Dale and Newbery offer a free, half-hour consultation, to help provide specialist advice for small start-up businesses.
We offer this advice as part of The Law Society's initiative "Lawyers For Your Business"
As members of "Lawyers For Your Business" we believe that by taking preventive advice about common legal issues, companies actually save money in the long run as well as avoiding the stress and disruption litigation can cause.
Prevention is always cheaper than cure.
Areas that could benefit from legal expertise include:
Some firms don't consult solicitors for fear of large legal bills, by which time any remedy still available is likely to be expensive. Early consultation is advisable if there is legislation to be complied with, or important legal documents such as contracts to be prepared.
Any owner of a business quickly discovers that there are more laws – and more potential legal pitfalls – concerning employment than almost any other aspect of commercial life.
It is important to understand your legal obligations as an employer, and be up to date, as these are constantly changing.
You have a right and duty to take reasonable steps to protect your business from the actions of employees, for example, should they leave to go to a competitor. You will certainly want to prevent your trade secrets being handed on. A poorly drafted contract of employment is fatal and trying to set down complex or lengthy terms and conditions is likely to be as useless in law, as having none at all.
Every business needs good staff performance. If you encounter an employee who persistently under-performs or behaves in a way that can damage your business or its reputation, then you should remove him or her quickly and without risking a claim for unfair dismissal.
Many of the legal problems – and associated costs – that trouble employers are easily avoided if the right actions are taken at the outset. Effective contracts of employment are vital, with full recognition given to the implications of different categories of employees, from full-time directors through to part-time or contract staff.
You should not even think of starting to trade without first getting a professionally drafted contract or standard terms of business. It is your only protection against bad or unscrupulous customers.
Although a simple telephone call can constitute a legally binding contract, you should not rely on unrecorded and unsigned agreements, even to vary standard terms and conditions. A written contract not only enables you to record exactly what you will do for a customer, it also gives you an opportunity to state how important matters like method and timing of payment, or settling disputes, will be handled.
A contract should both promote and protect your business. Care and professional advice needs to be taken to ensure that any contract is sound and will not contravene one of the many laws forbidding 'unfair' contract terms.
This leaflet highlights some of the key issues surrounding how to construct a contract and use it to protect your business. It is no good having a sound contract if a careless practice, like not checking customers' business registrations, leaves you open to fraud. This leaflet also looks at the topic of buying goods and services for your business.
As always, and in most situations, sound advice in the early planning stages pays dividends. Just ask your local LFYB member solicitor what can be done to help you make your business succeed.
A major part of the cost of running a business is having premises. Including rent, rates and repairs, it will typically take between ten and fifteen per cent of your overheads so it is vital to get the right premises – suitable for your needs, now and in the future, and on the right terms.
Few businesses have the capital to buy the freehold of new premises, so taking out a leasehold is the most common way to proceed. But remember that acquiring business premises is quite unlike buying or leasing a residential property. For one thing, you need to think about a lot more than the rent and the length (or term) of the lease. For another, the terms of business leases are much less standardised, which means that careful reading is always required. On the other hand, just about everything is up for negotiation if you can present a good case. Subject to market conditions at the time.
Be particularly wary of restrictive terms and conditions, otherwise your premises can become a problem you could do without. As many firms found to their cost during the last recession, the time to wish you had a 'break' clause or the right to sub-let is not when your profits are falling.
A range of expert advice is essential when negotiating a lease. In addition to a solicitor, you should be prepared to use a surveyor and/or a valuer so that you gain specialist advice on "going" rates and terms for the type of premises in question, to report on the possible liabilities for repairs and prepare planning permission.
There are several ways to structure your business. Although many businesses start as sole traders, they often end up either as a partnership or a private limited company, or sometimes, a public limited company (a 'plc').
The choice of structure, or changing a structure, needs careful consideration. It certainly depends on much more than just size or a possible tax saving.
Your decision will affect how the business develops, for example, the ease with which you can attract an outside investor. The structure you choose for your business will determine how easily you can sell the business (or your stake in it) or leave it to your family or others. It can also seriously affect the tax consequences of any transfer.
Timing is often crucial, and the right moment will depend on your long-term intentions. It makes sense to review the pros and cons regularly.
Although an accountant will be a key advisor, you should also consult your solicitor. The formation of a partnership or a limited company rests on important legal documents, which need to reflect accurately what you want to achieve, now and in the future. Transfer of an existing business to a new structure needs particular care.
Resist using standard or "off the shelf" documents when undertaking a transfer as they can often be inferior and unable to safeguard your interests.
Health and safety legislation used to specify actions that an employer must take – for example, with regard to the temperature of a workplace, or the number of fire exits. With the enactment of EU directives in 1992 (fully coming into force by 1996) duties have become wider but vaguer, often requiring employers simply to be 'reasonable'. Although this gives individual businesses more freedom and flexibility, it also becomes very important to check what standards other similar businesses are keeping to so they do not fall behind industry good practice.
Some regulations are specific to industries with known hazards, such as mining or chemical plants. Others apply to all workplaces, including 'benign' environments like offices. Criminal prosecution is the price of a serious breach, especially if a fatality or injury has occurred. If found guilty you can be fined and/or face jail – for up to two years in some cases. For less serious breaches, Health & Safety Inspectors may demand improvements to safety, or prohibit some activities altogether.
In addition to meeting all statutory requirements, you have a common law duty not negligently to expose staff to harm whilst at work. Otherwise you risk being sued for civil damages by an injured employee or, in the case of death, their dependents. Such cases often rely on failures to conform with health and safety requirements as evidence of civil liability. Finally, employees must also take reasonable care whilst at work both for their own protection and that of others. Any training necessary to ensure the safe undertaking of a job must be provided by the employer.
This booklet identifies the areas of law that you, as an employer, have to note. For general advice and information on their published guides refer to their website at www.hse.gov.uk. For how specific Acts might affect you, and whether your work conditions and methods fall within the law, you should consult a solicitor.
Every business needs money in order to grow. Capital investment and plans for expansion can be exciting but taking on too large a commitment or one that is premature can seriously damage the health of the most profitable business. You need to be sure that your personal wealth is not at risk and that any arrangement you enter into does not hamper your long-term plans, for example, to sell the business or pass it on to your family.
Extra cash is usually required because a business anticipates a temporary shortage before an investment generates enough profit to pay for itself. Therefore every means of improving existing cash flow – tighter credit control for example – should be used to reduce the amount of new money required.
For all but the largest firms, the main ways of raising money are borrowing from a bank or other lender, and selling a stake in the business. You can also investigate asset-based finance, such as leasing capital items or factoring to borrow against your sales ledger. Often this is less restrictive than a loan but be careful to check the terms and overall financing cost.
Borrowing from a bank leaves you free to manage your business, but as security will be required, a small business without significant assets will have to put up the wealth of its directors (their houses), or of external guarantors, to pay back the loan if the business can't. Alternatively a 'debenture' – a floating charge on all the business assets – may be required. Incidentally a bank overdraft is a very expensive way to borrow and you should avoid treating it as a long-term loan.
An investor can be an attractive source of finance because, unlike a bank, shareholders share the risks of the business and there are no interest payments. On the other hand any intelligent shareholder, and especially a professional like a business angel or venture capitalist, will expect to see the value of their investment appreciate considerably. If it doesn't, they will want to interfere with the management, or sell up.
Loan, debenture and shareholder agreements are all complex legal documents with long term implications for the business and its owners and directors. Legal advice at an early stage is essential to negotiate the best possible terms and safeguard the future prosperity of your business.
The Law Society have provided step-by-step guides which you can download as PDF documents below:
For further information on the "Lawyers for Your Business Initiative", as well as comprehensive information on the services provided by The Law Society please visit their website at:
http://www.lawsociety.org.uk/
All content has been provided by, and is copyright
of The Law Society.
For further information on the "Lawyers for Your Business Initiative",
as well as comprehensive information on the services provided by The Law Society
please visit their website at: http://www.lawsociety.org.uk/