Legal Compliance: Tips for Small Business Owners

Date Added 17.04.24

Navigating the intricacies of small business management is a path that has its fair share of hurdles, as the business landscape is riddled with opportunities for missteps. Amid the numerous challenges, small business owners face legal compliance, whilst incredibly important, should be carried out with caution as mishandling it can lead to substantial repercussions and costly mistakes being made. Being legally compliant not only helps you to protect your business but also promotes it by ensuring you have the right legal documents in place to ensure your business succeeds.

Below Tollers Commercial Services Team outlines their top tips for ensuring that you protect your business, as well as a review of the essential compliance documentation that is needed for your business.

Legal Entities used by business owners:

The main types of legal entities used by business owners are:

  • Sole Trader: in this situation, a person just sets up a business without using a separate legal entity. The benefits are that this is cheap and easy to do, but the main downside is that the Sole Trader is personally liable for the debts of the business;
  • Partnership: this is used when two or more individuals get together to make a profit. The risk remains that they will be personally liable for the debts of the business.
  • Limited Liability Partnership: the main benefit is that the partners have limited liability. The members act as the agents of the LLP and are only liable up to the amount they have contributed to the LLP.
  • Limited Liability Company: this is a very common legal entity used by business owners as it provides limited liability for shareholders (i.e. the price payable for their shares).

Top Tip: Commercial contracts: having the correct contracts in place.

A common oversight among small business owners when it comes to legal compliance is not having the correct documentation in place. Having contracts in place will help reduce the risk of disputes and costly litigation. These documents may include:

Standard terms of business:

we expect that every business has a set of standard terms of business, but if they don’t then they should do. This is a vital contract for your business as it sets out the terms on which you will do business including the goods or services you provide, when they will be provided, the price, limitation of liability, warranties, payment terms etc.

Tailored contracts with customers and suppliers:

if you don’t provide homogenised goods or services then you should have tailored contracts with your customers. Although probably based around a core precedent contract you can tailor this contract for each new matter.

Non-disclosure agreements (NDAs) to protect your confidential information:

if you are going to discuss anything that includes confidential information then please have an NDA in place before that conversation, otherwise, you could find that information getting to your competitors.

Protect your key intellectual property:

In general, intellectual property falls into two types, registerable and non-registerable. If your business is based on intellectual property rights such as patents, trademarks and copyright then it is important to take specialist advice.

Shareholders agreement:

This is one of the most important documents you can have as it regulates the relationship between the directors and shareholders. This is a private contract that usually deals with the transfer of shares, dividend policies, disputes, and the sale of the company. This contract is vitally important because the law does not provide much assistance to shareholders in a dispute except for the “just and equitable” winding up of the company if matters cannot be resolved (i.e. one shareholder buying out the other). Please ask us for a free copy of our Guide to Shareholder Agreements.

Top Tip: Internal compliance:

The law sets out that certain documents must be in place in the business. Depending on the type of business you have you will need to have the following documents in place as a minimum:

Data protection and GDPR policies:

These policies outline how a business collects, processes, uses, stores and protects their customers/clients’ personal information in line with the General Data Protection Regulation (GDPR).

Privacy policy for your website:

Your website privacy policy is a legal document that informs visitors to your website about how your business collects and deals with their data, what data is collected, and how it may be shared or sold.

Registration with the ICO:

The Information Commissioner’s Office is the government body responsible for regulating data protection in the United Kingdom. Being registered is a legal requirement if your business processes any personal information and shows your compliance with data protection laws.

You can register online by visiting the ICO website here:  https://ico.org.uk/for-organisations/data-protection-fee/.

Health and safety manual:

A business’s Health and Safety manual should contain all of the policies, procedures, checklists and templates to help ensure that a business has safe systems in place to prevent accidents/injuries in the workplace.

Staff manual:

Also known as the staff handbook or employee handbook, this important collection of documents and policies provides your employees with all they need to know in regard to working for your business. It includes information on employee benefits, the business culture, codes of conduct, attendance, reporting lines, disciplinary processes and much more.

Employment contracts and compliance with employment laws and regulations:

An employment contract summarises the agreement between an employer and employee and outlines the details of their employment. These vital documents assist both parties as they create a clear understanding of what is expected during the term of employment with the business.

Insurance including employer’s liability insurance:

As a business, it is important to have business insurance in place, as this provides financial protection in regard to loss caused by events that may arise during the day-to-day running of your business and should cover matters such as legal costs, theft, accident, injury or loss of income. Employers’ liability insurance is also important as it covers your business in regard to any claims you may receive from your employees should they fall ill or get injured at work. It is a criminal offence if a business does not carry employers’ liability insurance.

Statutory registers:

Under the Companies Act 2006, all companies are required to keep statutory registers and they include:

  • Register of shareholders;
  • Register of directors;
  • Register of secretaries;
  • Register of members;
  • Register of people with significant control;
  • Register of directors’ residential addresses;
  • Register of charges.

Talk to Tollers:

These are just some of the key documents you should have in place. Depending on the nature of your business others may be required.

As a business owner receiving the best legal advice is vital. If you would like guidance to ensure your business has everything required in place and is legally compliant… Talk to Tollers on 01604 258558, our experienced Commercial Services Team is on hand to provide you with the advice you need.

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