According to the International Trade Centre, micro and SMEs account for 90% of all businesses globally and 70% of jobs. In the UK alone, The Federation of Small Businesses (FSB) estimates that there were 5.94 million small businesses (with 0 to 49 employees) at the start of 2020, with SMEs accounting for 50% of turnover in the UK private sector. To recognise their importance to global economies, the UN has designated 27 June as Micro, Small and Medium-sized Enterprises Day.
As we approach this year’s Micro, Small and Medium-sized Enterprises Day, if you’re thinking about setting up a new business then you’re certainly not alone. The weekly statistical releases from the ONS continue to show a sustained increase in the number of new UK companies being incorporated each week, compared to the summer of 2019. Some of these new companies will have been formed by existing sole-traders seeking to formalise their business structures, or serial entrepreneurs trying their hand at something new, but a portion can likely be attributed to workers experimenting with their own side-hustles alongside their day jobs. According to a study conducted by Henley Business School in 2018, 25% of adults in the UK described themselves as having a side hustle.
Whether you’re looking to supplement your income, start working on a passion project, or you’ve spotted a gap in the market, if you’re ready to flex your entrepreneurial muscles we’ve outlined five things to think about as you get started.
1. Think about incorporating a company
It’s a good idea to run your business through a company as it can provide valuable protections for you and your business. Not only will a company structure separate your business’s finances from your own (so that creditors can’t go after your personal money or assets for debts owed by your business), but it can also make it easier to get investment or trade credit for your business and there can be tax benefits. It also makes your business look more professional!
It’s fairly straightforward to register your business as a company and our Starting a company toolkit will guide you through the process. It contains all of the documents you need to set up a company from scratch and a how-to guide to make sure you get the details right.
2. Choose your name and branding carefully
As your business grows, its name and branding can become really valuable assets in their own right so it’s important to have this at the forefront of your mind when you get started. You need to make sure your name and branding are original and permitted under law, and then take steps to protect them.
Checking your name and branding are original and allowed under law
If you end up infringing someone else’s intellectual property (IP) because your name or branding is too similar to theirs, they could sue you or force you to stop using your branding and name. Not only will this cost you time and money, but you could also lose any goodwill you’ve already built up in your new brand. Our Q&A contains guidance on how to check that your proposed business name, domain name and logo aren’t already being used by someone else.
In addition to possible IP infringements, there are also certain restrictions on what company name you can use if you decide to incorporate your business, and what branding you can register as a trade mark if you want to protect it. For example, if you’re going to be incorporating your business as a company now or in the future, you’ll need to think about the following when choosing your name:
- your company’s name can’t be the same as another company’s registered name;
- it must not include certain restricted terms, such as offensive words or expressions or other words that require prior consent from other authorities or bodies (eg ‘Olympic’ or ‘Red Cross’); and
- there are restrictions on the use of certain symbols or punctuation (eg #, *, =, % and + can’t be used in the first three letters of your name).
Protecting your brand and name
Your business name is very much associated with your brand and it’s a good idea to consider registering your name and your logo (if you have them) as trade marks. This will protect your business from copycats and prevent competitors from capitalising off your brand reputation and goodwill. If you’re going to protect your business’s name with a trade mark, it will need to meet certain requirements. For instance it must be distinctive, which means the trade mark must be clearly attributable to your business and distinguish your goods and services from those of your competitors. For example, invented words like ‘Sparqa’ or original names that are not linked to a description of a product (like ‘Red Bull’ for energy drinks) are likely to be distinctive.
If you’re thinking about registering your name and/or other branding as trade marks, our Step-by-step guide to apply for a UK trade mark online will guide you through the process. Our Q&A will also provide you with detailed guidance about choosing a company name and the requirements for registering a trade mark.
3. Set out your terms of business in writing
If your business provides goods or services to other businesses or consumers, there are real practical benefits to using proper written contracts or terms and conditions to set out your terms of business. For example, using a contract or terms of business can:
- make sure you and your clients or customers are on the same page about what service or goods are being provided and how;
- improve your cash flow by setting out your payment terms so it’s very clear what’s due and when, and how payment should be made;
- provide important protections for your business if something goes wrong (eg by limiting your liability); and
- help you to comply with consumer laws if you sell your goods or services to consumers (eg you can set out cancellation policies for consumers buying from you online).
To create your own customised standard terms of business, we have template T&Cs suitable whether you sell goods, services or both. If you provide your services on a freelance or consultant basis, our template consultancy agreements will help you to set out your terms, whether you work through a company structure or as a sole-trader.
4. Set up your online presence properly
Depending on the nature of your business, setting up an online presence can be a really crucial way for you to reach new customers and clients and to build brand awareness. When setting up your website, it’s important to do things properly as not only are there certain legal requirements to bear in mind, but there are also important protections for your business that are worth considering. For example:
a) Complying with data protection and cookies laws
b) Protecting your business from copyright and other infringements
Create your own using our customisable template.
c) Making sure your content is original
If you don’t make sure that the content on your website is original, you could end up in hot water. For instance, writing, music and images are usually automatically protected by copyright, which means you’ll need the owner of the copyright’s permission if you want to use it on your site. If you wind up infringing someone else’s copyright, they could make you remove the work form your site and/or pay them compensation. Equally, make sure your branding and website design is original; if it resembles any recognisable brands too closely you may be asked to take it down and/or pay compensation.
Find out more about using someone else’s Intellectual Property in our Q&A guidance.
5. Remember that cash is king!
Cashflow is usually crucial to any business, and if you’re just starting out it’s important to put in place proper processes from the start to ensure that your new business stays afloat. An important aspect of this will be proper invoicing. By creating an invoice template for your goods or services that’s easy to understand, clearly states the payment due date and includes your bank details alongside any other acceptable methods of payment, you can help to avoid queries from your customers delaying payment. There are also strict legal requirements about what to include in an invoice depending on whether your business charges VAT or not.
Finally, look after yourself! Setting up a new business can be all consuming, making it difficult for entrepreneurs to switch off. Sparqa Legal is here to support you and your business as it grows by helping you to manage your risk and get your legals sorted.
Before joining Sparqa Legal as a Senior Legal Editor in 2017, Frankie spent five years training and practising as a corporate disputes and investigations lawyer at leading international law firm Hogan Lovells. As legal insights lead, Frankie regularly contributes to Sparqa Legal’s blog, writing content across employment law, data protection, disputes and more.