There’s no doubt that legal advice is really useful when setting up your business. However, at Harper James Solicitors, we pride ourselves on being totally upfront with our clients.
That’s why we’ve started a series on what you and your business genuinely need a business solicitor for, and what you can do for yourself. This is part one: what you do and don’t need a solicitor for during the business formation stage.
Here you’ll find out:
- What a solicitor definitely can’t do for you, and where else to look
- What a solicitor can advise you on when setting up your business
- Choosing the right business structure and registering it
- Helping you with agreements about business premises
- Helping you with licences to trade
- When you need a solicitor for setting up your business: at-a-glance task checklist
- What our clients’ experiences were when choosing whether to take legal advice
What a solicitor definitely can’t do for you, and where else to look
When setting up a company, there are some obvious first steps you probably shouldn’t be paying a solicitor for. They include anything that doesn’t need legal expertise, such as:
- developing your idea and getting inspired
- writing your business plan (unless, of course, you’re planning to set up a law firm – then a solicitor might be able to help!)
- market research
- choosing a name for your business
| Developing your idea | We love these sites, that are full of great ideas for budding entrepreneurs, from how to jump-start your day to crowdfunding your business: |
| Writing your business plan | Here are some free templates and guides to get you started: You can also search for freelancers to help you write your business plan on sites like upwork.com |
| Market Research | Market research is an absolute must when setting up a company, since you need to understand both potential and existing customers’ wants, needs and budgets. You can do your own primary research in the form of surveys, polls, questionnaires and focus groups. You can also commission any number of market research companies to do this for you on a bespoke basis. Some of the bigger market research companies include: Always use an accredited company. The Market Research Society’s Buyers Guide is handy tool, or find a smaller market research consultant at the Independent Consultants Group. You can also get out there and do it yourself, either online or offline. Standing on street corners with a clipboard or cold-calling are becoming increasingly difficult, so the internet is the most efficient way to gather market information. There are lots of tools to conduct online surveys, but you’ll usually have to pay to target a specific demographic. Google Surveys can be useful for this task. Sites like Twitter also have built-in survey functions. To carry out desktop research, investigate market reports carried out by others. You can also pay for reports that have been published recently or look out for companies that publish occasional reports (or summaries) for free. Useful sources for free market research analysis can be industry publications, trade associations and even competitors, but also these: The trade association for your sector |
| Choosing a name for your business | There’s lots of online advice available for choosing a strong business name. But you need to be careful. Generally, your business name must not: You don’t really need a solicitor to advise on choosing your business name, you just need to check these places to make sure it fulfils the above criteria: However, if you want to stop people trading under the same business name as you, you’ll have to register your name as a trademark. You don’t necessarily have to use a solicitor to do this, you can register a trademark yourself here. |
What a solicitor can advise you on when setting up your business
There are some things a business solicitor can definitely help you with when setting up your business, such as:
- Choosing the right business structure and registering it at Companies House
- Helping you with agreements about business premises
- Helping you with licenses to trade
However, in some types of business, you might be able to do some of this yourself. Let’s take a look:
Choosing the right business structure and registering it
Whether or not you’ll need legal advice on choosing the best legal structure for your business clearly depends very much on the size, complexity and goals of the business you’re setting up.
Here are the most common types of business structures, and where you can read more on each type:
| Type of business | Features |
| Sole trader | A simple way to run your business without partners or shareholders. Involves minimal set up and accounting duties, but you’re personally liable for any business debts and paying taxes on any profits after deducting your costs. |
| General partnerships | You’ll share responsibility for running the business with others. Profits will be taxed as your personal income. Like with sole traders, all partners are personally responsible for business debts. |
| Limited partnerships | LPs are a rarely used legal structure for most companies – their purpose is almost exclusively for setting up and administering funds. LPs are similar to a general partnership, except at least one partner is a general partner who controls and manages the business, and at least one is a limited partner whose liability for debts is limited to only the amount they’ve contributed to the business. Partners pay tax on the profits |
| Limited liability partnerships (LLPs) | LLPs further reduce any partner’s financial liability for the debts of the business. There must be at least two designated partners at all times. Mostly used for professional partnerships like accountants and law firms. Partners each pay tax on the profits. |
| Limited companies | A company is a separate legal ‘person’ that can own property, enter contracts and run up debts. It’s owned by shareholders or members and managed by directors. The most common form of company used in practice is a company limited by shares. It can be private, where its shares can’t be openly traded, or public, where anyone can buy and sell its shares. A company limited by shares is responsible for its own debts and liabilities. Shareholders’ only financial duty is to pay for their shares. Limited companies are registered at Companies House and are subject to ongoing filing and disclosure obligations. |
| Social enterprises | Businesses that help people or communities. These are often set up as charities, but they can also be co-operatives or community interest companies. |
You can also choose to buy into a franchise. You’ll have to pick a business structure first though and set this up.
Either a solicitor, a business adviser or accountant can advise you which structure is best for you.
Once you’ve made your pick, do you still need a lawyer (or accountant) to set it up?
| Sole trader | It depends on the business. However, unless you need help getting a special licence to trade or dealing with data protection compliance, you’ll probably be able to deal with most aspects of your business yourself. You don’t have to register at Companies House if you’re a sole trader. You just have to register for Self-Assessment taxed with HMRC and file your tax return each year. You don’t have to register for VAT unless your turnover is more than £85,000 per annum |
| General partnership | Probably. Although there’s no obligation to do so, you’ll probably need help setting this up and drafting your partnership agreement that describes how you’ll work together. Partners register as self-employed with HMRC. One of you will be the nominated partner. You can register the partnership online or by using form SA400. Register as a partner using form SA401. |
| Limited partnership (LP) | Yes. Within a LP, there will be two types of partners (general and limited) and they each have different responsibilities and debt liabilities. You’ll need a solicitor to advise you on which parties should take which roles, and the necessary agreements. Registering a limited partnership can only be done by post, not online yet. Download the form and find the address to send it to here. |
| Limited Liability Partnerships (LLP) | Yes, as the responsibilities of each partner need to be described in an agreement, along with how profits are to be split, who will make decisions, and how partners can leave. It’s vital that you get legal advice on this agreement, and whether your business will even qualify to register as an LLP. A solicitor will most likely need to prepare the agreement, but once this is complete, you can register your LLP yourself on form LL IN01. |
| Limited Company | Yes, you’ll need legal advice to set up a company if you’ve more than one shareholder or if other people have significant control (i.e. over 25%) over your company. We always recommend that you have a shareholders agreement and Articles of Association that are adapted to your needs. If you only have one shareholder, you can set up as a limited company, and register it yourself, without help from a solicitor either online or by post on form IN01, although we would always be happy to do this for you |
There are several helpful government guides on forming and registering different types of business. Find them all here:
- Register a partner and a partnership
- Register a limited partnership
- Register a limited liability partnership (LLP)
- Register a limited company
- Register a social enterprise (multiple options)
Helping you with agreements about business premises
No matter what kind of business structure you’ve chosen, you should seek help from a commercial property solicitor if:
- Your business is buying or selling commercial property
- Your business is going to be a landlord or tenant of commercial premises
- Your business is taking over an existing commercial lease
Commercial property law is very complex – much more so than residential property!
One of the only situations in which your company would not require legal advice from a specialist commercial property solicitor is if you are a sole trader running a business from home. Most of the advice you’ll need for doing this can be found on gov.uk.
Helping you with licences to trade
There are as many licences to trade as there are different business ideas! It’s easy to apply for most of them such as licences for street trading, selling alcohol, and operating food premises. You can find a complete list, and usually apply online here. You can also use the licence finder to find out which licences are applicable to your industry.
However, there are some kinds of licences that are very specialist, and which will require advice from a licensing lawyer. The types of licence you may need legal help with include.
- Air carriers and civil aviation
- Chemical weapons
- Controlled medical drugs
- Consumer credit
- Due diligence on licensing
- Gambling and betting licences
- Licensing any intellectual property
- Overseas trading, such as importing and exporting
- Working with hazardous substances
When you need a solicitor for setting up your business: at-a-glance task checklist
| Task | Do you need a lawyer? |
| Choosing a business name | No |
| Preparing partnership agreements | Yes |
| Preparing shareholder agreements | Yes |
| Preparing articles of association | Yes - if you have shareholders |
| Registering at Companies House | No - providing you have all the required documents (for which you may need a solicitor) |
| Selling, buying or leasing commercial property | Yes |
| Getting insurance | No – find the correct business insurance at ABI |
| Obtaining licences to trade | Depends on your activity |
| Registering for VAT and other taxes with HMRC | No |
So, as we’ve seen, lots of these tasks you can do yourself, especially if you’re a sole trader with a straightforward business. But once your business ideas and structure start getting more complex, it’s best to involve a solicitor – at least for legal advice, if not the filing itself
What our clients’ experiences were when choosing whether to take legal advice
We asked some of our clients what their experiences were with legal advice (not necessarily from us) during the initial stage of setting up their companies. Here’s what they said:
Nick Holzherr, CEO, Whisk.com and Air HR software:
When setting up your business, were you clear on what you did and didn’t need a solicitor for?
I wasn’t sure at all. To be entirely honest, I was often looking to save on legal contracts and tried to use templates from template banks – a process that took significant amounts of my time.
For the very first steps in your company formation (like deciding which kind of legal structure to take, registering with Companies House etc), how did you feel about getting a solicitor at this stage? Did you consider a company formation agent?
Because we took investment when first setting up Whisk.com, I used a solicitor firm that our lead investors (Midven) recommended. It was the biggest deal we’d ever done, so we definitely wanted to have solicitors helping us. We set up all company formation documents, investment documents and employment contracts.
That’s actually when I first met Toby Harper, at the time he was acting for the other party. I was so impressed with how he quickly helped everyone get to the same page that I asked him whether he could help me on new deals we were doing. He happily obliged and about a year later he set up Harper James and I’ve been a client ever since.
What source(s) of information did you use when deciding what set-up tasks to give to a solicitor and which to do yourself?
I was relying heavily on what other parties asked, rather than looking out for my own needs. For example, when our investors asked for long contracts or when a large corporate asked for contracts – we’d make them happen.
Were there any particular areas you knew you could do yourself, but felt more comfortable having a solicitor do for you?
For me the biggest question is usually firstly what the risk level of the deal is and secondly whether me providing a legal contract will slow down or speed up a deal. For example, if the deal will have a big impact on my business, I’ll ensure I have a contract that’s been put together by a solicitor I trust. If it’s on the smaller size (e.g. less than £25,000) I might use a template or use a Statement of Work. On the other hand, if the other party is likely to take ages to confirm a legal contract, I often try and get a Statement of Work agreed instead and keep that really simple. That way, the other side doesn’t involve a solicitor and we can move quickly.
If you were aware you could do it yourself, what was the reason for asking a solicitor to do it instead? Did you prefer the security and reassurance of having a solicitor do it, or was there another reason you outsourced it?
I know that a solicitor will do a much better job than me on a contract, considering all the important aspects. If something is important and/or has potential risks for the business, I’ll almost always use a solicitor. It also saves me significant time: what takes me 3-4 hours takes a solicitor 1 hour, and with Harper James that ends up being a really cost effective way of working as well.
Do you think solicitors in general will tell you if there’s something you can do yourself?
To be honest, I’ve not really had that experience – but I think that’s because I’m a lot more risk *prone* than most people! At the point I’m talking to a solicitor, it’s almost always something I definitely need to speak to a solicitor to.
Duncan Smith, CEO, Fubar Radio:
When setting up your business, were you clear on what you did and didn’t need a solicitor for?
It was clear from the outset that we would need a solicitor to process all legal matters relating to the establishment of the business – matters such as shareholdings, Articles, subscription agreements, service agreements and so on. Toby Harper was able to offer a suite of documents for such matters.
What source(s) of information did you use when deciding what set-up tasks to give to a solicitor and which to do yourself?
In our case, Toby already came recommended and the establishment of his independent law services at competitive rates made the decision a no-brainer.
Start-ups are fraught with a multitude of tasks that the founders can handle but legal work is not something that you should ever attempt without proper legal advice. Otherwise, you can be caught out by something years later. So, it was an automatic choice for us. Dealing with a VC lead investor threw up numerous matters of due diligence from their side. A solicitor’s advice in handling these matters was invaluable.
Were there any particular areas you knew you could do yourself, but felt more comfortable having a solicitor do for you?
I would always recommend using some of your seed money to invest back into some solid experienced legal advice. Shareholders will thank you for it further down the line and it demonstrates to them that you take such matters with the seriousness that they warrant.
Do you think solicitors in general will tell you if there’s something you can do yourself?
Generally, yes. Looking back over the past 25 years of being an entrepreneur, I can’t think of any occasion where it has paid in the long run to attempt some legal work independent of advice. I have always taken the view that paying for advice once and making a commercial decision to do it yourself next time is better than never having sought the advice in the first place.
