Legal Overview For Setting Up A Business In UK

May 9, 2023

Setting up a business in the UK must comply with government rules and regulations, and industry regulators keep changing regulations and legal obligations for businesses.

Business owners need to stay updated with the latest legislation or hire small business accountants to help them understand the steps to keep up with the changes.

Legal requirements to set up a business in the UK.

Dealing with necessary legal processes can be complex and intimidating when starting a new business. Here are a few legal requirements for starting a business in the UK:

Register your business

Before registering your business, you need to choose a legal structure: Sole traders, Limited companies, and partnerships. For example, if you operate as a sole trader, you have minor compliance requirements compared to a limited company.

To know the process of registering your business, you can follow the UK government’s official website. Register your business with HMRC for corporation tax and other taxes, like VAT.

Get an insurance

Business insurance can protect entrepreneurs against everyday risks like premise damage and legal costs.

You need to get a few insurances for your business, like:

●      Employer’s liability insurance covers compensation costs for an employee’s injury or illness at the workplace.

●      Commercial motor insurance, if employees are using commercial vehicles.

●      Professional indemnity insurance when businesses deal with solicitors, architects and some healthcare professionals

●       If you are an optional Insurance are cyber insurance, commercial property insurance, etc.

Acquire industry-specific license

Certain businesses require a local authority or government permit to conduct their business like hotels, street traders, food outlets, etc. You need to consult with your local authority, a legal advisor, or an accountant about whether you need a license and what license you need.

Learn about employment law

If you are employing staff in your business, you need to learn about the employment law issues, terms and conditions, staff handbooks and written contracts. The primary laws to consider while employing staffs are:

●      Equal Pay Act, 1970: Equal payments for employees working for the same value regardless of sex

●      Sex Discrimination Act, 1975: No discrimination among employees during recruitment, training, or other activities.

●      Race Relations Act, 1976: No discrimination against an individual because of their race, colour, or ethnic group.

●     Employment Protection Act, 1978: Employers must hand over a written employment contract to employees for protection from unfair dismissal and mention other criteria as per the law.

Learn about consumer protection

Consumer protection rights are applicable to protect consumers from unfair business practices.

●      Sales and Supply of Goods Act: Any goods identified and agreed for consumer purchasing must be of a decent standard.

●      Trade Descriptions Act: No misleading information should be provided while advertising for goods and services.

●      Distance Selling Act: There must be a “cooling off” period when consumers can change their minds about purchasing a good or service and obtain a refund.

●   Data Protection Act: You need to follow the rules under the Act while collecting consumer details.

Developing internal legal documents

It is advisable to create a few internal legal documents to instil confidence in your business, like:

●      Privacy policy: Tell consumers how you collect their data, use, store, and protect them.

●       Company handbook: It contains the summary of what you do as a business, including mission statement, company policies, human resources and legal information related to employment, etc.

Other legal obligations

●      Health and Safety: If your business employs staff or contractors, you must consider health and safety obligations. An employer needs to meet two specific points:

●      They can demonstrate the possible risks to employees in the workplace.

●    They can present the details of threats in the workplace and how they can minimise the risk.

Put a health and safety policy in the business.

●      Follow the instructions under the Regulatory Reform(Fire Safety) Order 2005.

●      Comply with The Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013 if a business sells goods or services to consumers.

●      Large commercial organizations must comply with the Modern Slavery Act 2015.

●  There are a few website legal obligations to follow while setting up a business website in the UK.

An entrepreneur must be aware of a few other legal obligations while setting up a business in the UK. You can also seek help from accounting and audit firms on the legal obligations of your business. It is good to incorporate a legal action plan when reaching investors or to apply for funds. However, you have a simple legal checklist if you are not employing staff and operating a business yourself.


The legal requirements for businesses may seem daunting, but this guide will help you plan and meet your legal obligations. However, you can also consult your legal adviser for more questions and concerns.

A business fulfilling its legal requirements will protect itself from fines and ensure success in the long run.

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