Legal Tips Every New Business Owner in the UK Should Know

It’s exciting to start a new business, but it’s also easy to feel overwhelmed by everything you’ll need to think about. The most important (and often most boring) are the legal bits. Nobody likes reading legal documents, but not reading them could cause you some real trouble down the road. We’ve put together this easy, no-nonsense guide with legal tips that every new business owner should know.

1. Choose the Right Business Structure

First things first—you have to choose a legal structure for your business. That will affect how you pay tax, who’s on the hook for debts, and how much paperwork you’ll have to worry about. In the UK, the most well-liked options are:

• Sole trader: Can be set up most easily. You’re personally responsible for debts. Makes sense for small businesses or freelancers.
• Partnership: Two or more people are in various degrees, responsible and will share in the profits. They remain personally liable.
• Limited company: The company itself is a distinct legal person. Your personal assets are safer. More admin, though.

Pause and consider what is best for you. Sole trader sure sounds easy, but you’re on the line if something goes wrong. The limited company is more paperwork but offers better protection for you.

2. Register with HMRC (and Companies House if Needed)

If you are a sole trader, then, in order to pay tax through self-assessment, you will need to register with HMRC. You will also have to register at Companies House if you are setting up a limited company. It’s not very difficult, but you’ll have to supply information such as your company name, address, and information about directors and shareholders. Don’t skip this. And the penalties for failure to register can pile up, fast.

3. Don’t Skip Insurance

When you’re just starting out, you may think you don’t need insurance, but it’s one of those things you will wish you had if something goes wrong. At a minimum, think about:

• Public liability insurance: If someone has been injured or property has been damaged because of your business, this is what will cover you.
• Employers’ liability insurance: You must have this if you employ anyone, including part-time staff.
• Professional indemnity insurance: If you offer advice or professional services.
• Product liability insurance: If you sell physical products.

Shop around for quotes. It needn’t be costly.

4. Know Your Tax Obligations

Tax isn’t fun, but you can’t ignore it. Make sure you understand what you need to pay, and when. Sole traders pay Income Tax and National Insurance on profits. Limited companies pay Corporation Tax. VAT kicks in if your turnover goes over £90,000 (as of 2024). Keep good records from day one. Save receipts, invoices, and expenses. It’s a pain at first but will save you stress when your tax return is due. Consider getting an accountant, even if it’s just once a year to check your return. They’ll often save you more money than they cost.

5. Don’t Forget About GDPR

If you collect, store, or use people’s personal data (even email addresses), you need to follow UK GDPR rules. It’s not as scary as it sounds, but you do need to:

• Tell people what data you collect and why.
• Keep it secure.
• Only keep it as long as you need.
• Let people see or delete their data if they ask.

Put together a simple privacy policy for your website. Even small businesses need one these days.

6. Check Licences and Permits

Depending on what you do, you might need a licence or permit. Examples:

• Selling food? You’ll need food hygiene registration.
• Playing music in your shop? You might need a licence.
• Running a market stall? The council may need to approve it.

Check with your local council or gov.uk. Don’t just assume you’re fine because your business is small.

7. Write Down Your Agreements

Even if you’re starting with friends or family, always put things in writing. That includes:

• Partnership agreements.
• Shareholder agreements.
• Terms and conditions for customers.
• Contracts with suppliers.

It avoids confusion later. You don’t want to fall out over who owns what, who gets paid what, or who does which job.

8. Protect Your Brand

You’ve come up with a great name, logo, or design? Make sure it’s protected.

• Check it’s not already taken: Look on Companies House, the IPO trademark search, and a simple Google search.
• Register your trademark if you want to stop others copying it.

It’s cheaper to do this early than to fight over it later.

9. Keep Good Records

It’s boring but important. HMRC can ask to see records going back years. Keep:

• Invoices and receipts.
• Bank statements.
• Contracts.
• Employee records if you hire staff.

You can do it digitally, with software like Xero or QuickBooks. Just make sure it’s clear and you can find things when you need them.

10. Get Advice When You Need It

Don’t be afraid to ask for help. There are lots of free and paid resources out there.

• Local councils often have business support teams.
• Accountants can help with tax and business setup.
• Solicitors can help write contracts or check leases.

Better to pay a bit for advice than pay a lot for a mistake.

Final Thoughts

Starting a business is exciting. It’s also packed with little details that can mess you up if you overlook them. None of this is to dissuade you, either. It’s good to go in with your eyes open, is all. Get the legal basics sorted early, and you’ll spare yourself headaches later. It doesn’t have to be costly or difficult. It just needs to be done right. You don’t have to be a lawyer. But you do have to know enough to remain on the right side of the rules. Sort that out — and then get back to the fun stuff, building a business you love.