Starting a new business is an exciting step but it also involves a number of important legal decisions. Getting the right documents in place from the outset protects you, your business and anyone you work with and can prevent disputes and misunderstandings further down the line.
Here we set out the key legal documents most new businesses should consider and why each one matters.
Shareholders’ agreement or partnership agreement
If you are going into business with other people, a formal agreement between you is essential – regardless of how well you know each other. A shareholders’ agreement (for a limited company) or partnership agreement sets out how the business will be run, how decisions will be made, what happens if a partner or shareholder wants to leave and how disputes between the owners will be resolved.
Without one, you are relying on the default rules under company law or the Partnership Act 1890, which may not reflect what you have actually agreed and can lead to serious difficulties if the relationship breaks down.
Articles of association
If you are incorporating as a limited company, you will need articles of association — the rules that govern how the company is run internally. Companies House provides model articles that apply by default but these are generic and may not suit your specific circumstances. Having bespoke articles drafted gives you more control over how the company operates and can prevent problems as the business grows.
Terms and conditions of business
Your terms and conditions set out the basis on which you supply goods or services to your customers. They should cover payment terms, what happens if a customer fails to pay, how disputes will be resolved, your liability if something goes wrong, and any other conditions specific to your business.
Without clear terms and conditions, you are vulnerable to disputes about what was agreed and you may find yourself bound by a customer’s own terms by default. Well-drafted terms give you a solid foundation for every commercial relationship.
Employment contracts
If you are taking on employees, you are legally required to provide each of them with a written statement of employment particulars – commonly known as an employment contract – from their first day of work. This should set out their pay, hours, holiday entitlement, notice period and other key terms of employment.
Going beyond the legal minimum and having a properly drafted employment contract in place protects both you and your employees, and makes it much easier to manage the employment relationship if difficulties arise later.
Non-disclosure agreements
If you are sharing confidential information with potential partners, suppliers, investors or employees before a formal agreement is in place, a non-disclosure agreement (NDA) protects that information from being used or shared without your consent. NDAs are particularly important in the early stages of a business when you may be discussing sensitive ideas, pricing or business plans with people you do not yet have a formal relationship with.
Supplier and service contracts
Any significant ongoing relationship with a supplier or service provider should be documented in a written contract. This sets out what is being provided, at what cost, for how long, and what happens if either party fails to deliver. Relying on verbal agreements or email exchanges leaves you exposed if a supplier fails to perform or disputes arise about what was agreed.
Intellectual property assignment agreements
If you are working with freelancers, contractors or developers to create content, software, designs or other intellectual property for your business, it is important to ensure that ownership of that work is clearly assigned to your business in writing. Without a formal assignment, the creator may retain ownership of the work even after you have paid for it — which can cause significant difficulties if you later want to sell the business or licence the IP.
Website terms and privacy policy
If your business has a website — and most do — you need website terms of use and a privacy policy that complies with UK GDPR. The privacy policy must explain what personal data you collect, how you use it, how long you keep it and what rights individuals have in relation to their data. Failing to have an adequate privacy policy in place can result in regulatory action from the Information Commissioner’s Office.
Getting the right advice from the start
Not every business will need all of these documents immediately, and the right approach depends on your specific circumstances. But taking legal advice at an early stage — before problems arise rather than after — is almost always more cost-effective than dealing with disputes or gaps in your documentation later.
At Challenor Gardiner we advise new and growing businesses across Oxford and Oxfordshire on the legal documents they need, from shareholders’ agreements and employment contracts to terms and conditions and commercial agreements. We offer practical, plain-English advice without unnecessary jargon.
Call us on 01865 721451, email info@challenor-gardiner.co.uk or contact us online.
Find out more about our business law services in Oxford
This article is intended for general information purposes only and does not constitute legal advice. You should seek professional legal advice tailored to your specific circumstances before taking any action.