Common legal mistakes when setting up a business

Choosing the wrong company name

Either not checking if someone else is using a similar name - see our tips on how to choose a name for your business or deliberately choosing a name similar to an existing business so that people mistake you for them.  It's called ”passing off” and you'll probably have all the expense of changing your name at some point further down the line.

Infringing someone elses Intellectual Property

'Intellectual Property' is something that's created, like an invention, a brand identity (including words, logos and signs), or the creation of music, a film, art, or literary work.  It's important to protect your own intellectual property but just as important not to infringe someone else's.  Find out more about protecting your intellectual property.

Not setting up a business partnership properly

You could create a partnership without even realising it! If you run a business with somebody but don’t employ them, they're effectively a partner in the business, and entitled to a share of the profits.  If friends or family have given you money to start your business establish from the outset whether they consider it a loan or if they expect to be a partner in the business.

If you want to set up a partnership do it properly by having a written partnership agreement. This should include who the partners are and what happens if one of the partners wants to get out of the business.

Ignoring the Data Protection Act

The rules apply to electronic and paper records and essentially mean sure you shouldn't hold more details than you need, and what you do hold is kept secure, not passed to anyone else, and deleted once you've finished with it. For more information see Understanding the Data Protection Act

Not having proper legal agreements

It'll save you a lot of time and possibly money too, if you have clear written statements for any agreements you make.  Binding contracts can be made verbally but it's easier and safer if you put them in writing.  See Why you need contracts.

Save yourself the cost of using a solicitor by using legal contract and business agreement templates.  They're ready to download and customise. 

Not having the right employment policies and processes in place

When you employ staff make sure you follow the right staff recruitment and management processes such as having Employer's Liability Insurance and providing employment contracts. 

Find out more about how to employ staff and what you need to put in place

Not having the right business insurance

Some business insurance is compulsory, such as if you employ staff or have the general public visiting your premises.  Other types of business insurance are optional but are a sensible precaution to protect your business.  Find out about more about compulsory and optional business insurance