When your business is growing, it is essential to have all the key elements in place at the initial stage to avoid unnecessary risks along the way or when it comes to selling your business. These key elements, which will be discussed further below are:

  • Trading agreements
  • Employees
  • Business owner protection

Trading agreements

We advise every business to have terms and conditions and in particular trading agreements with your customers and key suppliers because if something goes wrong. For example, if a customer doesn’t pay on time, you have your agreements in place to secure and protect your business to recover the costs, which also helps with cash flow.

Employees 

As an entrepreneur, you will be most likely working all day and night to get your business off the ground and to achieve your vision. In this case, you may need to employ staff members to help support you and your business. Employees have lots of protection under the law. Therefore, you will need to consider employment written terms, pension, and PAYE. Additionally, you may want to look at incentivising key staff. A few options to do this would be via share options or EMI schemes.

Protecting the owners (you!)

When your business is making money, you may be potentially thinking about protecting your own interests in the company, and a way to do this could be via a shareholder’s agreement. This protects your shares in the business should a shareholder die, fall out, or tries to sell their stake to a third party. Creating a shareholder’s agreement will work out more cheaply than the risks of shareholder-to-shareholder litigation costs. Decision making is also a key element within the business, you may want to consider putting in a dividend policy in place and a protection plan should one of the shareholders pass away. For example, their share of the company could automatically go to their estate, or it could be automatically transferred to someone.

Other considerations include the following:

Funding – investors or lenders

At some point within your business journey, you may need additional funding as the business may need to expand, hire new employees, and buy more premises. Two major ways are via investors or Institutional lenders.

As mentioned earlier, investors will require an investment agreement, which looks similar to a shareholder’s agreement. If you have got an investment coming in you will have to give away equity and potentially some decision making, as the investor will want to have say over the buying decisions, which may interfere too much with the day-to-day running of the business. Therefore, getting the investment agreement checked over by your legal representative will help avoid long-term problems, protect your rights as the founders and make sure if the worst case happens you can get those shares back or buy out the investor.

The other way is institutional lenders, predominantly banks, and they will want some form of security like charge over assets or property (ie. your mortgage), or personal guarantee, which the banks would require you to seek legal advice. This process increases your liability and puts your personal assets at risk so it is something you should consider carefully.

Property

Something else to consider when your business is growing is property. You may no longer be able to work from home and need more space such as moving into an office, looking for retail premises, storage units, or warehouses, which will involve a form of lease with a landlord.

At this point, you will need to get legal advice to negotiate and check the terms with the landlord to ensure they suit you. Leases can go on for a significant length of time, you may want to speak to your solicitor to see if there are break clauses, so that if the business isn’t doing as well as you hoped you can vacate in a shorter time frame. Other things to consider are if there is a rent-free period, what’s your liability, what happens at the end of the lease, is there going to be a repair obligation?

Intellectual property and data

Intellectual property and data will be more relevant to some businesses than others but it’s worth considering registering trademarks to protect the brand and it is cheap to register with the Intellectual Property Office. You can get trademark protection in different countries, it’s best to register the trademarks in the areas where you operate in. You will want to ensure you do searches to make sure the brand name isn’t taken.

Expansion 

You may be looking to expand your business due to the successful growth and consider buying other businesses, buying your competitors out to bring their staff, expertise and clients on board or you may want to add a new area of expertise. Doing your due diligence when you’re a buyer is key, it is worth speaking to your financial and legal advisors to know where to be looking, what questions to asking and making sure as a buyer you have the proper protection.

This is a brief overview of the considerations when growing a business, if you need legal advice for any of the above, contact us on 01782 646320 and we can have a thorough discussion about your business and how we can help you achieve your business aims.

Our corporate team

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