Business Law & Compliance

The five legal areas critical to your business

6 min read

11 June 2015

Ignoring your legal accountability can be a costly mistake as nearly half of businesses realise too late. For a round-up of what you need to know, here are five areas in law that businesses are often tripped up by as they grow.

It’s hard to grow a business. There is a lot to keep on top of, such as sales, marketing, the website and the seemingly less profitable area of “legal considerations” can often take a back seat. However, there are some legal requirements that if ignored or mismanaged can cost you everything. 

A report based on a survey of 10,000 businesses by the Legal Service Board found that 46 per cent of SME’s cited unaddressed legal issues as having a significant detrimental effect on their business, with an average cost per issue of just under £14k.

Here’s a five point list to check off to make sure your legal ducks are all in a row.

1. Copyright

Understand where all your brand assets come from and how they can be used.

Did you know that The Intellectual Property Act 2014 means someone can make limited and reasonable use of copyrighted photos, songs, films and art without getting the permission of the copyright holder – catering for the online culture, including “mash-ups”.

However, there are changes in the design laws that mean if someone intentionally copies a registered design it can be a criminal offence.

Many problems occur legally when commissioning design work. If a SME commissions a designer who is a third party, the design is owned by the designer unless otherwise agreed. So make sure you create terms of ownership in writing when commissioning.

If you want to know more you can get a free IP Healthcheck.

2. Liability

Avia conducted a survey of 1,507 SMEs and found that 11 per cent of SMEs were unaware that liability insurance is a legal requirement in any scenario. Avia said that “employers without the insurance carried the risk of fines of £2,500 for every day the business is not properly insured”. If you are guilty of not having considered liability insurance, it’s time you did.

3. Employment

Bigger businesses have human resources departments that manage concerns and issues between employees and employers, but for SME’s the strains of miscommunication or grievance between employer and employee can spill out into legal confrontation. Employment law is changing all the time and it’s important to understand the legal requirements. 

For instance, all employees have the legal right to request flexible working, not just parents and carers. Maternity leave must be respected and can be shared between the parents. The basics are that eligible employees can take up to 52 weeks’ maternity leave. The first 26 weeks is known as “Ordinary Maternity Leave”, whilst the last 26 weeks are called “Additional Maternity Leave”. 

Read more about law:

If you are setting out to discipline a staff member the steps are: 

  1. A letter setting out the issue;
  2. A meeting to discuss the issue;
  3. A disciplinary decision; and
  4. A chance to appeal the decision. 

It’s important to understand correct management of procedures as if a case goes to court, your company may be found at fault of unfair or constructive dismissal.

Being embroiled in a dispute in any one of these areas will take time, cost money and may damage your reputation as a business.

4. Tax

Whilst HMRC use their resources predominantly to pursue major tax fraud, no business manager worth their salt wants to mismanage a tax return and create stress around what should be a simple procedure. The best way of managing this legal must for a SME is to either employ a recommended accountant or invest in software that helps you process accounting information as you go.

5. Data Protection Act

This law governs how you should store, retrieve and use people’s personal information. Today this is highly relevant as if a customer chooses to purchase an item online, their personal details can be filed into a company’s CRM system. The Data Protection Act of 1998 means that people have the right to know what information is held on them by a business. A business must make sure the information they keep is fairly and lawfully processed, processed for limited purposes, is adequate, relevant and not excessive, is kept secure and is not transferred to other countries without adequate protection.

Legal requirements, when ignored by a business, can clearly create trouble at some stage and how deep you fall into a legal mire may simply depend on how prepared you are.

Richard Forsyth works for website marketing company Varn Media.

Image: Shutterstock