Plenty of founders start out running on trust. You split the equity with a co-founder over coffee, a friend builds the website as a favour, and a supplier deal lives entirely in your inbox. None of it causes a problem until something changes: a co-founder wants out, a friendship cools, or money gets tight. The informal arrangements that felt easy at the time tend to be the ones that cost the most to untangle later.
The equity you split over coffee
Two people start a business together, agree to go halves, and shake on it. Nobody writes anything down because it feels premature to draft paperwork between friends. Then one of you puts in eighty-hour weeks while the other drifts, one wants to bring in an investor, or a partner decides to leave and expects half the value of everything built. Without anything in writing, you are left arguing over what you think you agreed eighteen months ago.
Plenty of new businesses
operate without any legal advice in the early days, usually to keep costs down, but the fix is not complicated. A shareholders’ or partnership agreement settles the awkward questions while everyone still gets on:
- Who owns what, and how much
- What happens when someone wants to leave
- How you bring in or buy out a partner
- Resolving decision deadlocks
This is standard work for commercial solicitors. George Ide LLP’s team handles it regularly,
drawing up the agreements that carry a company from its founding documents through to the later share buyouts that a solid agreement keeps painless. The payoff becomes clear when an investor runs due diligence or a partner wants out, the business with clear terms moves quickly, while the one trading on memory loses months and legal fees reconstructing what everyone meant.
The website nobody actually owns
Say a mate designs your logo and builds your first website, either free or for a small cash sum. You paid for it, so you own it. Right? Unfortunately no, not necessarily. Under UK copyright law,
the person who creates the work is usually its first owner, even when you commissioned and paid for it, unless they have signed those rights over to you in writing. The Intellectual Property Office is clear that a commissioner only gets ownership if it is agreed in a contract.
In practice, the freelancer who built your site could still own the design. That is fine until you fall out, they go quiet, or you want to rebrand and cannot track them down. A short written assignment at the point of hiring avoids all of it, and saves you from discovering years in that you do not own your own brand.
The helper who turns out to be staff
Early on, you bring in another pair of hands. A friend helps out a few days a week, or you pay someone cash to cover busy periods. You think of them as casual, but the law might treat them as a worker or an employee, and that carries obligations you may not have planned for: holiday pay, the minimum wage, and tax handled correctly.
Getting this wrong is an easy mistake and a costly one. It is worth checking
which employment status actually applies before you agree anything, because the label you use matters far less than how the arrangement works in practice. If someone works set hours under your direction, calling them self-employed does not make it so. HMRC can look back over how the relationship really worked and bill you for unpaid tax if the status was wrong.
The deal that lived in your inbox
The same pattern shows up with suppliers and customers. A price and a rough scope get agreed over email, work starts, and everyone is happy until a delivery is late, an invoice goes unpaid, or someone’s idea of what was included differs from yours. An exchange of emails can form a contract, but a messy one, with the important terms scattered or missing.
A simple set of written terms fixes the boundaries. Clarify what you are providing, when payment is due, and what happens if either side walks away. While it doesn’t need to be long or full of jargon, it does need to exist so that when issues arise there is something to point to.
Getting it down early is the cheap option
None of this means papering your business in contracts before you have made a sale. It means recognising which handshakes are the risky ones:
- How you seal a deal with a co-founder
- Creative ownership of anything you have paid for
- The working status of the people helping you
- Your trading terms
Those four cause the most grief when they are left vague.
Sorting them while everyone is still friendly is quick and cheap. Sorting them once there is a dispute is neither. A little discomfort early saves a lot of expense later, a trade most founders would take.
Guest contributor
Guest
