7 Deadly Startup Sins.

Written by Johnathan ReesBusiness

So you’re starting a business — so much to do, where to begin?

Here are 7 of the most common mistakes made by start-ups:

1. Trading structure.

Choosing the wrong one. A corporate vehicle (limited company or limited liability partnership) provides protection for the entrepreneur via limited liability and creates a “firewall” with creditors. As a sole trader or partner you have unlimited liability for your business’s debts

2. Business plan.

Not having one. A good plan — thoroughly interrogated — will help you understand your funding requirements and identify any weaknesses in your proposition. Inadequate planning often leads to working capital problems for the business

3. Property arrangements.

Committing to an inappropriate lease (too long/ short/ expensive/ small/ big etc.). Minimise your commitments in the early stages e.g. do you need a city centre location, can you share an office, work from home? Get legal advice on the terms of any lease

4. Personal guarantee.

Signing one without knowing the implications or the alternatives. This can result in unlimited liability for the founder and circumvents the limited liability protection provided by a company or LLP structure

5. Contracts.

Failing to implement proper terms for dealings with customers and suppliers (meaning you don’t get paid for what you do/ get what you pay for) and key staff. Investing in standard conditions of sale — and printing them on your quotations, orders and invoices — can help protect your cash-flow

6. Compliance.

Failing to ensure that all consents and licences are in place and regulations complied with e.g. 3rd party software licences, inadequate website conditions, VAT registration, overlooking data protection obligations, not implementing insurance and not filing financial statements on time. These omissions can lead to damage to credibility, credit-rating and reputation, lost management time, fines, lost orders or worse e.g. being prevented from carrying on all or part of the business

7. Intellectual property.

Failing to secure ownership of important IP generated for you by 3rd party contractors and failing to protect key IP which the business creates. Make sure your contracts with 3rd parties and staff ensures IP belongs to your business

Written by
Johnathan Rees
Corporate Lawyer
Johnathan is a corporate lawyer with commercial law firm Joelson Wilson, based in London’s West End. He is part of the firm’s Food and Drink team which advises companies across the food and beverage, leisure and retail sectors. He advises businesses on a variety of corporate transactions from mergers and acquisitions and private equity fundraisings to commercial agreements. Welsh, and a former rugby player, Johnathan cites an interest in people ...

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