If you’re launching a start-up and selling goods or services directly to consumers, even an unintentional misstep, like unclear refund policies or misleading advertising, could result in complaints or regulatory penalties.
For example, many new businesses inadvertently breach consumer protection laws by failing to provide clear information about cancellation rights. These regulations are designed to protect consumers, but they can pose significant risks to your business if not carefully adhered to.
Our commercial law solicitors understand the unique challenges start-ups face and can provide tailored guidance to help you stay compliant while building a trusted relationship with your customers.
Contents:
Is your business caught by consumer protection law?
For many entrepreneurs or part-time side hustlers, the first time they realise that their business is caught by consumer protection law is when they encounter a problem. From a commercial solicitor’s point of view, that isn’t a great way to meet a client; we would prefer to advise you on how your business is affected by consumer protection law and to ensure that you have the right policies, procedures, and contract paperwork in place so your business can thrive and grow.
Many start-ups and small businesses think consumer protection law isn’t relevant to them as they don’t have business premises or a shop or their turnover is modest or they are only selling to businesses. None of those things matter as it’s whether your activities amount to a business under consumer protection legislation (although your customer’s rights and the extent of your obligations will depend on whether you are selling to a customer or a business).
Broadly there are 4 trading categories with corresponding abbreviations:
- C2C – consumer to consumer
- C2B – consumer to business
- B2C – business to consumer
- B2B – business to business
In the first two categories, your consumer protection obligations are fairly modest but if your activities count as a business and you are selling to a consumer or another business it is essential to know the basics of consumer protection law, have standard paperwork in place to protect your business, and to know when to get help before a situation escalates into a dispute.
Are you operating a business?
You may think that you are not operating a business because you aren’t incorporated as a company or because you don’t have a separate business bank account but the
You may think that you are not operating a business because you aren’t incorporated as a company or don’t have a separate business bank account. Still, the test for whether you are a ‘business’ is much broader than that.
Ask yourself these questions: Are you a registered company or partnership? Do you have a business name or a physical location? Do you pay to advertise your goods or services? Are you registered for VAT? Is your operation generating a significant proportion of your income? Are you buying and selling goods at a profit or delivering services? If you answered yes to any of these, there’s a good chance you fall within the legal definition of a business. If you're selling to consumers, that means stricter compliance obligations under consumer protection law.
Commercial solicitors look at regulation 2 of the Consumer Protection from Unfair Trading Regulations 2008 as their starting point for whether activities should be classed as a business. Still, the definitions in the regulations are vague enough for start-ups to need specialist advice on their status.
According to the 2008 regulations, a business is defined as including a trade, craft, or profession, and a trader is loosely defined as a person who, in relation to a commercial practice, is acting for purposes related to their business. These general definitions don’t say you need a registered company or a shop to be in business. So, if you answered yes to any of the questions, you probably are in business, because, as the old adage goes, “if it looks like a duck, it probably is a duck.”
This kind of ambiguity is precisely why, if you are a new founder, you should take time to understand everything you need to know about start-up business structures. Choosing the right setup can help clarify your legal responsibilities from the outset. Whether you’re operating solo or planning to scale, it’s also important to know how to choose the right business structure that fits your goals, liabilities, and long-term strategy.
Once you’ve identified your structure, ensure your operations are protected and compliant. Having the proper legal documents in place can save you trouble in the future and establish a strong foundation for growth.
FAQ on whether you are running a business
Some of our commercial solicitors have been the first to help entrepreneurs who have developed from a bit of trading on their smartphone to companies with multi-million-pound turnovers. The question is when do you become a business or trader? Here are a few scenarios our business lawyers regularly come across:
- The weekend business – you may be employed during the week but have a little sideline operating at weekends. If it is a bit of recycling on Gumtree or eBay or the occasional car boot sale then you are OK. It’s when your weekend activities generate a chunk of your income that you need to start looking carefully at whether your side-hustle has morphed into a business. The answer lies in the frequency and quantity of your sales rather than the legal status of your business or whether you have formalised your business with a bank account, logo, or letterhead
- The non-VAT registered business – it is an urban myth that if your business isn’t registered for VAT then you don’t need to worry about consumer protection legislation. It again comes down to the degree of trading – if you are selling novelty hot water bottles online then the likelihood is that you will be classed as a trader and subject to consumer protection legislation, including product safety
- The helping a friend business – if you are a bathroom fitter by day or semi-retired you could be roped into fitting a friend’s bathroom or walking their dog. A one-off activity does not necessarily make it a business, but it comes down to scale. You are more likely to be found to be in business if you are fitting the occasional bathroom rather than walking a do,g because of the amount of work and profit involved
B2C consumer protection essentials for start-ups
When a consumer sells to a consumer (C2C) or to a business (C2B), the seller has limited obligations and it is a case of buyer beware. The legal position changes when your enterprise is classed as a business and you fall within B2C trading as you must comply with a wide range of consumer protection laws, such as:
- Information provision
- Description of goods
- Product safety
- Cancellation rights
If you’re selling both to consumers and other businesses (B2B), it’s important to note that business buyers still have some implied rights, particularly around safety, but the obligations on you are considerably lighter than those for consumers. Your pricing and profit margins between B2C and B2B likely reflect that added compliance burden.
Navigating these differences is crucial, and understanding how to comply with distance selling regulations and consumer protection laws will help ensure your business meets its legal obligations from the outset.
Why start-ups need to consider consumer protection compliance
When you’re running a sideline quasi-business or trying to grow a start-up, it’s easy to focus entirely on growth and overlook consumer protection legislation. While that mindset is understandable, commercial solicitors warn that it’s also short-sighted for several reasons:
- Failing to comply with consumer protection laws leaves you exposed to complaints, damaging online reviews, or even referrals to trade bodies or trading standards authorities.
- More seriously, you could be sued by a consumer, for instance, if your goods are not as described, aren’t fit for purpose, or don’t meet relevant safety standards. If you're not operating as a limited company or LLP, that legal action could result in personal liability. Understanding how to limit your business liability from the outset is a crucial step in protecting yourself.
- Beyond the legal risks, consumer protection complaints can stall your momentum. Reputation is everything for a young business, and negative feedback can significantly hinder its ability to attract customers, partners, or funding.
If you're at the stage of putting legal foundations in place, our commercial and corporate solicitors can support you with company formation, drafting standard terms of business, and creating clear, protective supply of goods agreements tailored to your specific needs.
Expert legal support for your start-up
Compliance with consumer protection law is not just about avoiding legal penalties; it’s also essential for building lasting customer loyalty and trust. Our commercial law solicitors are here to guide you through the intricacies of these regulations, ensuring your business practices are both legally compliant and commercially sound.
