Five ways to safeguard your business.

Written By Mark Maclean

To a lot of people (including me!) their business is their baby – so much effort and time goes into nourishing and growing the business and building it into something you can be proud of. There is always work to be done but sometimes we forget that the business needs proper protection (just like a baby!) to ensure you can keep doing what you love no matter what comes your way (and of course, so the money keeps rolling in…).  

In this blog post, we'll look at five key things you can do to protect your business and make sure it is in the best shape possible:

  1. Find the right structure for your business

  2. Think carefully about your contracts.

  3. Protect your creations.

  4. Safeguard client data (and your reputation!).

  5. Don’t forget about insurance!

 These are steps that every business owner should be thinking about at some point, so why not sit down now with a coffee and we’ll explore these actionable tips together!

  1. Find the right structure for your business.

A business structure is the foundation of your business, and it needs to be right so that everything else can follow. There are several options in England/Wales but broadly speaking most people choose one of the following:

  • Sole Trader

  • General partnership

  • Limited partnerships (LPs)

  • Company

  • Limited liability partnerships (LLPs)

Each has its own pros and cons and you need to consider the size of your business, your liability preferences, and tax implications when making this decision.

I regularly get asked about the differences between a sole trader and a company and one of the biggest differences I discuss with clients is this: as a sole trader you are personally responsible for debts/liabilities of the business. That means if the business fails the creditors will be knocking at your door! This puts a lot of people off, and especially with higher risk business models a limited liability company is a must. It does, however, come with a higher burden in terms of formalities and financial accounting.

Even if you started out with one structure, it is possible (albeit a little time consuming) to switch to another if that better suits your business needs. I would suggest getting some professional input (including from an accountant) when making the switch, as there are various formalities you will need to comply with to ensure it is done properly.

2.       Think carefully about your contracts.

Picture this: you've struck a fantastic deal with a new client but one year in you make a big mistake and the client threatens to take formal action. If you didn’t commit the deal to writing and carefully scope out your obligations and liabilities, this could prove to be a very costly transaction.  

So many business transactions you handle will be a contract in one form or another, and crucially even if an agreement is oral (i.e. not in writing), it will still be binding. Why take the chance and leave the terms to be decided by a court when you could get them in writing at the start? A good contract establishes clear expectations, outlines payment terms, limits liability, and safeguards against disputes.

For certain contracts, terms must be in writing anyway e.g. a Section 1 statement for employees.

Depending on the nature of your business, you should be taking the time to fully review your contracts with:

  • Suppliers

  • Clients

  • Employees

  • Landlords (i.e. a lease if renting commercial premises)

  • Investors

  • Independent contractors

Where necessary seek professional assistance (ideally from a lawyer) to draft or review your contracts, to avoid potential headaches down the road.

3.       Protect your creations.

Even if you don’t run a typically creative business, I would argue that a good business thrives on creativity and innovation. Whether it's a catchy slogan, unique product design, or proprietary software, protecting your intellectual property (IP) is crucial.

Trademarks, copyrights, design rights, and patents can safeguard your ideas - preventing others from copying or profiting from your hard work. I recently prepared a summary overview of the different rights here if you want to better understand which right(s) is the most suitable for your needs.

Thinking about what IP you need to protect and how best to do it is a key step to take early in your business journey. Some useful free resource websites which may assist you:

If you need to formally register your IP right(s), I would suggest getting in touch with a legal professional (which includes specialist patent/trademark attorneys) to ensure the correct process is followed.

 4.       Safeguard client data (and your reputation!).

In today's digital age, data is king. Even if your core business model doesn’t revolve around data collection, you will inevitably end up collecting, storing, and processing client data at some point and with that comes responsibility and various legal obligations.

The two key sources of data protection law in England/Wales: the General Data Protection Regulation ((EU) 2016/679) UK GDPR ) and the Data Protection Act 2018. Compliance in this area can be a bit of a pain, but it must be followed carefully otherwise the Information Commissioner (ICO) can in theory fine you up to the greater of €20 million or 4% of annual global turnover! (Albeit in practice for small businesses the fine will likely be much less).

Ensure your business complies with data protection laws by:

  • Implementing robust security measures.

  • Creating a clear privacy policy / notice.

  • Registering (if required) with the ICO.

  • Having a way to secure and manage consents, including for direct marketing.

  • Educating your staff about data handling best practices.

Some useful free resources that may help you:

The law in this area is extensive and if you have doubts or need further clarity on any thorny data issues, I would suggest speaking with a lawyer (I have saved many clients from the seemingly unending labyrinth of the ICO website - a website which ICO was previously forced to admit was not in fact GDPR-compliant itself…!).  

5.       Don’t forget about insurance!

I worked for several major insurers for a number of years handling their claims / disputes and the one thing I can now say for sure is that the right insurance product can be a make-or-break issue for a business when the unexpected occurs.

A key lesson to be learned from the COVID pandemic is that unforeseeable events can quickly decimate even the strongest businesses. I worked with many struggling businesses and those that had comprehensive Business Interruption cover fared much better overall because they had a financial safety buffer when their business operations had to stop completely. So it is certainly worth thinking about!

Certain types of cover may be mandatory, including:

  • Employers' Liability (EL) – this covers claims brought by employees of your business, and it is a requirement for most businesses that employ staff (even on a casual basis).

  • Motor Liability - if your business uses vehicles for business purposes, you will need motor insurance to cover damage / liabilities associated with accidents, theft, etc.

  • Regulated professions – some professions require their members to take out specific types of insurance, so always check for industry-specific requirements in your business sector.  

For optional, additional cover you may wish to consider the following policies:

  • Property Insurance - protects your business property (including buildings, equipment, inventory, and supplies) against loss or damage caused by events like fire, theft, flood etc.

  • Business Interruption Insurance – helps to cover the loss of income / ongoing expenses if your business operations are disrupted due to a covered event, such as a natural disaster.

  • Public Liability (PL) – covers injury and damage claims brought by third parties arising out of your business operations.

  • Professional Liability – covers claims against your business for professional negligence, errors, omissions, or other issues that can arise if you provide professional services.

  • Cyber Liability Insurance - protects your business from financial losses and liabilities resulting from data breaches, cyberattacks, or other cyber incidents that may compromise client data.

  • Directors and Officers Insurance (D&O) – protects directors of a company against claims regarding their actions as a director (including negligence/ mismanagement.).

Rather than looking at insurance as another irritating overhead, it is helpful to reframe it as a really useful tool to manage your risk, and which may save you a lot of money in the long run! I would suggest working with a good broker to identity the big risks your business faces (including some focus on the industry in which it operates) and think about which insurance product(s) can help you mitigate those particular risks.   

Conclusion

Congratulations, you're now better equipped to safeguard your business! We have looked at some specific  areas where you can tighten up your business processes and there are actionable changes you can start making now.

Remember, legal challenges are a natural part of the entrepreneurial journey. By addressing these issues early and seeking professional guidance when needed, you'll navigate the legal landscape with confidence and keep your business on the path to success.

If you want any more information or wish to chat about any particular issues your business is facing, please don’t hesitate to get in touch.

Cheers to your legal-savvy entrepreneurship!

 

Mark Maclean
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