Building a business is incredibly exciting, but there is another side to it where you’re having to deal with the government (and a massive mountain of paperwork) just to keep the lights on. It’s so tempting to just focus on the fun stuff like marketing and product design but there are lots of legal obligations that you need to make sure you’re following as well. Getting the legal side of your business sorted out early is the absolute only way to actually protect the money you are working so hard to make every single day. 

Business structure

When you first start out you have to decide exactly what kind of entity you actually want to be and it makes such a difference to your future. A lot of people just start selling things and default to being a sole trader because it’s easy and you barely have to do any paperwork to get rolling. That’s fine for a very small side project, but it means your personal money and your business money are the exact same thing in the eyes of the law. If someone sues you for a mistake you’ve made then they can literally come after your house and your personal savings. Setting up a limited company puts a protective ‘wall’ between your personal bank account and your business liabilities, so if everything goes horribly wrong you only lose what the business actually owns.

Taxes

Taxes are the absolute worst, but they’re a reality of making money and you have to face them head on. You’ve got to understand exactly what you owe the government before you start spending your profits on new equipment or expensive office furniture. Every single time you get paid you need to put a percentage of that cash straight into a totally separate savings account that you never touch so you are actually ready when the tax bill finally arrives. If you wait until the end of the year to figure out how much you owe you are going to be in for a huge shock that could bankrupt you. You also have to think about value added tax if your turnover hits the threshold because suddenly you are legally required to charge an extra twenty percent on top of everything you sell and then hand that extra money straight over to the state. It completely changes your pricing strategy and your cash flow so you need to be watching your revenue numbers like a hawk every single month.

Insurance

You might think you do not need any kind of business insurance if you are just working from a laptop in your living room but that’s a huge mistake! People are incredibly unpredictable and things go wrong all the time when you are dealing with the public. If a client trips over a power cable during a meeting, or someone claims your professional advice caused their company to lose thousands of pounds you need serious protection. Public liability insurance covers you if someone gets hurt or you accidentally damage their property while you are working on their premises. Professional indemnity insurance is what saves your skin if you make a mistake in your work that costs your client a ton of money and they decide to sue you for damages. Use a business insurance broker to find the right policy, without it you’re basically gambling with your entire livelihood every single time you take on a new project or sign a new client. Paying a small monthly premium is absolutely nothing compared to getting hit with a massive legal bill that completely destroys your company.

Licenses

Almost every physical business and a surprisingly large amount of digital ones require some kind of local authority license before you are legally allowed to start trading. You need to check with your local council to see exactly what permits apply to your specific industry and then you actually have to fill out the long forms and pay the application fees. 

Contracts

If you agree to do a big job for someone and you dont write anything down you are going to have a really hard time forcing them to pay you when they suddenly change their minds three weeks later. You need a solid piece of paper that clearly outlines exactly what you are doing and exactly how much they are paying you and exactly what happens if the client doesnt like the work or decides to cancel the project halfway through. You need clear terms of service (that both of you read and sign before you start doing any actual work). It sets clear boundaries and it stops demanding clients from asking for endless revisions because they know exactly what they paid for right from the beginning.

Protecting customer data

If you run any kind of business today you are collecting data whether you realize it or not. You are grabbing email addresses and storing payment details and keeping permanent records of exactly what people buy from you over time. You have a strict legal obligation to keep all of that private information completely secure and you have to tell people exactly what you are doing with their data. If your website gets hacked and a bunch of customer emails get leaked onto the internet you can face enormous fines if you dont have the right security and privacy policies in place beforehand. 

Employment laws

Hiring people is the absolute best way to scale your operations but it requires a totally different level of legal compliance and human resources management. You also have to follow incredibly strict employment laws regarding working hours and paid holidays and workplace safety standards. If you treat your employees poorly or you try to cut corners on their employment contracts you will eventually end up in a tribunal facing a lawsuit that could ruin your reputation.