How to set up a business the wrong way

1. Not considering the legal requirements of setting up a website

Most businesses will have a website even where they are not selling goods or services via the internet. Many businesses forget to prepare the basic legal documents required for their website. Businesses should include the following legal documents on their website:

- Privacy policy - this document sets out the basis on which the businesses will be collecting data from their website users and how the information will be processed and used. Businesses will also need to register with the Information Commissioner’s Office – see www.ico.org.uk for more information.
- Cookies policy – it is a legal requirement to inform users about what cookies will are stored and accessed when they use a website. This document is required to ensure that businesses are complying with the laws on collecting cookies.
- Website usage terms and conditions – this document sets out the basis on which users can access websites. It will contain terms to protect intellectual property as well as a range of other matters.
- Website terms and conditions of sale – if a business is selling goods and services via the internet then you it will need terms and conditions to set out the basis on which the business is selling goods and services.

2. Not putting in place any contracts

When you are busy operating a business, dealing with customers and suppliers and supervising employees there is not much time left in the day to put in place contracts to govern all these arrangements. However, the majority of disputes occur because of unclear terms or no contract having been put in place.

There are three main areas where businesses fail to put in place contracts:

2.1 Contracts with customers and/or suppliers

2.2 Contracts with employees and/or directors

2.3 Contracts with shareholders, business partners and funders

It is crucial to put in place contracts in all of these areas to avoid disputes. Often businesses ask which contracts are the most important and which can be left for a future date. In reality all contracts are important. If there is no contract in place, then it is very difficult to show what terms have been agreed and this can result in lengthy and costly negotiations between parties at a future date when an issue is being resolved.

3. Not protecting intellectual property and confidential information

When starting a new business, many business owners will be keen to tell people about their ideas, inventions and new designs. Business ideas, inventions and designs are the crown jewels of the business and need to be protected.

There are several types of intellectual property that may need protecting in a business:

• Brand and logo
• Inventions
• Your business name
• Depending on the type of business you have you could also have intellectual property that is in written form

There are different ways to protect your intellectual property including trademarks, patents, design rights and copyright. It is important to obtain business legal advice to get advice on the best way to protect your intellectual property.

It is also useful to put in place non-disclosure agreements (NDA). An NDA can offer you some protection in relation to the information you disclose. A signed NDA is an expression of intent and goodwill by both parties and a deterrent against disclosure of confidential information.

This blog was first written by one of LawBites lawyers and reproduced with their permission.