Law and Small Business
This article was written by Abhilasha Manturgekar, who is participating in qLegal as part of her Commercial and Corporate Laws Masters studies at Queen Mary University of London. She is a Bronze Award Winner of qLegal’s Blog Writing Competition 2021–2022. The content of this article does not constitute legal advice and should not be relied upon as a source of legal advice. **
What do we know about small businesses?
Small businesses are termed as the stimulators that strengthen and foster municipal economies. Such setups are important as they provide a platform for imminent entrepreneurs. At the beginning of 2021, the United Kingdom had approximately 5.5 million small businesses.
The ‘evolution of small businesses’ gained remarkable momentum due to the flood of innovative technologies. We could see a shift toward a more e-commerce preferred consumer behavior. Businesses began using social media to promote their products and services. There was also an inclination towards personalised customer service, and owners started being a little more socially conscious. Even with restrictive investment, small businesses were reasonably committed to tackling climate change. Most remarkably, small businesses began promoting data transparency.
As per the Small Business, Enterprise and Employment Act 2015, small businesses are organisations that consist of a staff of less than 50 individuals. Small businesses are further distinguished depending upon their annual turnover and balance sheet total. Some important variables that help in differentiating small businesses from other mammoths are — the number of employees, statistics such as total sales and assets, organisational structure, and its standing in the industry.
A business typically goes through five stages of evolution:
- initial existence,
- survival during tough times,
- success,
- taking off which is a test of how the business handles success,
- resource maturity.
Do small businesses need the law i.e. “Does an ounce of prevention worth a pound of cure?”
Yes, a lawyer would quickly respond, but what would the entrepreneurs say? Factually, one of the constant fears faced by small businesses is the fear of staying up to date with rules and regulations.
The legal checklist for small businesses is long and consists of:
- registration,
- insurance,
- duty to create equal opportunities,
- complying with data laws,
- Disclosure and Barring Service (DBS) checks,
- scrutinising the employee’s right to work in the UK,
- adhering to health and safety laws,
- providing nothing less than the national minimum wage,
- reporting to the HMRC,
- update oneself with the current pension regime, and
- everything else that the lawyer harps on.
Before interrogating entrepreneurs to see if they are scared of seeking legal advice, I asked myself if I feared lawyers before becoming one… It is always advised to step back and look at the whole picture. Legal costs and the struggle to find the right lawyer are considered expensive and time-consuming. There is constant antagonism between small businesses and lawyers. Most of the time, this hostility is due to legal fees and complex terms used in law. But like they say, “an ounce of prevention is worth a pound of cure.” Seeking legal advice and addressing issues at hand is beneficial in the long term.
What are the benefits of seeking legal advice?
Many small businesses avoid legal professionals and prefer DIY models to comply with the law. As fascinating as a sit sound, small businesses and especially start-ups are extremely sensitive to legal calamities. They do need guidance in analysing and restricting their personal liability. If small business owners want to bring in more partners, the legal complexities increase with respect to the partnership agreement. It is also necessary for businesses to understand the basics of contracts, and it is dangerous to enter into contracts that they do not understand. The route to gain funding and establish a relationship with lenders requires proper legal advice. This advice will change depending upon the sector, service, product, and every other word that the lawyer harps on.
Is it possible to bridge the gap?
When asked if small business owners see lawyers as complex, non-approachable, and intimidating creatures, the answer was that the task to understand legal jargons, the complexity involved in grasping long texts, the fear of missing out on minute compliances, the cost of seeking legal advice during the initial stage of business, and the right way to find a suitable lawyer were the main concerns.
While all these replacements seem justifiable, it is the lawyer who needs to bridge the gap and fight all stereotypes. Apart from translating the contents of a contract, law and lawyers are efficient to protect the idea that leads to a start-up. Like how the law protects intellectual property, it also protects the residuary entrepreneurs, if in case the principal entrepreneur opts to take an exit route. Proper legal advice can help in gaining various employment benefits. And just like that, a good ounce of law and legal intervention can provide vital assistance to small business owners.
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**qLegal provides pro bono legal advice and legal education to start-ups and entrepreneurs on intellectual property, data protection, corporate and commercial law. See the qLegal website for more details and to book your appointment. Follow us on Twitter and LinkedIn for regular updates on issues relevant to your business.