Do I need a solicitor to start a business?

Legal advice is obviously valuable when setting up a business, however is the use of a solicitor compulsory? Let's analyze what you do and don’t need a solicitor for during the business formation stage.

What a solicitor can’t do for you

When setting up a business, there are some obvious first steps for which legal expertise is not needed such as get a business idea, write a business plan, conduct market research, choose a name for your business and for your brand. 

What a solicitor can advise you on when setting up your business

A corporate legal advisor will be of great help when setting up your business to carry out tasks such as choosing the right business structure and registering it with Companies House, assisting you with business premises agreements or with trade licenses.

However, depending on the type of business you want to start, you may be able to do these tasks yourself. Let's take a look at a few common business structures to determine if and what task you really need legal counsel for.

Choosing the right business structure and registering it

Needing legal advice to choose the best legal structure for your business clearly depends on the size, complexity and goals of the business you are creating.

Sole trader is a form of business without partners or shareholders that is easy to set up and has simple accounting for, but you are personally responsible for all trade debts.

In a general partnership the manager personally shares the responsibilities with another person or business entity. Profits are taxed as income and each partner files a separate tax return. Here too, all partners are responsible for all trade debts.

Limited Partnerships (LPs) are a rarely used legal structure and the main purpose is to create and administer funds. LPs are similar to a general partnership, except that at least one partner is a general partner who controls and manages the business, and at least one is a limited partner whose liability for debts is limited to the amount of its contribution to the company.

Private Fund Limited Partnership (PFLP) has been around since 2017 and is a new type of limited partnership specifically tailored to the needs of private equity funds and their managers and investors. PFLP aims to provide better protection and clearer limits to limited investor liability and to alleviate some of the administrative and financial burdens than LPs.

Limited Liability Partnerships (LLP) further reduce the financial liability of partners for corporate debts. They must have at least two designated partners at all times.

Social enterprises help people or communities. These are charities or incorporated charities, but they can also be cooperatives or community benefit corporations.

The limited company is a legal entity separate from its shareholders and directors. The most common form of company used in practice is a company limited by shares. A limited company is responsible for its own debts and commitments. The liability of each shareholder is limited to the amount unpaid on the shares of that shareholder. Limited Companies are incorporated at Companies House and are subject to ongoing filing and disclosure requirements.

You can also choose to start your business as part of a franchise. This will not prevent you from having to choose one of the legal structures presented above before proceeding to purchase a franchise.

Of course, a solicitor can advise you on the legal structure that will best meet your needs, as can a business or financial advisor. But once you have chosen the right structure a solicitor (or an accountant or an agent) is it still necessary for the creation and registration of the company? Except from sole trader and sometimes general partnership, the answer is yes because you'll be dealing with complex financial structure and set out the responsibilities of each partner. 

helping you with agreements about business premises

No matter what kind of business structure you’ve chosen, it’s advisable to get legal advice from a commercial property solicitor if:

  • Your business is buying or selling commercial property
  • Your business becomes the owner or tenant of commercial premises
  • Your company takes over an existing commercial lease

Commercial property law is very complex, so unless you are an independent contractor running a home business, you will definitely need the advice of a solicitor in this area.

Helping you with licences to trade

There are as many business licenses as there are different business ideas! There are many licenses you can apply for yourself, including those for street trading, the sale of alcohol, or the operation of food premises. You can use the license finder to find the licenses applicable to your industry.

However, there are certain types of licenses that are very specialized and will require the advice of a licensing lawyer. Here are some types of license that require legal assistance:

  • Air carrier and civil aviation
  • Chemical Weapons
  • Controlled drugs
  • Consumer credit
  • Licensing due diligence
  • Gaming and betting licenses
  • License of any intellectual property
  • Foreign trade, such as import and export
  • Works with hazardous substances

There are many things you can do on your own when setting up your business, especially starting a simple sole proprietorship. But when your business structure starts to get more complex, it's best to involve a solicitor for sound legal advice, or even for the actual filing.

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