The top legal considerations when growing a business

Do you run your own business? Or are you thinking of setting up your own business? Either way, you’re probably thinking a lot about ways to grow that business. After all, what other reason is there for starting a business in the first place? Entrepreneurs are well-known for being visionary and highly motivated individuals and while those characteristics are admirable, they still need to be tempered with some more hard-nosed considerations. Above all, the key to successful growth is planning.

Failing to plan is planning to fail

There are several crucial factors to consider, not least of which are the vehicles of growth. Do you intend to grow by buying up smaller businesses (acquisition)? Or maybe forming partnerships with other companies (joint ventures)? Or will you licence your business methods, intellectual property, and brand to others so that they can start their own business using your brand (franchising)? Or would you prefer growing a business organically by means of getting more customers and more employees over time? A lot may depend on whether you’re considering expanding your business internationally or domestically. Each method comes with its own peculiar challenges.

How about your corporate structure? Is it set up for growth? Are you able to issue new shares if you need to? Do you have an appropriate shareholder’s agreement in place that is sufficiently future-proofed? Will you need to make any changes to either the share structure or the agreement? It is best to consider these things in advance.

Funding is a crucial consideration. Most businesses need capital to expand. Would you seek debt funding (borrowing money) or equity funding (seeking investors)? Again, both have their respective pros and cons.

Of utmost importance is to think clearly about your strategic aims. You need to decide what you want to achieve before you decide upon the methods of achieving it.

Taxes, regulations and capital

For many, these are boring subjects but they are highly relevant and any business owner should have at least some awareness of the relevant taxes and regulations pertaining to their particular sector. A failure to take these into consideration can completely scupper the most elaborate of plans.

As far as finances are concerned, are you seeking debt funding, equity funding or, maybe, a combination of both? If you’re seeking debt funding, then are you aware of what sources are available? Have you thought about their terms and conditions and whether or not these are fair and reasonable?

If you’re looking for investors, then have you considered what share of your company you are prepared to sell them? Have you measured this against the possibility of having to raise future funding rounds by similar methods? Are you aware of incentives such as the Enterprise Investment Scheme and how that could help you to raise capital?

Insurance and premises

This is another often overlooked or unconsidered issue. Do you have employer’s liability insurance? If so, is the amount of cover adequate to cover your growth plans?

Are you in the business of selling goods or services? If you’re manufacturing or selling goods, then you will need product liability insurance. Not having such cover can leave your business dangerously exposed. If you’re a service business, then you may need to consider taking out a professional indemnity policy. Should you consider key-man insurance in case a director succumbs to an accident or serious illness or dies?

Do you have premises such as a shop or office which can be visited by members of the public? If so, a public liability insurance policy is also a must. Speaking of premises, do you own them as the freeholder or do you rent them as a tenant? If the latter, have you familiarised yourself with the lease, including the possible impact of future rent reviews?

Protecting your interests and succession

What happens if you fall out with your partner or other shareholders? Can they force you out of the business? What will you do if a serious dispute breaks out between you? How will you seek to resolve this?

If the business is not a one-man band, then have you ensured that all responsibilities and profits are divided fairly?

If you are a ‘solopreneur’ then have you considered what might happen to the business if you were to have a serious accident or contract a serious illness that prevents you from running the business? Who would take over in those circumstances?

Connected with this is succession planning. This includes provisions not just for your death or serious illness but also who is going to take over your role in the event that you wish to retire?

Speak to a business lawyer

There is a lot to take in here and, for many people, it can all be dizzying. That’s why any business owner who has plans to grow should seek the services of an experienced corporate solicitor who can advise you properly and guide you through all of these business legal considerations and help you avoid the pitfalls that will prevent you from fulfilling your ambitions.

For further information and trusted legal advice regarding corporate law, get in touch with us at Carlsons Solicitors.