 Illustrations Millie Marotta 2014

The right of Johnathan Rees to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988

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A CIP catalogue record for this book is available from the British Library

ISBN 978-1-907974-16-8

1 3 5 7 9 10 8 6 4 2

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Disclaimer

No book written by a lawyer would be complete without a disclaimer. This one is no exception. The topics covered here are vast and a book of this length could not be, and is not intended to be, a comprehensive review of the law and practice in these areas. In my defence it was never my intention to turn you into a lawyer (there are too many of us already) but rather to write a guide to the more significant issues to be considered, from a legal perspective, when starting a business. You should take legal advice before applying the information in this book to your specific circumstances.

For my parents, Beryl and Peter.
For my daughters, Megan and Bethan.
For Johanne.

Let me start by introducing myself and explaining the background to this book. I am a corporate lawyer and have been advising business startups for more than 25 years. Over that time its fair to say that I have developed an understanding of what makes an entrepreneur and, more importantly, the hurdles and mistakes which can sabotage the best ideas and fledgling companies.

The motivation for this book was to share with you some of the experience and knowledge I have gained working with startups in the hope that this will help you lay solid foundations for your business and recognise some of the pitfalls along the way.

Do Protect has a single, simple objective protection for entrepreneurs. From the initial decisions such as choosing the appropriate legal structure for your business to the everyday issues of dealing with customers and suppliers, raising finance and building a team, there are a variety of challenges which confront any new business it can be all too easy to trip up. Hopefully this book will help you make the right decisions to protect you and your business.

Recent data suggests this book is relevant now more than ever. In 2013, we saw in excess of 500,000 new business registrations in the UK, continuing the growth of the last few years. Even allowing for the fact that these will not necessarily be trading immediately, this is a staggering figure more so given the prevailing economic climate of the past five years.

Of course, there will be a variety of reasons to explain this statistic some more positive than others but the bottom line is, I believe, a fundamental change in peoples attitude to risk. This itself is driven by different factors, but the inescapable conclusion is a growing acceptance that the world has changed. For all the threats and challenges posed, change creates opportunities for individuals not just to achieve greater flexibility and variety in their work but, in turn, to gain more control
of their lives to become masters of their own destiny. A rapidly expanding network of private investors eager to back the right businesses to plug the so-called equity gap is further evidence of this trend.

Finally, a few words about what makes a successful entrepreneur. Despite what the textbooks would have you believe, in my experience there is no such thing as a typical entrepreneur. Different motivations drive different people age, gender and experience are no indicators. That said, the most successful business startups that I have encountered are invariably led by founders who count passion and commitment among their qualities and, just as importantly, attention to detail or at least have had someone they can rely on for that.

Like its objective, the basic message of this book is also simple. The devil always is and always will be in the detail getting the small things right from the outset so you can then focus on the bigger picture.

So good luck with your venture. I hope this book becomes a valuable member of your team.

Law

Speaking solely as a lawyer, the United Kingdom rather unhelpfully has three different systems of law: English law (covering England and Wales and including laws made by the National Assembly for Wales), Scottish law (covering Scotland) and Northern Irish law (applicable to Northern Ireland).

For the purposes of this book the terms English law or UK law mean the law of England and Wales. For those of you intending to start a business in another country remember that it will be subject to its own laws taking in most of the areas covered in this book. Where applicable, you should engage local lawyers for advice. However, broadly speaking, there is much common ground between countries and my hope is that even if you are starting a business outside of the UK, this book will be of help regardless of your location.

Best Business Structure

There are a hundred and one things to consider when you first decide to start a new business. The first and most important question, however, is how are you going to run your business? The how here is not concerned with your culture or philosophy but the simple question of the type of trading structure or vehicle you will use. As you will see, there are a number of options available, each involving different costs and formality and offering varying levels of protection.

Well look at each in more detail but the fundamental question to bear in mind is: Are you willing to be personally liable for the debts of your business?

There are of course other factors which might influence your decision, including: Will you be working alone or with others? Will each of you be equally involved in the running of the business? How do you intend to finance your business? What is your attitude to risk and exposure? However, the question of whether your assets, such as your house or flat, will be on the line invariably helps to focus the mind.

The trading structure you choose is important as the decision will affect matters ranging from your personal financial exposure to the risk perception of your business, flexibility for raising finance, levels of admin, how your business will pay its tax and how you will take money out of the business. In short, it matters.