The legal pitfalls every start-up should know about

Share via

Are you finally taking the leap with your innovative business idea? That is great news. But, to succeed as an entrepreneur, you will need to navigate the law and comply. Sound daunting? It can be, but with the right legal support in place, there’s no reason why your business can’t fly out of the starting blocks.

There are many legal pitfalls start-ups need to be aware of when setting out with their business venture. Ignore the pitfalls, and you could find your business on the wrong side of the law. On a positive note, there are many laws you can use to protect your business.

Let’s take a look at the main legal pitfalls every start-up should know about.

Business structure

Your first legal requirement is to define your business structure. Are you a sole trader, a partnership, or a limited liability company or partnership (LLP)? Does it matter? Yes. How you define your business determines how much tax you pay, your liabilities, and may even influence your access to funding. Find out more about choosing the right business structure here.

Licenses and registrations

Certain types of business need a license to operate. If your business is a taxi firm, pet shop, kennels, a hotel, a restaurant, a hairdressers, a food outlet, a massage parlour, an acupuncturist or a tattooist you will need a license from your local authority. You also need a license if you plan to sell alcohol. This isn’t an exhaustive list so do check with your local authority before setting up – and be sure to check out the overview on licenses and registrations.


The insurance you need for your start-up will depend on the type of business it is and the risks involved. Businesses are legally obligated to have public liability insurance and employer’s liability insurance, as well as buildings insurance for the business premises, and motor vehicle insurance for any company vehicles. You may also need industry-specific insurance depending on your type of business. If you are part of a recognised profession, check with your industry body what is required for your business.

For more information on the types of insurance your business must have, see here.

Health and safety

You will need to comply with health and safety laws to prevent accidents and protect your staff from harm. Health and safety laws apply to all businesses, whether you are a sole trader or a large business. Even a sole trader has a duty of care to themselves and the public. For small low-risk business the steps you need to take are simple and straightforward. Find out more about health and safety requirements.

Employment law

If you are employing staff, you need to be clued up on employment law. You need to the know the legalities of things like employment contracts, holidays and absence, and redundancies and dismissals. It seems unimaginable at the outset that you will be faced with the necessity of disciplinary action against a staff member, but if you aren’t legally compliant it could cost your business a lot.

This employment legislation guide published by Breathe is a good starting point to find out more about the law behind running a business. The Advisory, Conciliation and Arbitration Service (ACAS) offers free advice to employers on employment law if you need further help.

Contract Law

Not getting contracts nailed down is one of the biggest legal mistakes a start-up can make. Handshakes really aren’t good enough and are invariably open to some form of misinterpretation at some point down the line. It is worth seeking legal advice on contract law when starting out. Setting up and running a business can be fraught with difficulty if you don’t have the right legal structures in place to protect you.

Intellectual property

What is intellectual property? Intellectual Property (IP) covers your trade name, branding, visual identity, and your unique products or components which have value in their pioneering design. Even your unique processes are a valuable asset. By its nature IP is difficult to define when they are simply your ideas, but when they become tangible designs or products, issues and disputes can easily arise.

IP is a very complex area of law and it is highly recommended you seek specialist legal advice in this area. For more information on start-ups, IP and the law, see here.

Data protection

All businesses, no matter how big or small, need to comply with the General Data Protection Regulations (GDPR). Ultimately GDPR is a law set out by the EU to protect the rights of individuals by controlling how businesses handle their customer data. It is a global measure and applies to any business around the world that an EU resident interacts with.

Despite Brexit, GDPR will form part of UK law, even after we leave the EU. Some post-Brexit changes to the legislation are inevitable, but it is likely it will still exist more or less in its current form.

Find out how start-ups can easily comply with GDPR here.

Support and advice

It’s a good idea to join your local relevant trade association and consider becoming a member of your local Chamber of Commerce. These bodies can prove invaluable resources when starting up a new business. They will provide you with the opportunity to learn from others who have been in your situation before you. It could save you some expensive mistakes!

Always seek the advice of a legal professional for advice on areas of the law you don’t fully understand.

Good Luck!

Share via
Mike James is a UK-based writer for a few small companies and organisations, as well as numerous print and online magazines. Specialising in technology developments and business matters, Mike is best known for articles based around how best to integrate the two - particularly concerning cyber security, where he has been published in some of the leading authorities online.