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Legal and Business issues for new Creative Businesses
There has been substantial growth in the number of creative businesses in the UK in the last 10 years. 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.
Limiting personal liability
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 to by it. This means that in most cases the business owner will have no further liability and so his 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.
Agreements with business partners
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.
This will help provide more certainty for the continuation of the business in the event of disagreements or departures.
Terms and Conditions of trading
These may be part of a 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.
These can also be used as a tool for risk management by including terms which limit 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.
Intellectual Property (IP) Issues
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 your creation or invention.
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 registering your designs or inventions will help ensure that you retain control of commercial exploitation.
The biggest problem for most people is being ripped off. Products, 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 advice and investing time in identifying the extent of IP, and properly protecting it, will help sustain and add value to the business, reducing the risk of being ripped off or being sued or inadvertently ripping others off.
E-Commerce
The web site might be used a source of information for customers 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 7 days.
Consideration should be given to whether conducting business over the internet might compromise any pre-existing or potential distribution networks for the products or services of the business, and whether it might be unlawful to sell certain products in a particular country.
Data Protection
It is likely that most businesses will need to be registered with the Information Commissioner’s Office because they will be collecting personal information such as names and contact details of clients, customers, staff or others. 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 businesses to use personal data for marketing purposes.
Becoming more equipped in business
Creative businesses now 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.
By John Deane
Solicitor at national law firm Russell Jones & Walker
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