Like all things, building a successful business from scratch needs a strong foundation. Sometimes, a good idea is your best starting point. Inspiration for your business can come from generating other ideas daily, seeing which ones stick around, and filtering the ones that can be turned into reality and suit your startup.
However, starting a successful company requires more than simply implementing these solid ideas. Many business owners don’t realise that another critical step in building a successful startup is a good grasp of the legal requirements for UK startups and how these can factor into the operating costs of their business. In fact, according to the Legal Services Board, 32% of small and medium-sized enterprises in the UK have experienced legal challenges within the last year, which can unfortunately take a toll on finances. Therefore, understanding basic legal requirements and how much they might cost your startup is essential.
How much do legal fees cost businesses?
Legal requirements are essential in protecting a business startup’s interests and avoiding the repercussions of failing to comply with the law. According to research by HP, an average UK startup spends approximately £6,259 on legal costs. However, the exact cost may vary depending on the legal services that your startup needs. Some of the most common legal documents that require fees include business registration and licences, intellectual property registration, contract reviews, and property leases if you rent an office for your startup. Paying fees for these documents ensures that your startup complies with the regulations that enable smooth business operations.
Dealing with legal costs can be prohibitively expensive. This can challenge startup owners, especially since 24% of business leaders view economic instability as their biggest concern when managing their enterprises. Luckily, you can reduce legal fees to help you maximise your profits and save money. Here’s how:
Reducing legal costs
Contracts are essential legal documents that include agreements with various stakeholders, so they must be clear and watertight to promote good relationships between your business and other stakeholders. Fortunately, business leaders can use AI-powered tools when writing contracts to avoid costly human errors. Take Definely’s proofreading software, which provides automated proofreading checks – from inconsistent punctuation and cross-reference issues to proper capitalisation and formatting – with a click of a button. Using this type of software eliminates man-made errors and allows you to cut down on time spent manually checking your documents. With this kind of tech, startup leaders won’t have to shell out money to settle legal disputes arising from poorly written, ambiguous contracts.
When your startup business gets involved in a conflict with one of your clients or consumers, it can be escalated to litigation or a court trial to resolve matters – which can be very expensive. Instead, you can opt for alternative dispute resolution (ADR). This procedure involves direct negotiation, mediation, and arbitration to settle a complaint with an impartial resolution body’s assistance to reach an agreement. This process is generally less formal and, more importantly, more cost-effective than traditional legal court proceedings.
Additionally, due diligence is the backbone of reducing unnecessary or unwanted legal fees. With due diligence, startup owners can carefully review and ensure legal compliance, minimise risks, and make crucial decisions that align with business interests and goals. Due diligence is also carried out to assess the potential financial risks of building a successful business. By reviewing regulatory compliance and risks, startup owners can be well-equipped to run their businesses without worrying about potential costs caused by legal mishaps.
Running a startup business can be expensive, especially with all the legal fees and documents you must prepare. However, with careful planning, software tools, and cost-efficient methods to settle disputes, your startup can reduce these unnecessary legal costs and focus on growth and expansion.