Running a Business? The Legal Traps That Could Cost You Everything

Issue No. 5 | November 2026 | Free Newsletter

Contracts, shareholders, suppliers, unpaid bills and business disputes. Welcome to the world of company and commercial law.

You've built a successful business. Customers are buying. Money is coming in. Everything seems to be going well.

Then something happens.

Your biggest customer refuses to pay a £40,000 invoice.

Your business partner announces that he's leaving — and taking half your customers with him.

A supplier fails to deliver goods you've already paid for.

Or your landlord suddenly demands an additional £25,000 under a clause in a lease you barely remember signing.

Suddenly, you're not just running a business.

You're dealing with lawyers, contracts, threats of litigation and potentially enormous financial losses.

Welcome to company and commercial law.

It sounds rather grand, doesn't it?

But the reality is simple.

Company and commercial law concerns the legal rules governing how businesses are formed, owned, managed and operated — and how they deal with other businesses and individuals.

And whether you're running a corner shop or a company turning over £10 million, it matters.

First, what's the difference between company law and commercial law?

They're closely connected, but they're not quite the same.

Company law deals primarily with the business itself.

Who owns it? Who controls it? What powers do the directors have? What happens when shareholders fall out? What are the company's legal obligations?

Commercial law deals principally with business transactions and relationships.

Contracts. Suppliers. Customers. Distribution agreements. Business purchases. Unpaid debts. Commercial disputes.

Put them together and you have an enormous area of law affecting virtually every business in Britain.

And here's the important part.

You don't have to be in trouble to need company and commercial advice.

Sometimes the best advice prevents the trouble happening in the first place.

1. The contract you signed without reading

We've all done it.

A document arrives. It's 25 pages long. Full of complicated language.

You sign.

Six months later, something goes wrong.

Only then do you discover that the contract contains an automatic renewal clause, a substantial termination charge or a limitation on the other party's liability.

And suddenly you're trapped.

Commercial contracts can cover almost anything: supplying goods, providing services, appointing agents, licensing software or distributing products.

The wording matters enormously.

Our advice: Before signing an important agreement, understand precisely what you're promising, what the other party must deliver and how you can get out if things go wrong.

A few hours spent examining a contract could prevent years of litigation.

2. When business partners fall out

Two friends start a company.

They each own 50% of the shares.

One works twelve hours a day. The other loses interest.

Then they disagree about money.

Who can make decisions? Can one director remove the other? Can either force a sale of the business?

What happens if one shareholder wants out?

These disputes can become bitter, expensive and destructive.

A properly prepared shareholders' agreement can establish how important decisions are made, how shares may be transferred and how disagreements should be resolved.

Without one, the parties may find themselves relying on company law and the company's articles of association.

And a successful business can become paralysed by a disagreement between its owners.

3. Directors — your limited company may not protect you from everything

Many business owners assume that operating through a limited company means they can never become personally liable.

That's wrong.

A limited company is generally a separate legal person, responsible for its own debts.

But directors have statutory duties.

They must exercise reasonable care, skill and diligence, act within their powers and promote the success of the company, subject to the applicable legal requirements.

And when a company is approaching insolvency, the interests of creditors can become particularly important.

There are circumstances in which directors may face personal liability, including certain wrongful trading, misfeasance and personal guarantee situations.

Our advice: If your company is experiencing serious financial difficulties, don't simply carry on hoping everything will improve.

Get advice early.

4. Your customer won't pay. What next?

Unpaid invoices are the curse of small businesses.

A customer owes £18,000.

They've promised payment five times.

Now they won't answer the telephone.

What can you do?

Depending on the circumstances, your options might include a formal letter of demand, negotiation, mediation, court proceedings or enforcement action.

In qualifying business-to-business transactions, you may also be entitled to statutory interest and fixed compensation for late payment.

But before spending money pursuing a debt, ask another question.

Even if you win, can the debtor actually pay?

A court judgment against an insolvent company may be worth very little.

Sometimes commercial intelligence is as important as legal knowledge.

5. Buying or selling a business? Be careful!

Imagine buying a profitable business for £250,000.

The seller tells you the customers are loyal, the accounts are accurate and everything is running smoothly.

Three months later, you discover that a major customer has left, an important contract is about to expire and the business has substantial liabilities.

That's why proper due diligence matters.

Depending on the transaction, this may involve examining accounts, contracts, employees, assets, debts, intellectual property and regulatory obligations.

A purchase agreement may contain warranties and indemnities designed to allocate risks between buyer and seller.

Buying a company's shares is very different from buying selected business assets.

The cheapest business purchase can become the most expensive mistake of your life.

Specialist regulated legal, tax and accounting advice may be essential for completing these transactions.

6. Commercial property — the hidden danger

You take a lease of business premises.

The rent looks affordable.

But what about repairing obligations?

Service charges?

Rent reviews?

Break clauses?

Personal guarantees?

What happens if the premises cannot be used for the purpose you intended?

Commercial leases can contain substantial financial obligations extending over many years.

And disputes about access, repairs, utilities and the condition of premises can have serious consequences for a business.

Before entering into a commercial lease, obtain appropriate specialist advice.

Once you've signed, escaping a bad bargain may be extremely difficult.

7. When a business dispute becomes a legal battle

Not every commercial disagreement needs to end in court.

Sometimes a carefully written letter identifying the legal issues can bring the parties back to the negotiating table.

Sometimes mediation is the answer.

Sometimes a properly structured settlement agreement resolves matters that might otherwise take years.

And sometimes litigation is unavoidable.

The important thing is choosing the right approach.

A business dispute isn't simply about who is right. It's about achieving the best practical and commercial outcome.

A victory in court can be very expensive.

A sensible settlement may allow the business to move forward.

So where does Talk Legal come in?

At Talk Legal, we believe that business owners should be able to discuss their legal problems without immediately committing themselves to substantial legal fees.

We are interested in the practical issues that businesses face.

Contract disputes. Unpaid debts. Shareholder disagreements. Company management questions. Commercial property problems. And disputes with suppliers, customers and business partners.

Our starting point is always the same.

We talk to you.

We listen. We ask questions. We examine the important papers.

And we consider what the problem really is, what the law may say and what options might be available.

Sometimes the answer is straightforward.

Sometimes it requires detailed legal research.

Sometimes specialist solicitors, counsel or insolvency practitioners need to become involved.

Where a matter requires work reserved to authorised legal professionals, we will explain that and recommend appropriate specialist assistance.

We don't pretend every problem has a simple answer.

But we do believe that a careful, independent initial assessment can help business owners decide what to do next.

The Talk Legal view

Running a business is difficult enough without unnecessary legal problems.

Too many business owners wait until a dispute has become a crisis before asking for advice.

By then, commercial relationships may have broken down, money may have been lost and the available options may be limited.

Sometimes one carefully drafted agreement can prevent a major dispute.

Sometimes an independent examination of the papers reveals a legal argument that has been overlooked.

And sometimes the best advice is to settle, cut your losses and get back to running your business.

Good company and commercial advice isn't just about knowing the law. It's about understanding business.

Got a business problem?

At Talk Legal, we offer a careful initial assessment, often in writing and completely free.

No obligation to instruct us.

No fee unless you agree in writing.

Serious about your case. Determined to win.

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The Legal Brief provides general information about company and commercial law, principally in England and Wales. It is not legal advice tailored to individual circumstances. Talk Legal is not regulated by the Solicitors Regulation Authority. Certain legal activities and transactions require authorised professionals, and appropriate specialist advice should be obtained where necessary.