Social media has revolutionised the way in which we interact with businesses and each other and has shown that it can be a generous friend to business owners and entrepreneurs, helping them to harness a following, build their brand and grow a worldwide customer base. The success of widely known brands, such as the Body Coach, Huda Beauty and Glossier, are testament to this; their founders capitalised on the reach of social media to plant the seeds of, and then scale, these now highly successful businesses.
The UK has long been a place of innovation, and the pandemic seems to have catalysed this further. During the recent lockdowns many discovered (or rediscovered) talents, skills and ideas, or simply dedicated more time to their existing passions. Through sharing posts on social media they gained attention, traction, and even sales. You might be one of these people, and as the world adapts to the new normal, now may seem like an opportune moment to leverage your following and, like the founders of Floatplane, take steps towards launching your own digital platform or online business that allows you to supply digital content, goods or services independently of the mainstream social media channels.
In this blog we lay out some of the key practical and legal considerations to help get you started.
Business vehicle and setup
The first step in setting up any business is deciding what kind of business vehicle to use. You can conduct business as a sole trader (i.e. where you own and operate the business as a self-employed individual) or by setting up a corporate entity such as a private company limited by shares, and there are pros and cons to both options.
No registration is required as a sole trader because there is no separate legal entity created but you will have to file an annual tax return each year in respect of your revenue. However, since there is no legal distinction between you as the owner and the business you will have unlimited, personal liability for the business’ debts.
Conversely, by trading as a private company limited by shares, the owners (i.e. the shareholders) will have a separate legal personality to the company. If you are the only shareholder and director of the company then your personal liability as a shareholder will equal the nominal value of the shares that you own (as opposed to the market value of the shares). As such you are likely to have minimal liability for any debts of the company. That said, you should be aware that there are certain limited circumstances where a company director may incur personal liability for their actions such as wrongful trading.
A private company limited by shares can be set up easily and will require you to provide certain information to Companies House (for example, a registered office address as well as details of the directors and shareholders). There are however certain administrative costs and obligations that come with operating through such business vehicle, including the annual filing of company accounts, the need to keep accurate internal records, possibly register for VAT, complete corporation tax returns and pay corporation tax. For further information about establishing a business in the UK please see our dedicated webpage here.
Domain names and setting up a website
Once the company is set up you will need a website to direct your social media followers to so that they can buy whatever goods, services or digital content you are offering. For this you will need to buy a domain name (i.e. a unique URL for the website to be accessible from a particular web browser). You can buy domain names from various domain registrars such as Go Daddy and Bluehost. Once purchased, only you will be able to use the specific domain name (subject to renewal). You might start with a “.co.uk” domain but if you want to engage customers outside the UK you should consider buying additional domains e.g. “.fr” (France). You may also decide to register domain names that are similar to your trading or company name to reduce the potential for cybersquatting.
Website design and development
Next you’ll need to go about setting up the website. Unless you have the skills to design and build a site yourself, you will need to engage a web designer to do this for you. When engaging a designer you should be sure to enter into a clearly written website design and development agreement (“Agreement”) with appropriate safeguards to protect your business interests. Some of the key things you would want to cover in such an Agreement and keep in mind for the website include:
Whether you are planning to use your website to sell goods, services or digital content or if you want people to subscribe for regular access to your website, you will need a watertight set of online terms and conditions. Such terms will need to meet certain fairness and reasonableness requirements depending on whether the offering is aimed at business or consumer customers. We provide top tips for drafting online consumer facing terms and conditions in our video here.
When you collect personal data from visitors and customers through their use of the website you will need to tell them how you look after their personal data and set out their privacy rights pursuant to the core principles of the UK GDPR. Please visit our data protection resources for more information about how we can assist you with data protection compliance and other privacy related matters.
Kingsley Napley has a dedicated team of corporate and commercial lawyers with extensive experience setting up companies, advising entrepreneurs and drafting commercial agreements and we will be able to assist you with all your business needs, from inception onwards.
For advice, or further information on the above, please do not hesitate to get in touch.
ABOUT THE AUTHORs
Jordan joined Kingsley Napley in September 2020. She is currently a trainee solicitor in the Criminal Litigation team. Jordan's previous seats were in the Medical Negligence and Personal Injury department, where she assisted with litigating cases arising from serious injuries and fatal accidents; and in the Corporate and Commercial team.