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From thinking carefully about the right moment to file a patent, to securing your data from day one, to not being put off by making the odd mistake, Harper James Solicitors' expert team share their top tips for setting your business up for success.

1. Think about the right moment to patent your idea.

Patenting your idea can be complicated, often involving a lengthy process and high costs. Everyone wants to protect their ideas, but knowing when and how to apply for a patent is key when launching a business with a unique product or service.

"Think really carefully about whether you should apply for a patent", IP Partner, Lindsay Gledhill, advises. "It is a very hard decision. We see some inventors who regret not applying early, but we see just as many businesses struggling due to the downstream patenting costs.

“If you are inventing a new product or process, ask yourself whether elements of it can be kept secret while in use by the customer. If so, you may be able to get the protection you need without incurring the cost and risk of filing patent applications. But you’ll need to make careful records of the secret information in case there is ever a dispute about it.”

2. Make sure any new business is run on your terms.

Any entrepreneur wants the initial stages of their business to run as smoothly as possible, but you still need robust legal protection in place, however simple it may be. Commercial and Technology Associate, Ed Kilner, recommends that any businesses starting out have an initial set of terms in place for their initial clients or customers.

Ed explains: “One of the best pieces of advice I can offer to anyone starting out is simply having a set of terms in place from the outset. They don’t have to be long and scary, but the key thing is to have a limitation of liability clause in place. Some clients come to us here at Harper James and say they have not had any written contract in place with their customers in the early days.

“Some clients think this is great as they don’t have to go through negotiations. All this means is that if a claim is made against them their liability could be unlimited. If they have even a simple set of terms in place with a limitation of liability clause in there, then they immediately limit their exposure as a young business.” 

3. Secure your data from day one.

The handling of data is a key part of any business activity. GDPR rules can be confusing at times. However, the security of both client and internal data needs to be paramount for businesses.

David Sant, Data Protection expert, advises: “It might seem a headache when you are just starting out, but being mindful from day one that all businesses must comply with data protection is vital. There is often a misconception that small businesses don’t have a duty to register with the Information Commissioner's Office, or that they don’t have to worry as much about keeping personal data secure - this isn’t the case. 

“If your business uses or processes personal data of customers, suppliers or staff, it is wise to understand the effect of data protection laws on your business from the outset.

"Remember, even if you are a small business, you will still have the same legal obligations as a large business to process personal data lawfully and transparently; to keep it secure and to comply with other data protection principles."

Data Protection and Privacy Solicitor, Clive Mackintosh, added: “Compliance with GDPR is often an unfortunate oversight in startups, with many entrepreneurs failing to recognise the value of data in business.

“Sometimes, businesses need to be educated on what they need to do in order to comply with GDPR rules, how they can do this and the best way to deal with large amounts of customer or client data.

“If data security is breached, businesses could face consequences including ICO fines, a loss of credibility or even civil suits from affected customers. Taking the time to receive legal advice prior to beginning operating will save you from having to deal with any of these outcomes.”

4. Get proper employment contracts in place. 

Employee contracts must be in place from the start of any business. While it may seem like an unnecessary chore if you’re only a small team, it’s important to ensure that employment contracts are ready and can be signed either before or on the day a new employee starts working.

Ella Bond, Employment Law Solicitor, explains: “Since 6 April 2020, some key information for terms and conditions of employment must be provided to employees and workers from their first day. Well drafted contracts ensure this obligation is met.

“It will also help protect your company from the outset in the event of issues arising and means that any post-termination obligations, such as covenants, would be in place from the start. Remember, anyone working for the business should have a contract, including directors."

5. Recognise where you have some bargaining power.

Often, owners feel that when they are a fledgling business, they don't have a strong enough position in the market to leverage bargaining power. This can lead to unfair agreements, with negotiations often skewed against smaller businesses.

Sarah Gunton, Commercial Law Partner, says: “As a small business, you may feel like you have less bargaining power than the person across the table, whether they are a supplier or a customer. You may agree to terms which apportion a higher amount of risk to your business – often when the other party may be better-positioned to do so.

“This is a common mistake among startups looking to make a name for themselves, and when it is not commercially appropriate to accept a certain risk, it may be possible to argue that, if the other side wants the relationship to survive (or, indeed, thrive), they should take some of the risk.”

6. Consider using employee share schemes to improve your tax efficiency and attract talent.

Employee share schemes are common in the world of startups, including Employment Management Incentive (EMI) schemes. If businesses don't qualify for an EMI scheme, a growth share or other share ownership arrangement might be used instead.

Share schemes can help businesses in several ways, including to attract and retain talent, as well as reducing tax liabilities for both the employee and company.

Employee Incentives Solicitor, Ian Fraser, explains: “Employee share schemes, whether they are EMI schemes or other arrangements, can benefit a new business in a variety of ways. They can help startups to attract and retain talent they may not have been able to otherwise, and by maximising the tax reliefs that are available businesses can improve their bottom line and shareholder returns massively."

7. Be ambitious and don’t be frightened of making a mistake.

Starting out in business can be daunting and there will be times where things don’t run smoothly. But how you react when things go wrong can be critical to where your business ends up going. 

That’s why Toby Harper, the CEO of Harper James Solicitors, says being ready for these moments is the vital thing to remember when starting out. 

“Be ambitious and don’t be afraid to go for it", he advises. "The pandemic may throw up hurdles, but it also presents opportunities for entrepreneurs, particularly in the tech sector, to create new products and services.

“Have a clear plan and strategy in place and can get as much advice and support as you can in the early days.

“Don’t be afraid of making mistakes - often it’s those moments, and how you react, which teach you the most.”

Contributed by Nick Owens
Neina Sheldon
Article by Neina Sheldon
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