Expert view: Start-up structures
Mark Alexander, head of commercial legal services at Vincents Solicitors, answers some of the most common queries raised by those looking to set up a new business.Q: What’s in a name? A: One of the first legal decisions you must make when starting a business can also be one of the simplest - the business name. You cannot use the name of a business that already exists, or use an established name with a slight change. Check online and at Companies House to determine whether the name you want to use for your business has already been legally registered by someone else.
Q: What legal structure should I choose? A: There are three basic legal forms of business: sole proprietorship, partnership and limited company. The right legal structure for your business can save you money, help you get more money, and save you from future headaches. The wrong one can take years to unwind, especially if corporate documents are not in order.Q: What do we do about share capital and shareholder agreements? A: From day one it’s essential to document and agree the allocation of equity shares between the initial investors into a Shareholder Agreement. This is important in terms of ownership, voting rights and control, dividends and ultimately the value of individual holdings in the business today, and on exit.
Q: I get all this, but I think any legal problems can be solved later, ok? A: There's a tendency to think, “once I get my funding, once I'm up and running, then I've got time to hire a solicitor; right now, I'm running as fast as I can to get my business plan done and winning customers.” This is shortsighted logic. Many problems can't just be patched up later. Does that mean that you should devote all of their time, effort, and money to the legal issues? No. That's a good reason to hire a competent solicitor. It will cost much less to get it right at the beginning than to try to sort it all out later and correct it Mark Alexander Head of commercial legal services Vincents Solicitors