Business Must Haves
Must have legal documents for a small business:
As a start up or small business you will have a to do list longer than your arm, and it is easy for legal documents to fall to the bottom of that list. Below is a short set of essentials for your business, that if you do nothing else you should have in place.
- If you are operating through a limited company:
o Articles of Association: Articles of Association are the legal governance document for your company, setting out the rules and regulations of the company structure. If you have multiple shareholders and wish to have different share classes (allowing for different dividend rates) then having bespoke articles is a necessity, however for most small businesses model articles which you are automatically given on incorporation will be sufficient. Whilst they can be lengthy, it is worth reading your articles to be clear what you can and cannot do.
o Shareholders Agreement: Many small businesses will have multiple shareholders, either splitting ownership between business partners or allocating shares to spouses or other family members. In these instances, it is critical you have a shareholder’s agreement. This agreement sets out how the shareholders will interact with the business, financial principles for the company, and most importantly what happens when someone wants to leave the business. Who can they sell their shares to and do the remaining shareholders have a first right of refusal. Whilst we all want business relationships to remain strong, relationships do break down and it is much better to have that process agreed whilst the relationship is good. Too many times I have seen the business creator issue shares to a spouse and then incur significant financial, emotional and legal hardship trying to get them back. Having a shareholders agreement protects you from day 1.
To find out if you need a shareholder’s agreement, check out our Checklist of considerations here.
- All Businesses, whether operating through a company or as a sole trader will need:
o Terms and Conditions/ Supplier or Client Agreements: You are set up and ready to sell your services or products, but on what terms. Having your own terms and conditions allows you to manage your business risk. This document will set out the term, deliverables, payments and importantly the warranties and liabilities, as well as governing law and jurisdiction. Without this, you leave yourself exposed to unknown terms of a third party or relying on statutory legal positions, neither is advisable. Terms and conditions should be specific to your business, taking into account the nature of your work, appetite for risk, levels of insurance and many more considerations. Whilst there are a number of templates out there, I strongly advise working with a specialist to create bespoke terms and conditions which makes sure your business is fully protected for your circumstances.
o Website Terms and Privacy Policy: Nearly all businesses will have a website, ensuring you are legally compliance in this area is important and can set the tone for clients interacting with you. Since the introduction of GDPR and the Data Protection Act 2018 which enshrined it into English law, your privacy policy (and your business) must be compliant with data protection regulations or face significant fines. As each business will gather and use information differently, having a tailored policy is a must.
These are just a few documents that you should have in your business to maximise your legal protection. Of course, there are a much broader suite of documents which I recommend depending on the work you carry out, such as:
- Confidentiality/Non-disclosure agreement
- Sub-contractor agreement
- Director services contract
- Collaboration agreements
- Master service agreements and statements of work
- And many more.
If you would like to find out more about the legal needs of your business and how we can help, book a free initial 30 minute consultation.