Starting up a business

Posted by Michelle Davenport on
Our Corporate team have experience of working with both entrepreneurs and established business owners who are looking for their first (or next) venture!

Whatever their reasons for wanting to start a business – from a desire to work for themselves to spotting a niche in the market – there are three main factors start-ups will need to consider.

1. Building a solid business plan

Today's business world is a competitive environment, so a good business plan demonstrates whether your start-up idea is worth investing time, effort and money into.

When starting up, it is worthwhile carefully thinking through and planning your business. Having clear achievable goals and timescales will help concentrate your efforts. What will your business do? How will the business make money?

At a more developed stage of your business, your business plan will also help third parties, such as potential investors and banks, to see what the future might look like and how you will get there.

Rather than start with a blank page, here is a useful template:

2. Getting the structure right

There are different structures which have different benefits and downsides in terms of liability and in due course, attracting investors. It's important you understand the benefits and limitations of each option. We can help you decide what structure would best suit your business.

3. Securing funding

If it’s funding you’re after, completing a business plan is the key to attracting investors and unlocking the capital that can kick start your venture.

It is important to consider how you will fund the costs of the business. Initially, you may be using savings and/or loans, but you may be thinking about raising money from investors.

We can advise you as to which option might be best for you. These might include:

Loans

Loans can be one way to raise necessary funds whilst keeping control over the company/business and profits (contrast with the position where you receive funding from outside investors).

If you qualify, start up loans are available from the Government. 

Banks and other institutional lenders may also be willing to lend, but they are likely to require security over the business's assets.

We can help advise on whether this is the right option for you and can explain in simple terms the conditions of loan and security documents.

EIS/SEIS

You may decide that outside investment may be best for your business. However when starting up, you may find it difficult to get investment from third party investors because your company may be seen to be a "high risk investment". There are tax incentives available for investors to invest in smaller companies carrying out certain trades using the Enterprise Investment Scheme (SEIS and EIS). Find out if your company may qualify. You can also apply to HMRC for advance assurance that your company does qualify for this Scheme.

We can help to ensure that the investment in your qualifying company is made in accordance with the EIS/SEIS rules and in accordance with company law.

Private equity investment

Experienced investors are likely to want to protect their investment in your company. There are several ways of doing this, for example investors might want to be involved in the major decisions of the company. Or they may require the right to appoint director(s) to your board. On the other side of the coin, you will want to ensure you are able to run the business effectively.

We act for both investors and companies which are receiving investment and so we are well placed to guide you as to what is reasonable and draft/negotiate a shareholders' agreement to meet your requirements and to secure that all-important investment.

Crowdfunding

For certain businesses, crowdfunding can be a successful way of raising money. Read our latest article on crowdfunding and how it works: 

If you require any further information about starting up a business; raising money for your business or making investments into startups we are here to help guide you through each stage of the process.  

About the Author

Michelle is a Senior Associate in our Commercial team in London. Michelle takes a solutions orientated approach to advising clients in buying and selling businesses, and in respect of their other corporate and company law requirements.

Michelle Davenport
Email Michelle
020 7014 5269

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