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Do you know about these four legal obligations of a business?

4-minute read

Lauren Hellicar

Lauren Hellicar

3 June 2021

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Keeping track of the legal obligations of a business can be a job in itself. It’s rarely a case of learning them when you start out and leaving it at that.

The legal requirements for business are ever-changing, with new rules and updates coming into place all the time – and small businesses are expected to keep up.

When you’re a sole trader or a firm made up of a few people, however, you may feel like filing this never-ending task at the bottom of the pile. But doing so could get you in trouble with the authorities.

To help you stay on the right side of the law, we’ve pulled together four of the less obvious ones to watch out for.

1. The licence small businesses may not know they need

software licenses for small businesses

It’s common knowledge that running a business that serves food or alcohol, such as a pub or restaurant, legally requires you to be licensed. The same is true for tradespeople like gas engineers, who are required by law to be on the Gas Safe Register.

But there’s another type of licence that can often be overlooked, especially if you run a small business and have a limitless list of other responsibilities to take care of by yourself.

If someone asked you which software packages your business uses, would you know the answer? And would you know if they’re licensed versions? If not, it's a good idea to find out. Failing to use licensed versions of the software your business relies on means you’re breaking the law. It may also mean that you’re opening your business up to cyber attacks.

So while it might cost more to begin with, being a licensed software user pays off in the long run. Keep an eye out for discs, user manuals, and downloads in your office that look less than legit. And if you’re unsure, check with the company your software appears to have come from.

Read more about other small business licences you might need.

2. The insurance you may not know you’re legally required to have

employers' liability for small businesses

Insurance for small businesses comes in a range of different types, from public liability to professional indemnity, and others in between, like tool insurance, legal expenses insurance, and business contents insurance.

The combination of covers you need will depend on the type of business you run.

Some professional bodies might require members to have certain types of business insurance – for example, members of the Institute of Chartered Accountants of England and Wales (ICAEW) have to have professional indemnity insurance.

But it’s not a legal requirement for business to take out all the different types of insurance (that being said, failing to protect your enterprise in case things do go wrong could be the difference between going under or staying afloat).

Employers’ liability insurance is the exception – and definitely one to watch out for.

Contrary to popular belief, it isn’t only for businesses with ‘employees’ in the strictest sense of the word. That’s why it tends to pass under the radar of lots of small business owners. Generally speaking, most businesses that have people working for them – whether that’s full-time staff or those hired on a more casual basis – are legally obliged to have employers’ liability insurance.

Besides being required by law, it can potentially guard your business from unmanageable compensation claims, for example:

  • if someone is injured or becomes seriously ill as a result of working for you
  • if someone injures a third party or damages a third party’s property while working for you

And if you don’t have employers’ liability cover when you’re legally supposed to, you could be fined up to £2,500 for each employee every day you go without it.

Read more about the different type of small business insurance you can take out to protect your business if something goes wrong.

3. The property law you may not be aware of

intellectual property for small businesses

While you might think of your tools, stock and supplies as property, many small businesses forget that intellectual property needs protecting, too.

Intellectual property law is there to protect the things you create, such as your:

  • product and its design
  • brand name
  • inventions

A trade mark, the identifying mark of your business or product, falls into the category of intellectual property.

Trade mark infringement happens when you use a trade mark that’s the same as or similar to one someone else is using for similar goods or services – and doing so can land you with a bill for damages.

Likewise, if another company breaches your trade mark, you’ll want to do all you can to stop it negatively impacting your business. While large organisations may not struggle to find the money or resources to deal with legal action in cases like this, the same probably can’t be said for small businesses.

Read more about intellectual property law for small businesses.

Professional indemnity insurance can cover you if your work for clients unintentionally infringes copyright.

4. The assessment you should carry out

health and safety for small businesses

Small, medium-sized, or large organisations are required by law to assess and manage the risks in their workplace. This means taking reasonable steps to prevent harm to members of the public, employees, and any contractors on site.

The good news for small businesses (meaning you have fewer than five employees) is that you don’t have to write down your risk assessment. It’s more a case of applying common sense to keep everyone safe.

According to the Health and Safety Executive, you should take the following steps to assess the risks in your workplace:

  1. Identify the hazards
  2. Decide who might be harmed and how
  3. Evaluate the risks and decide on precautions
  4. Record your significant findings
  5. Review your assessment and update if necessary

Hazards include things like chemicals, electricity, working up a ladder, or leaving a drawer open. Risks are usually the chance that somebody could be harmed by a hazard, and the level of that harm.

Read more health and safety guides for small businesses:

With plenty for you to stay on top of as a small business owner, from accounting to legal structure, it can be tough to find the time to keep up to date with changes to the law.

Joining a trade association can be a good way of getting help to understand your responsibilities if you haven’t got the time to do the legwork yourself.

Do you struggle to keep up with the constant changes to your legal obligations as a small business? Let us know in the comments below.

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Lauren Hellicar

Written by

Lauren Hellicar

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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