Thanks to the ease of setting up a business online, more people than ever are making money from their hobbies or are doing what they love full time. Despite the many benefits of this, some small business owners are starting out without doing any research into their legal obligations. Here we look at the most common legal issues overlooked by small businesses:
Is your business name legal?
You may have spent hours agonising over finding the perfect name for your business, but did you check whether it’s legal? It’s important to have a name that is as unique as possible, especially in your field or local area. The first step is to check with Companies House whether your business name has already been registered. The general rule is to make sure people aren’t misled by your company name – i.e. you couldn’t have a fast food restaurant called McDonald’s, but you could use the name for another type of company, e.g. McDonald’s Knitwear or McDonald’s Bakery. There are also protected terms you cannot use in your business name, including ‘bank’, ‘insurer’, and any offensive words.
Are you breaching copyright laws?
It’s not just business names that are protected from being copied. If you run a craft business, you need to be careful about recreating likenesses of copyrighted material. Many craft businesses find some success in selling products based on popular characters or themes, but this could be a breach of copyright laws. For example, you legally need to obtain a license from Disney if you wish to advertise and sell a Mickey Mouse cake.
Are you paying enough tax?
If you’re making any money from your business, it’s essential you inform HMRC (Her Majesty’s Revenue and Customs) to ensure you’re paying the right amount of tax. This applies even if you’re only making a few extra pounds from your business on the side of a full time job. You may not even have to pay tax if you’re only making a small amount and it’s your only form of income, but it’s still a legal requirement to register as self employed. If you already earn above your tax threshold (i.e. if you have another job) it’s likely you’ll have to pay around 20% of whatever you make from your business. It’s wise to put a portion of your income aside so you can pay it to HMRC when you complete your tax return.
Are you qualified?
If you’re planning on offering services rather than products (such as therapy, beauty treatments or financial advice), ensure you’ve got the relevant training or qualifications. Many practitioners will need to gain a license, and your business could be shut down if you continue to offer your services without one. Do some research into licensing and qualifications in your industry – even if it’s not a legal requirement, displaying your qualifications on your website will reassure your customers of your expertise.
It doesn’t need to be difficult to set up your own business, but by ensuring you’re aware of the issues above you can prevent your business being fined or shut down over issues that can be easily avoided.