Business Basics
The first step I think is establishing what type of business you are going to run; e.g. Sole Trader, Limited (Ltd) or a Partnership. Although I had already decided that I was going to be a sole trader, I had not fully assessed the reasons why this was currently the best option. There are several advantages, including:
1. This is much easier to set-up; I just have to inform Inland Revenue and Customs (within the UK).
2. I current have no assets and therefore do not need limited liability that is offered as an Ltd. However banks almost always (especially with the current economic climate) demand personal guarantees on loans to the company, which is one less advantage, in regards protection, of being a Ltd.
3. It means cheaper start up costs as I don’t have to pay the registration fee at Companies House and annual costs associated with a Limited company.
4. As a sole trader, accounts are not published on Companies House. This is something that many new small and medium enterprises (SME’s) find important as cashflows for the first few years tend to be less than desired.
It is likely, however, that after several years of trading my business will become a Ltd. This is because of the reputation that comes with this status as banks and many suppliers prefer Limited companies.
The all Important Company Name
The name of a company is obviously of great significance but before this workshop I really didn't know where to look to see if a trading name was available. There are many websites available to give anyone quick advice and show if the name has been taken, e.g. if you are setting up as a Ltd then Companies House will search all names, or similar names to your business.
However, if like me you are a sole trader then it is slightly harder to figure out if a name is taken as you don’t have to register the trading name. A good indicator is to do a domain search and if the website address is unavailable then it is likely so is the trading name. Because e-commerce trading is such a big thing we were advised to choose a trading name that matches your website address, and even if you don’t want to use a website yet, buy it and keep it for when you do! It really doesn’t cost very much at all e.g. when I was researching it I found domains available for £5-£20 for 2 years, which is really cheap!
We were advised to try the below search engines to look for domain names and reminded that it is obviously best to avoid giving your company a name that is similar to one already in your trading sector:
www.123reg.co.uk
www.nominet.com
Other considerations when choosing a trading name include avoiding offensive words (which doesn’t really need explaining!) or names that are linked with the government or Royal family or suggest a connection with them.
More Basic Issues
Maintaining the reputation of your brand is obviously vital. The lecturer explained that once you have established your trading name, one way to do this is to ensure that letters, emails, website etc all include your company’s full name and address and trademark if you have one. If you are a limited company then the country of registration and registration number should be included as well as a VAT registration number if valid. For my business I realise that branding will be really important to help keep up the image of the company.
Terms of business
I doubt there’s anyone out there who has not had to read a terms and conditions document, and personally I know that I’ve skipped a good few sections on them before and often just skim the pages. Even worse than that, I know I’m guilty of clicking the ‘I agree’ box when I haven’t even looked! However I also know that I’m not the only one, but the workshop explained that the truth is, reading terms and conditions are SO important!
Within business, terms and conditions determine how much you get paid, when you get paid, what your obligations are as a supplier, distributer or retailer, what your customer’s obligations are as well as limiting your liability. Ultimately terms and conditions put you in control of the contract and keep your business almost bullet proof, something which I hadn't really thought about.
If shareholders or partners are part of your business then such documents allow for clear and decisive decisions to be made without arguments over who is responsible for what! Although this doesn't apply to my business right now, it could do so in the future.
Intellectual Property rights: Trademarks, Copyright, Patents and Passing off
Philip also explained intellectual property in relation to our businesses, stating that it is really important to ensure you clearly define your product and ensure it is protected. If talking to another company or pitching an idea it is advised to write it down and get the other party to sign a confidentiality agreement. Without this you have no control of the idea and they could easily use it without you! However there are many other ways to protect your ideas and designs, known as intellectual property rights:
Trademarks
“Trade marks are symbols (like logos and brand names) that distinguish goods and services in the marketplace.” (Intellectual property office)
If you want to protect an image that represents your brand then this is normally how it is done. It protects logos and words either on their own, or together. Trademarks do not have to be registered but to register a trademark within the UK can cost as much as £200 for a specific category and class, after which it is another £50 for every extra category. These must be renewed every 10 years. Check out:
www.patent.gov.uk (It brings you through to IPO). Because I intend to have an image as part of my brand name this is something I will investigate further. Copyright
“the exclusive legal right, given to the originator or their assignee for a fixed number of years, to publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.” (Oxford dictionary)
This simply means that you are not allowed to reproduce such work in any medium or even copy and paste an image that is copyrighted, without first asking permission. It is recommended to put © followed by the trading name and start year on the bottom of all work including websites. This may add legal value in some countries and also put people off using your work without asking. One way to add protection is to post a letter via special delivery with the work inside so that the date can be traced if ever there is a dispute about offending your copyright. Also, providing your solicitor with a copy will do the same. I hadn't realised it was so complicated!
Within the UK, copyright is automatic with no registration, fees or forms, but does not protect names or titles. Ideas themselves are also not protected but the work as a result may be. Copyright does however apply to any medium e.g. it can be implemented on websites, pamphlets, pricing structures/ layout of documents, any new creations and on symbols.
There is no limit to how many copyrights you can use, and whilst something is copyrighted it can also have another intellectual property right connected to it, e.g. copyright can protect your logo, but you could also register the logo as a trade mark.
Patents
“a government licence giving an individual or body the sole right to make, use, or sell an invention for a set period.” (Oxford dictionary)
As stated above, patents can only be used for inventions and must prove original and industrially appropriate. Patents do however take a long time to process, not to mention the cost involved! For my fashion business patents will only be relevant if I develop a new structure to the clothing or develop a new template. I feel this is very difficult within the fashion industry as most new ideas are developed from older ones!
Passing off
Passing off is a legal concept that allows for the protection of a business’ trading reputation. It protects businesses if another company trades from their reputation, e.g. if a company sold bottled water and were called ‘Volvil’ this would allow Volvic to take legal action as the name and sector of trading is too similar. If Volvil were to sell dodgy water this would reflect badly on Volvic.
Passing off can also protect those businesses without a registered trade mark or company name e.g. a sole trader who has not registered their name.
Other Legal Considerations
For extra protection try this link for the property office. It has a whole list of topics and specific areas for protection:
Websites
The Web is becoming more and more relevant in our society. As an e-commerce site I want to ensure that I use my company’s website to its full potential, but must ensure I do this legally. As mentioned earlier it is very easy to buy a domain name, but we were reminded that it is really important to double check that you do own it and control it before paying big bucks to customise it.
Premises
As my business is an e-commerce one, for now I do not need to consider renting or purchasing shop space, however it is vital that this is thought out, e.g. if you rent a space how flexible is the contract encase you need to move premises to meet market demands etc? As I intend to run my business from a spare room in rented accommodation I will need to check that my tenancy agreement allows me to run a business from my house as many do not.
Employees
I will be starting my business on a small scale and with little capital so employees will not be something to be concerned with. I have been told of the stress and time it takes to be an employer and I am thankful I don’t have that problem for a while! When my clothing company does branch out in the future there will be plenty of legality involved e.g. health and safety including licences and certificates as well as environmental consents and licences. Tax, National Insurance etc also have to be considered and whether or not business will be subcontracted to other firms.
Conclusion
I was always aware that understanding legal issues within my business was important, but after the legal workshop I was given a more in-depth, clearer picture of what I really need to consider before trading and as my business grows and changes. I hope this has been a useful overview to you and reminded you of anything you might have forgotten to consider too! I would suggest talking to a solicitor about your business as well as looking at the IPO's website
because you never know what you might have missed!Thanks for reading and I would appreciate any feedback,
Faith
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