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Startup Legal Guide UK: Structure, Funding & IP

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Part ofCorporate Law

Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
Building a startup in the UK is exciting, but the legal side can feel like a tangle of decisions you have never had to make before. From picking the right company structure to signing your first investor term sheet, each choice carries consequences that are hard to unwind later. I put this guide together for founders who want a clearer picture of the corporate and commercial issues that tend to come up in the first few years, without wading through pages of statute. It covers the basics of incorporation, shareholder arrangements, raising money from angels and VCs, and looking after the intellectual property that makes your business worth something. If you want to talk any of it through with an experienced legal adviser before you act, there is an option to book a call further down the page.

Overview

Corporate and commercial law for startups is the cluster of rules that governs how your business is set up, owned, run and funded. In England and Wales, most of it flows from the Companies Act 2006, but it also pulls in contract law, employment law, data protection, tax rules and intellectual property law.

For a founder, this shows up in very practical ways: the form you choose when you incorporate, the agreement you sign with a co-founder, the terms on which an investor puts money in, and the contracts you sign with suppliers, customers and early hires. Getting these foundations right early tends to be much cheaper than fixing them later, particularly once outside investors are on your cap table.

This page walks through the areas founders most often ask about, so you can spot the issues that apply to your situation and decide where you need a deeper conversation.

Key steps

  1. Decide on your business structure. Before you do anything else, work out whether you want to trade as a sole trader, a partnership, an LLP or a private limited company. Most UK startups that plan to raise investment choose a limited company, because shares are easier to issue and liability is generally limited to what you put in.
  2. Incorporate and set up the basics. Register the company at Companies House, draft articles of association suited to a growth business rather than the default model articles, and put in place a founders' agreement or shareholders' agreement. Sort out your registered office, PSC register, statutory books and a business bank account early.
  3. Protect your intellectual property. Identify what makes your business distinctive, whether that is a brand name, software code, designs or confidential know-how. Register trade marks where it makes sense, make sure IP created by founders, employees and contractors is properly assigned to the company, and use NDAs before sharing sensitive information.
  4. Plan how you will raise money. Think about whether you need friends-and-family money, angel investment, a seed round or venture capital, and in what order. Consider whether SEIS or EIS advance assurance could make your company more attractive to early investors, and model how much equity you are prepared to give up at each stage.
  5. Get your commercial contracts in order. Put written terms in place with customers, suppliers, employees and contractors. Pay particular attention to payment terms, liability caps, data protection obligations, IP ownership and termination rights. Clean paperwork makes due diligence dramatically easier when an investor or buyer eventually looks under the bonnet.

Common questions

If you're dealing with this kind of situation, a call with an experienced legal adviser can help you work out the right next step — from £89.

Common questions

Q Should my startup be a limited company from day one?
For most founders planning to take on investment, hire staff or build something with long-term value, a private limited company is the usual choice. It separates personal and business liability, makes it straightforward to issue shares and options, and is what investors expect to see. Trading as a sole trader can work for very early experiments, but moving later involves extra admin and tax considerations.
Q Do I really need a shareholders' agreement if there are only two of us?
Yes, arguably more so. When there are only two founders, a fall out or a change in commitment can stall the whole business. A shareholders' agreement sets out what happens if someone wants to leave, what counts as good or bad leaver, how decisions are made, and how shares can be transferred. It is far easier to agree these points while you are on good terms.
Q What is SEIS and EIS, and why do investors mention them?
SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) are UK tax reliefs that can give individual investors significant income tax and capital gains benefits when they back qualifying early-stage companies. Many UK angels will expect your company to qualify. Advance assurance from HMRC is often sought before a round to confirm the company is likely to meet the conditions.
Q Who owns the intellectual property my developers create?
It depends on their status. IP created by employees in the course of their employment generally belongs to the company, but it is still worth confirming this in the contract. IP created by contractors or freelancers usually belongs to them by default unless the contract assigns it to you in writing. For any startup where code or designs are core, written IP assignment clauses are essential.
Q How much equity should I give to an early investor?
There is no single right answer. It depends on how much you are raising, your valuation, the stage of the business and market conditions. Founders often think in terms of how much equity they are prepared to part with across all early rounds combined, rather than looking at each round in isolation. Heavy early dilution can make later rounds harder, so modelling the cap table over time is worthwhile.
Q What documents should I expect when raising a seed round?
Typical documents include a term sheet, a subscription or investment agreement, an updated shareholders' agreement, revised articles of association and board and shareholder resolutions. There may also be disclosure letters, warranties from the founders, and documentation for SEIS/EIS compliance. The exact pack varies, but investors almost always expect a formal paper trail rather than handshake arrangements.
Q Do I need to worry about data protection as a small startup?
If you handle any personal data, whether customer details, email sign-ups or employee records, UK GDPR and the Data Protection Act 2018 apply regardless of your size. Most startups need a privacy notice, appropriate security measures, clear lawful bases for processing and, in many cases, registration with the ICO. It is worth getting the basics right early rather than retrofitting later.
If you're dealing with this kind of situation, a call with an experienced legal adviser can help you work out the right next step — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.