Legal Requirements for Starting a Business UK (Z160)

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This is a PDF Pamphlet on Starting a Business – with Legal Tips from ContractStore’s legal experts.

It introduces what you need to know for setting up – taxes, company structure, naming your business, and of course the legal documents and info that you need to put in place to establish your company.


How will you structure your business?

There are four types of business structure. These are Sole Trader, Partnership, Limited Company, and Limited Liability Partnership.

A Sole Trader is an individual who sets up a business and there are very few legal formalities. He is personally responsible for all business liabilities. His accounts and records are confidential.

A Partnership is where two or more persons run a business and share the profits in an agreed manner. It is important to have a written partnership agreement setting out the partners’ shares in capital, profits and losses as well as the management and decision making processes. Each partner is liable for the business on a ‘joint & several’ basis. Again accounts and records are confidential.

A Limited Company is a legal entity established to separate the affairs of the business from the personal affairs of the owners – the shareholders. A company can be set up quickly and cheaply. Its Memorandum & Articles of Association contain the rules for the business. It must be registered at Companies House. Details of shareholders, directors etc. are open for public inspection and accounts have to be filed each year. A company is owned by its shareholders, but is managed by its directors. In a private company the shareholders will frequently appoint themselves as directors. The liability of the shareholders is technically limited. But, in practice, people may require personal guarantees before lending money or supplying goods to a company.

A shareholders agreement is often entered into which deals with management and decision making as well as what happens to the shares of someone who dies or wants to leave. This is a private agreement and does not have to be filed at Companies House.

A Limited Liability Partnership or LLP is a cross between a partnership and a company: like a company, it is a legal entity registered at Companies House and has to file accounts. But unlike a company, it does not pay corporation tax – instead each partner is taxed on his own share of the profits. Nor does it have Articles of Association. Instead the partners or ‘members’ should have their own LLP Agreement setting out the rules for running the business. LLP’s are mainly used by solicitors, accountants and other professional firms.

What about the name of the business?

If you are setting up a business, check to see that the name you want isn’t already in use – you can find existing company and LLP names online at

Bear in mind that if you use a business name that already exists, that other business could take action against you. If you are also setting up a website you will need to check if the domain name that you want is available. And if it is, it may be worthwhile registering related domain names – such as .com as well as To improve the protection of your business name, you may want to register a trade mark with the UK Intellectual Property Office –

Information matters

A limited company or LLP must show the name of the business, the place of registration (e.g. England), company (or LLP) number and registered office address. A sole trader or partnership should show the name of the owner or partners and the main business address. This information must appear on all notepaper, invoices etc. and on the website. It should also be shown on emails sent by the business. If registered for VAT, the notepaper should show the VAT number. If you collect data on clients, customers, etc. you may need to register with the Information Commissioner under the Data Protection Act – You are also advised to have a privacy policy on your website. ContractStore offers a free privacy policy that you can download and use on your site.

What legal documents should you have?

Partnership Agreements, LLP Agreements and Shareholder Agreements have been mentioned above. ContractStore has a range of  agreements dealing with ownership and management for these different business structures.

If you employ anyone whether full-time or part-time, UK law requires every employer to issue to every employee within 2 months from the date he/she starts work a statement laying out the terms of the employment. These include the job title, salary, working hours, holidays, notice periods etc. You may want to have other terms as well, in which case you will need to issue employment contracts. If you obtain services from self-employed people, you should have an agreement with them setting out the services they provide, fees etc. – e.g. a consultant appointment.  If your business supplies goods or services, you are advised to have some standard Terms of Business that at least contain a description of the goods or services you will supply, prices, payment terms, delivery dates and some wording aimed at limiting your liability if something goes wrong. It is good practice to issue Order Forms confirming the details of each job and make sure your Terms of Business apply to each job you get.

What taxes must you pay?

Income tax on profits of the business is payable by a Sole Trader and by the individual partners in a Partnership or LLP. A Limited Company pays corporation tax on its profits. Employees of a business will have income tax deducted under the PAYE system (and this can includes directors of a company who are also shareholders). Shareholders of a company may be liable for income tax on the dividends they receive. If turnover is above the current threshold, which is subject to adjustment by the Government each year, a business must register for VAT. It can be useful to register even if the turnover is less, especially if the business incurs a lot of VAT payments to suppliers etc.

How ContractStore can help you

Getting advice from a lawyer can be expensive, and not many people setting up in business can afford the fees for all the documents that they need. At ContractStore you will find over 200 document templates for business. They cost no more than £50 plus VAT.

They include:

  • Shareholders Agreement
  • Partnership Agreement
  • Confidentiality Agreement
  • Consultant Terms of Business
  • Employment Contracts
  • Agreement for the Sale and Purchase of a Business
  • Terms & Conditions for Sale of Goods
  • Loan Agreement
  • Selling and Manufacturing Products Overseas


There are more detailed notes on the topics covered in this booklet, as well as advice on preparing a business plan. We also offer free information documents that you can download from the site. You may still need legal support but with our documents you can save a lot of the fees you might otherwise incur. Also we can arrange legal services for our customers as well as commissioning contracts for special purposes. And unlike your lawyer and accountant, ContractStore. com is open for business 24/7. Good luck with your new venture. It may be hard, but working for yourself can be so much more rewarding than working for someone else – even if those rewards are not always financial!

Don’t take our word for it:

“Your site had the best selection of documents I found on the internet” KK, Essex, UK

“I am very happy with the contracts I’ve downloaded and so glad I found you!” RP, Massachusetts, US

“I was quoted £700 by a lawyer for the same document I bought here for just £50” BC, Bedfordshire, UK


Whenever you use legal contracts in your business, remember to visit

Legal Documents for Business

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Just email for details of how we can help you protect your business.

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