Going into business for the first time can be one of the most daunting things you can do but it can also be one of the most exciting.

A recent study indicates that 20% of small businesses will fail within the first year. This however means that 80% of small businesses will continue and hopefully prosper but planning will be key. With great possibilities ahead, here is a useful guide of things to consider to help make a start-up a success.

How to Start Up a Business

Choosing the structure

Deciding how to structure the business will allow you to organise the inner workings. There are a number of type and picking the right one, both from a legal perspective and from an accounting perspective, can save you time and money in the future. The standard types of business structures are:

1) Sole trader

Seen as the default position for individuals setting up their business and is defined as someone who runs their own business and is self-employed.


  • Easy to set up
  • You make all the decision


  • Unlimited liability

When one person isn’t enough, going into business with partners may be the solution. Simply defined as a relationship between individuals carrying on business together with a view to making a profit.

2) Partnership


  • Easy to set up
  • Collectively make decisions
  • More diverse skills and expertise than with a sole trader


  • Unlimited liability
  • Can unintentionally create a partnership and be subject to partnership rules

Similar to a partnership although must be registered.

3) Limited Liability Partnership (LLP)


  • Liability limited capped at investment into the partnership
  • More diverse skills and expertise than with a sole trader


  • Formalities to comply with including accounting
  • Decisions made collectively

4) Company

Can either be limited by shares or by guarantees given to the company.


  • Liability limited capped at cost of shares or financial guarantee given
  • Can have more diverse skills and expertise than with a sole trader


  • Formalities to comply with including legal duties as directors and accounting
  • Decision making may require shareholder approval

Sorting out the Financing.

Whatever the structure you choose, it is important that the rules of the entity are set down. Either in the form of a partnership agreement (the alternative means the partnership is governed by the rules in the Partnership Act 1890) or a shareholders agreement which gives all parties certainty over the responsibilities, decision making and exiting the structure.

Depending on your business, the initial start-up costs will vary. Some businesses will need stock and a physical location whereas others simply need a computer and an Internet connection. Sourcing the correct finance can put you on the right footing and will help keep the money flowing when you need it the most. Types of financing include:

  1. Start-up loans – loans designed to help businesses develop from the ground up. May also include a business development manager to help you get started.
  2. Grants – depending on the type of business, applying for grants may be a way to fund businesses without the need to take out loans.
  3. Bridging finance – considered a short term financial source with a higher interest rate due to the ease in obtaining funds from lenders.
  4. Mortgages – long term lending with lower interest rates however this requires a substantial asset for the lender to take security over.

Protecting your Business

For some businesses, the ideas they have and the products they produce are fundamental. Knowing how to protect your ideas will give you an edge to ensure competitors do not steal your intellectual property. Whether it is registering a patent or a design or simply knowing your rights under copyright law, knowledge is power.

Another way to protect your business is with insurance. If you are trading in the public, having public liability insurance will limit your exposure if something happens. You may also consider insurance against stock, insurance for key employees if they are essential to the business or professional indemnity insurance. In any case, planning for the worse may mean your business can continue if something doesn’t go as planned.

Finding a Premises

If you need a physical premise, finding the right one can make or break your business. Generally, the starting point will be to rent as this can help with cash flow as initially the cost will be consistent and you may not need as much of a deposit.

Location will affect price so being realistic with what you can afford and ensure you should always understand the lease you are entering into. A Landlord will always draft a lease in their favour, whether it is their definition of rent (the more that is classed as rent, the more the landlord can use to terminate the lease if unpaid), time frames for payments to be made, break clauses and the requirements needed to be able to break the lease or whether you will be entitled to a new lease at the end of the term. All of these require negotiating and drafting documents and the time spent at the outset can save you from issues later down the line.


If one person isn’t enough (no matter how good you are), you may need to employ individuals to help progress the business. Employment law is complicated and getting it wrong can cause huge problems; many of which have hit the news recently. Having the right contract, knowing your responsibilities for national insurance, pensions and tax will keep you on the right side of HMRC and the Employment Tribunal.

Terms and Conditions

So, you have finally set up the business. Everything is good to go and you are ready to being dealing with your customers. But first, you need to set down the terms and conditions that will govern your transactions. Depending on your business though, some consumers enjoy rights set down in statute like the Sale of Good Act and the Consumer Rights Act. Knowing what the starting point is and whether you disapply the statute rules can improve your position when something goes wrong but will also ensure you know your rights.

Hopefully the above has given you an overview of things to consider when starting up a business. May of these we can help with such as:

  • Drafting shareholder/partnership agreements;
  • Dealing with Lender’s requirements during financing;
  • Negotiating a lease that meets your need;
  • Advising on employment contacts and procedures; or
  • Drafting your terms and conditions

If you need help with any of the above, please call Phillip Hewett on 0207 449 3139.