Did you know that around 5 million new business are started in the UK every year, and that a significant majority of those businesses are set up without considering the type of legal entity that’s needed, and having the right infrastructure in place ? Only about 10% are set up as limited liability companies.
Starting a business is a bit like building a house. Without the right foundations in place the house would be, to coin a phrase, on “shaky ground” and the same principle really applies to starting a business, where it’s imperative to have some decent legal advice from solicitors and also some good accountants.
The dilemma for a new business is that, for wholly understandable reasons, most new businesses focus on marketing, product and sales and with most things legal or accountancy based, there is no obvious immediate benefit, only cost, so it has a negative connotation. In a recent poll of small businesses, not surprisingly the majority said that they didn’t seek legal advice because if the cost. Legal fees are expensive, there’s no doubt about it. What clients don’t always realise that solicitors have some very big overheads, including the usual ones such as office, staff and equipment, but they must also pay a very high premium, in relative terms, for professional indemnity insurance, which provides a very high level of protection for clients. Therefore, what is objectively a high hourly charging rate of often upwards of £150.00 plus VAT peer hour does not, in reality, equate to profit of more than perhaps a third of that for the solicitor practice.
So, what to do if you are small business ? The options we would suggest would include :-
- seeking a fixed fee quote for set services – many solicitors, including Turbervilles in London and Riverview Law will now provide this
- find experienced small business solicitors, check references and credentials at the Law Society.
- focus on the most important issues, such as the right legal entity, a shareholders or partnership agreement, bespoke terms and conditions and if you have employees or consultants, the right contract of employment or consultancy agreement, as appropriate. There are now some very reasonable and practical shareholder agreement solicitors who understand the cost/benefit approach.
- consider the new types of services available now such as interactive legal document creation, which can be cheaper
- read up carefully on the internet, there are now many fantastic free legal resources