The growth of the ‘side hustle’ has been one of the big success stories to come from the COVID pandemic. Some statistics suggest that as many as one in four people started a side hustle as a way to bring in extra income during lockdowns and periods of furlough.
For some, what started as a way to earn some extra cash may now have become the main way of earning a living. We have even seen some hugely successful businesses grow from humble beginnings over the past two years.
Here, James O’Donnell looks at some of the ways in which you can seek to protect your business as it grows.
Business Structure
Putting a legal framework in place around your business is generally considered a ‘given’, but businesses that were started informally, perhaps during the midst of the pandemic, may not have been formally registered. Depending on the business status opted for, registering a company formally can bring multiple benefits and is certainly a step worth taking. It may also be that a business that began under one structure might warrant a change. For example, if you began a business as a sole trader but have subsequently grown the way you operate, it may be worth considering registering as a Limited Company. There are pros and cons to different legal structures, which a solicitor or accountant will be able to advise you on.
Contracts
The early days of starting a business can be exciting and depending on how experienced you are in owning and running a business, you may or may not have taken the time to put legal frameworks and paperwork in place. Good contracts are essential for every business and can offer a significant level of protection if a problem ever arises. The type of contracts required will depend on the nature of the business and its customer base, however, all businesses can benefit from a well-drafted set of Terms and Conditions.
A solicitor will be able to advise you on the contracts that are most suited to your business and will be able to draft these so they are tailored to your business and its needs. Contracts necessarily contain legal clauses and terminology that you may not be familiar with. Relying on a downloaded template from the internet could actually tie you into commitments that you do not want to make.
Employees
Taking on employees is one of the biggest responsibilities any business can take on. Becoming an employer isn’t just a case of agreeing on a role and making payment at the end of the month. Employment law is onerous and places numerous responsibilities on businesses. Employers need to be well aware of their obligations, taking the time to ensure they have the procedures in place to follow them, in order to avoid potentially damaging claims.
A common mistake made by businesses that experience growth is a failure to review existing contracts as and when employees become more senior. A notice period of 2 weeks might be suitable for an entry-level member of staff, but if they are subsequently promoted to become a manager, you may wish to consider a lengthier notice period alongside other restrictions, potentially around restrictive covenants and the protection of company data.
Premises
Taking the step of moving into commercial premises – or finding larger, dedicated premises – is often one of the biggest transitions for growing businesses. However, it is not always appreciated how much responsibility – and liability – is taken on when occupying a commercial property. The suitability of the property for the length of the term of the lease, along with the repair and maintenance responsibilities, are two of the main things to consider. Leases are highly complex documents and seeking advice from a solicitor is essential to avoid significant costs down the line.
For further legal advice in relation to any aspect of a growing business, or to arrange a review of your business documentation, contact James O’Donnell.