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Know Your Pink Law 5 - Creating Sucess
Know Your Pink lLaw 5
A leading law firm gives advice about setting up business in the creative sector
"Where a proposed business starts out with two or more business partners, it is sensible to document the relationship between them"
I have been thinking about starting up my own graphic design and photography business from home, along with a friend. I’ve just been made redundant and so we've now decided to start.
Should we set up a limited company?
Without doubt, conducting a business with the benefit of limited liability is advisable.
Limited liability means that it is the company/ limited liability partnership (LLP) which enters into contracts with third parties. The individuals stand behind the company/ LLP and so are not personally liable for contracts entered into by it.
This means that in most cases the business owner will have no further liability and so personal assets – property, car and financial savings – will be safe. Personal guarantees are likely to be required, but the good thing is that the extent of such personal liability can be negotiated.
A company or LLP can be set up easily and inexpensively directly through Companies’ House, or with the help of a professional.
Do we need a Partnership/ Shareholders' Agreement?
Where a proposed business starts out with or becomes owned by two or more business partners, it is sensible to document the relationship between them.
Such a document will cover the procedures by which the business will be managed, how profits will be shared, and the process by which somebody might leave the business and be paid out, and how new partners might join the business.
This document need not be long or complicated, but it will help provide more certainty for the continuation of the business in the event of disagreements or departures.
What about Terms and Conditions of trading?
These may be part of your web site or a hard copy document.
To be enforceable, the important thing is to ensure that they are incorporated into a binding contract between the business and the client/ customer, for example by using tick boxes on your website.
These can also be used as a tool for risk management by including terms which limit the liability of the business if claims are made against it.
However, for such terms to be valid and enforceable, when drafting, careful consideration must be given to many factors including whether you are doing business with consumers or businesses and the particular nature of your products and services.
We've heard bad stories about having your ideas and designs copied or ripped off. What can we do?
The UK Patent Office has a very informative web site with useful information and instructions on how to obtain the right type of protection for a particular creation.
The commercial success of a particular creative expression is generally dependent on reputation and/ or innovation. Attaching a name or branding to your product or service will make it stand out from the rest, and properly protecting your creations will help ensure that you retain control of commercial exploitation.
The biggest problem for most people is being ripped off. Products, designs, names and ideas can, if not protected, be picked up by other organisations which are in a better position financially to exploit them. This can mean that the creator is left with no acknowledgment or monetary reward for their hard work and creativity.
Seeking proper advice and investing time in identifying the extent of intellectual property (IP), and properly protecting it, will help sustain and add value to a business, reducing the risk of being ripped off or being sued for inadvertently ripping others off.
We want to be an entirely web-based business. Can we do that?
Yes you can. The web site might be used as a source of information for your customers and/ or as a portal through which business is conducted.
The subject matter of a web-based business transaction could be the transfer of physical goods, or it could be virtual subject matter (premium content) being accessed through a “pay as you go” or subscription service.
Any sale of goods to consumers over the internet requires a buyer to be given the right to cancel and return most goods, generally within seven days.
Consideration should be given to whether conducting your business over the internet might compromise any potential distribution networks for products or services of the business, and whether it might be unlawful to sell certain products /images in a particular country.
What about data protection legislation?
As with most businesses, it is likely that you will need to be registered with the Information Commissioner’s Office if you collect personal information such as names and contact details of clients, customers, staff or others. The process is straightforward and the annual registration fee is £30.
It is most common for businesses to incorporate into their terms and conditions a privacy statement which explains why personal data is being collected, and the purposes for which it will be used in the future, so that Data Protection and related legislation is complied with.
A series of “opt in” or “opt out” choices can also be incorporated into terms and conditions to enable your business to use personal data for marketing of other products and services of the business or of third parties.
Anything else?
Get going!
There has been substantial growth in the number of creative businesses in the UK in the last 10 years. It seems that despite – or even perhaps because of – the current economic downturn, people remain enthusiastic about starting their own business to exploit a creative expression.
The process will present many challenges, none of which is insurmountable. It's important to get things going and do what you do best - in your case graphic design and photography.
However, a little attention to the above issues at an early stage can help you build a business that is more capable of surviving and flourishing.
As a creative business you will have access to many relevant services and information designed to assist in growing successful and sustainable businesses. Funding and support organisations are accessible via the internet. Even traditional service industries such as law are responding with flexible and practical advice at reasonable rates.
If you would like information regarding business start-up please see www.rjw.co.uk/our-expertise/business-services/creative-businesses or contact John Deane on 020 7657 1430
Russell Jones & Walker is a leading national firm of solicitors that has been upholding the legal rights of individuals for more than eighty years.
As partners of Stonewall, and through their work with the Terrence Higgins Trust, they are acutely aware of the specific legal issues faced by the gay community.
You can visit the Russell Jones & Walker website here
If you have any legal questions you would like answering then email Editor@pridelife.co.uk
