Running your business and trading. Supporting you on your business journey. When setting up a new business, it s essential that you re familiar with the relevant aspects of the law. Breaking a law because you didn t know about it is not a defence so for your own protection and peace of mind it pays to be informed. This is one of two guides that will give you an overview of the key areas of the law you should be aware of when setting up and running a business. This guide covers: Data protection. Advertising. Intellectual property. Employing staff. Health & safety. Business insurance. Environmental issues. Refunds and returns. Agreements and contracts. Terms and conditions. Licences. Insolvency.
Data protection. If you keep information about individuals that would enable someone else to identify the person whether customers, staff or contacts you may need to notify the Information Commissioner s Office (ICO). Even if you are exempt from notification, you must still abide by the principles of the Data Protection Act 1998. The Act applies to information on websites as much as to computer and paper records. There are eight enforceable principles of good practice concerning data. Data must be: Fairly and lawfully processed. Used for limited purposes. Adequate, relevant and not excessive. Accurate. Kept only as long as necessary. Processed in line with the subject s rights. Not transferred to countries that don t have adequate protection. Secure: the responsibility for security rests with you (even inadvertent disclosure of personal information could make you liable to pay compensation to the person concerned). You may only carry out data processing where one of the following conditions has been met: The individual concerned has given their consent. The processing is necessary to fulfil a contract with the person. It is to protect the person s vital interests. It is to comply with a particular law. It is in the legitimate interests of the business (unless this adversely affects the individual). It is a criminal offence to break the law on data protection. If you are caught, you could face a fine, a custodial sentence or community service. For more information on your responsibilities under the Data Protection Act, see the Information Commissioner s office website: www.ico.gov.uk
Advertising. Make sure that your advertising is accurate, truthful and doesn t unfairly disparage the competition. If you make a claim in your advertisement that is untrue, the Advertising Standards Authority may order you to withdraw it. Also, Trading Standards Officers can take appropriate action if they consider an advertisement contains false or misleading descriptions. Be careful when comparing yourself with the competition, either by implication or explicitly as it must be in a way that is clear, fair, true and accurate. The various restrictions imposed by law are set out in the British Code of Advertising and displayed on the Advertising Standards Agency website: www.asa.org.uk Intellectual property. Copyright exists to protect creative works like articles, poems, photographs, designs, songs and sculptures. You do not need to register copyright, but you should be very careful when you copy the material of others. Remember to seek permission to use other people s photographs or drawings. Copyright only applies to the original works, not copies, and only to the means of expression, not the concept itself. So if someone writes an article, only the words, not the ideas in it, are protected. To protect an invention, you must apply for a patent. It is essential to do this before the details are made public anywhere. To protect a logo or a slogan, you must register it as a trademark. Consider taking out intellectual property insurance to help pay for the cost of defending your intellectual property rights. Employing staff. If you employ staff in your business, you have certain legal responsibilities and obligations. Failure to meet these could result in legal action being taken against you. Make sure that all new employees are entitled to work in this country, or you could face heavy penalties. For a list of the documents you can inspect to prove this together with general guidance for employers on employing workers from overseas see the Border and Immigration office website: www.bia.homeoffice.gov.uk. Have a contract of employment in place from the day all employees start work. A solicitor can supply a sample contract.
To avoid leaving yourself open to claims for unfair dismissal, discrimination and breach of contract, take independent legal advice before altering terms and conditions of employment, making people redundant or dismissing them. You should warn employees that any discrimination, sexual harassment and other illegal acts will not be tolerated as you as an employer could be found liable in these cases where you have failed to take action. Think about any additional requirements that you may have based on the size of your workforce such as the availability of pensions. For more information on these and other legal issues around taking in staff, see [Employment law: a checklist for employers]. Health & safety. As a small business owner, you have significant legal obligations regarding health and safety issues. If you fail to carry out these responsibilities, you may face prosecution, your insurance premiums may rise, and you may find it hard to buy insurance altogether. Information for businesses is available from the Health & Safety Executive website: www.hse.gov.uk Business insurance. If you employ anyone, even on a casual, part-time basis, you are legally required to have employer s insurance in the UK. Other insurance can also be useful as a sensible business precaution: If you sell products, product liability insurance could protect you if someone is injured by a defect in your product. If you offer services or advice, consider adequate professional indemnity insurance. The effects of a mistake in a service or product you have provided can be out of all proportion to the initial error. Many professional bodies make it mandatory for their members to take out adequate professional indemnity cover. Consider consulting an insurance broker and the relevant professional body about any legal insurance requirements.
Environmental issues. Many businesses must also comply with certain environmental obligations, for example, regarding the control and disposal of hazardous substances. [Find out more from the Environment Agency's Netregs site: www.netregs.gov.uk] Trading. Refunds and returns. The Consumer Protection (Distance Selling) Regulations 2000 give certain rights to remote buyers (e.g. customers buying on the telephone, internet or by direct mail), such as the right to cancel an order within seven days. You must make it clear to customers their rights in respect of distance selling. There are certain exceptions, which could include holidays, perishable goods and personalised goods. Tapes, CDs, videos and computer software are also excluded unless they are returned unopened. Ensure that you are following the appropriate regime for your type of goods before launching your product. There are a number of statutory rights in respect of refunds ensure that you are aware of the rights of the customer and also your own when requested to give a refund. Making any conditions clear to the customer at the time of purchase will go some way to protecting your position. Agreements and contracts. Contracts form the basis for business relationships. Such agreements can be oral or even implicit, but for clarity it s best to have them in writing. If you breach a contract, the other party will be entitled to damages. A binding contract must be clear as to what all parties are to do, be agreed and include an intention from both parties to be bound to the contract.
Terms and conditions. To ensure you have effective means of debt control, you need to spell out your terms and conditions of trade (T&Cs), and get your customers to agree to, and ideally sign them, when placing an order. There are services available that provide you with generic terms and conditions which can be adapted for your business be sure to have them checked by a solicitor first to ensure they offer you the best protection. Some essentials to consider are: Retention of title clauses: under this, you retain ownership until payment if your customer becomes insolvent before paying up, you may not be able to reclaim your goods without it. Payment terms: make it clear to your customers when you expect payment for goods or services. Licences. Some trades, such as the food industry and financial services providers, require specific licences to operate. Your local Business Link or national equivalent will be able to advise you. Insolvency. If a business does not have enough cash to support its operations, it is insolvent. It is a criminal offence to continue to trade when you know your business is insolvent. If this happens in a limited company, directors can become personally liable. If your business gets into financial difficulties, seek professional advice immediately. You may be able to reschedule debts e.g. a Voluntary Arrangement. Be aware that liquidation or receivership may be inevitable.
While all reasonable care has been taken to ensure that the information in this business guide is accurate, no liability is accepted by Lloyds TSB for any loss or damage caused to any person relying on any statement or omission in this business guide. This business guide is provided for information only and should not be relied on as offering advice for any set of circumstances and specific advice should always be sought in each instance. When using these services your agreement will be with the relevant third party and their terms and conditions will apply. Lloyds TSB shall not be responsible or liable to you for any failure by the third party to provide these services or in relation to use by the third party of any confidential information supplied to them by you. www.lloydstsb.com/business Lloyds TSB Bank plc Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: 020 7626 1500. Lloyds TSB Scotland plc Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. SC95237. Telephone: 0131 225 4555. Authorised and regulated by the Financial Services Authority under numbers 119278 and 191240 respectively. Lloyds TSB Bank plc and Lloyds TSB Scotland plc are covered by the Financial Services Compensation Scheme and the Financial Ombudsman Service (please note that due to the schemes' eligibility criteria not all Lloyds TSB Commercial customers will be covered by these schemes).