Legal and Business issues for new Creative Businesses

The term “creative business” is applied to industries including design,
architecture, film and video, photography, the arts, literature and
publishing, advertising, performing arts, software and computers.

Limiting personal liability
Without doubt, conducting a business with the benefit of limited liability is advisable.

Limited liability means that it is the company/limited liability
partnership (LLP) which enters into contracts with third parties. The
individuals stand behind the company/LLP and so are not personally
liable for contracts entered to by it. This means that in most cases
the business owner will have no further liability and so his personal
assets – property, car and financial savings – will be safe. Personal
guarantees are likely to be required, but the good thing is that the
extent of such personal liability can be negotiated.

Agreements with business partners
Where a proposed business starts out with or becomes owned by two or
more business partners, it is sensible to document the relationship
between them. Such a document will cover the procedures by which the
business will be managed, how profits will be shared, and the process
by which somebody might leave the business and be paid out.

This will help provide more certainty for the continuation of the business in the event of disagreements or departures.

Terms and Conditions of trading
These may be part of a web site or a hard copy document. To be
enforceable, the important thing is to ensure that they are
incorporated into a binding contract between the business and the

These can also be used as a tool for risk management by including terms
which limit liability of the business if claims are made against it.
However, for such terms to be valid and enforceable, when drafting,
careful consideration must be given to many factors including whether
you are doing business with consumers or businesses and the particular
nature of your products and services.

Intellectual Property (IP) Issues
The UK Patent Office has a very informative web site with useful
information and instructions on how to obtain the right type of
protection for your creation or invention.

The commercial success of a particular creative expression is generally
dependent on reputation and/or innovation. Attaching a name or branding
to your product or service will make it stand out from the rest, and
registering your designs or inventions will help ensure that you retain
control of commercial exploitation.

The biggest problem for most people is being ripped off. Products,
names and ideas can, if not protected, be picked up by other
organisations which are in a better position financially to exploit
them. This can mean that the creator is left with no acknowledgment or
monetary reward for their hard work and creativity.

Seeking advice and investing time in identifying the extent of IP, and
properly protecting it, will help sustain and add value to the
business, reducing the risk of being ripped off or being sued or
inadvertently ripping others off.

The web site might be used a source of information for customers or as a portal through which business is conducted.

The subject matter of a web-based business transaction could be the
transfer of physical goods, or it could be virtual subject matter
(premium content) being accessed through a “pay as you go” or
subscription service.

Any sale of goods to consumers over the internet requires a buyer to be
given the right to cancel and return most goods, generally within 7

Consideration should be given to whether conducting business over the
internet might compromise any pre-existing or potential distribution
networks for the products or services of the business, and whether it
might be unlawful to sell certain products in a particular country.

Data Protection
It is likely that most businesses will need to be registered with the
Information Commissioner’s Office because they will be collecting
personal information such as names and contact details of clients,
customers, staff or others. The annual registration fee is £30.

It is most common for businesses to incorporate into their terms and
conditions a privacy statement which explains why personal data is
being collected, and the purposes for which it will be used in the
future, so that Data Protection and related legislation is complied

A series of “opt in” or “opt out” choices can also be incorporated into
terms and conditions to enable businesses to use personal data for
marketing purposes.

Becoming more equipped in business
Creative businesses now have access to many relevant services and
information designed to assist in growing successful and sustainable
businesses. Funding and support organisations are accessible via the
internet. Even traditional service industries such as law are
responding with flexible and practical advice at reasonable rates.

By John Deane
Solicitor at national law firm Russell Jones & Walker