Business
issues and practice
Serving
your customers, finding new ones, keeping your
employees happy, it's a full time job. The last
thing you need to worry about is the mass of red
tape and legislation that affect your business.
We help ease that burden by keeping you abreast
of legal changes which may impact on you and suggesting
the easiest way you can comply with them.
BACK
TO MAIN SUBJECT MENU
Buying
and selling a business
Buying
a business
It's
a major commitment. There are a number of legal
issues to consider all of which can affect the
profitability and success of the business including:
Premises
Are they freehold or leasehold? If leasehold,
how long does the lease have to run? How much
is the rent? When was it last reviewed? See our
Guide to Leasehold Business Premises for more
information
How
to own the business
There are a number of ways you can own a business:
See
below for more details.
Employees
If you are taking on new staff then they need
contracts of employment. If the business has existing
employees do you want to take them over? Under
the Transfer of Undertakings (Protection of Employment)
Regulations commonly known as "TUPE,"
employees of the seller automatically become employees
of the buyer on completion of the sale. See our
employment law page.
Fixtures
and fittings
What belongs to the seller and what to a leasing
and finance company? The hire of some equipment
can be expensive. Do you want to take such liabilities
on?
Selling
a business
Once
you have sold it you want to ensure as far as
possible that you are free of all liabilities.
Make
sure employees are taken over where possible as
this can avoid expensive redundancy payments.
Payments
are taken to be inclusive of VAT unless stated
to the contrary. Remember to charge VAT if the
buyer is not VAT registered.
Have
you transferred the liabilities under all leasing
and finance agreements?
A
sale of shares as opposed to assets may be advantageous
for getting rid of all liabilities, speeding up
the transaction and reducing tax liability.
BACK
TO MAIN SUBJECT MENU
Commercial
property
Business
property can be freehold or leasehold or you may
purchase a freehold subject to leasehold interests.
For leasehold business premises see below. When
buying a freehold investment property which is
subject to a lease a number of factors can affect
the freehold value. These can include
If
you are acquiring premises for your own purposes
then carefully scrutinise any planning permission.
We have recently seen a planning consent, which
permitted the use of premises as a car wash, but
hidden away in the conditions attached was a prohibition
on trading from the premises on Saturday afternoon
or Sunday, probably the busiest time for any car
wash. Restrictions on trading hours are not unusual
where business premises are situated in mainly
residential areas.
BACK
TO MAIN SUBJECT MENU
Contracts
and terms and conditions of trading
Contracts
Contracts generally don't need to be written to
be legally binding unless they are for the sale
of land or its lease for a period of more than
three years, or where intellectual property and
other similar rights and actions are involved.
Verbal
agreements are perfectly valid but can lead to
dispute over what has been agreed.
A
written contract concentrates the mind on what
you are agreeing to, creates a permanent record
of what has been agreed and leaves less room for
dispute.
A
contract doesn't have to be 40 pages long. One
side of A4 may be enough.
Terms
and conditions of trading
If you are selling goods or providing services
then you will be entering into a contractual relationship
with your customers and clients.
Using
standard terms of trading gives you a ready made
form of contract to use and allows you to extend
and limit the rights and obligations laid down
by statute
The
law places considerable limitations on what you
can and cannot say in a contract particularly
when dealing with consumers
The
Sale of Goods Act, Unfair Contract Terms Act,
Unfair Terms in Consumer Contract Regulations
and the Distance Selling Regulations can all have
a significant impact on the way in which you do
business. Although they may not trouble your business
on a daily basis, if a dispute arises and you
have not complied with them then you could find
yourself with a major problem on your hands.
If
you want to know more about these issues and download
some specimen terms and conditions then see Terms
and Conditions of Trading in our Free Advice
section
BACK
TO MAIN SUBJECT MENU
Joint
venture agreements
These
are used where two or more parties come together
for a common business venture. It could be a one
off project or an ongoing relationship.
The
formation of a joint venture company can be a
good vehicle through which the venture can be
conducted.
Joint
venture agreements are similar to a shareholders
agreement.
Although
the parties will be working towards a common aim,
it will not normally be a partnership and due
to the tax and legal implications of partnerships,
the parties will often make an express declaration
that they are not partners.
BACK
TO MAIN SUBJECT MENU
Leasing
business premises
After
salaries this could be your most expensive overhead.
Having
to move premises can severely disrupt your business.
Leases
do not always run from the date they are entered
into. If you take over an existing lease check
carefully how long it has left to run.
What
will it cost you to be there in rent and repairs?
Rent review dates can be missed. Make sure you
don't take over a lease with an outstanding rent
review
Just
because a business is carried on from premises
it does not mean the lease permits such a use
or that there is planning permission for such
a use.
Beware
of conditions attached to planning permissions
they can have a significant effect on how you
conduct your business.
If
you want to know more then see our Guide to Leasehold
Business Premises.
BACK
TO MAIN SUBJECT MENU
Licensing
The
successful trading of many businesses can be dependent
on having one or more licences in place.
The
most common of these relate to the sale of alcohol,
sale of food, betting and gaming and the holding
of public entertainment.
If
buying a business, check if you need them and
whether the current seller posses them. Consider
what restrictions apply.
Many
of these can be personal to the current holder
and will have to be transferred to you. Do not
automatically assume this will happen or that
you will be able to have restrictions removed
BACK
TO MAIN SUBJECT MENU
Partnership
and Limited liability partnerships
Partnership
When
two or more people come together for a common
business purpose this will often be a partnership.
There need be nothing in writing in which case
the partnership will be governed by the Partnership
Act of 1890 (do you really want to run a business
in the 21st Century on rules made in the 19th
Century?). Even if the parties do not intend to
be partners the law may well treat them as if
they are. In such cases a Joint Venture Agreement
can help avoid this problem.
You
will normally be liable for the actions of your
partner(s) even if you do not agree with or have
any knowledge of what they have done.
Have
a clear understanding between you as to what each
of you can and can't do without the consent of
the other(s).
Communicate
that to all relevant third parties such as your
bank, major customers and suppliers (as appropriate).
A
partnership agreement should also provide as to:
Limited liability partnerships
As
from the 6th April 2001 partnerships can register
themselves as a Limited Liability Partnership
("LLP") under the Limited Liability
Partnerships Act 2000. The Act refers to members
(as opposed to partners) of an LLP. Only time
will tell if this phrase becomes common currency
in place of the term partner.
An
LLP has the organisational flexibility of a partnership
and is taxed as a partnership. In other respects
it is very similar to a company. It must file
accounts and other documentation with Companies
House
As
with a company it is a legal entity in its own
right and can sue and be sued in its own name.
It can also continue in existence independent
of any change in its members.
As
it is a separate legal entity third parties will
contract with it direct. This will mean that members
(partners) will no longer acquire personal liability
for the actions of other members (partners) as
they do under an ordinary partnership.
The
words Limited Liability Partnership or LLP must
appear at the end of its name.
As
with existing partnerships the members can enter
into a member's (partnership) agreement to regulate
the running of the LLP between them.
As
in dealings with companies, care must now be taken
due to the limited liability status of LLPs.
BACK
TO MAIN SUBJECT MENU
Sole
Trader
As
the term implies, it means trading on your own.
There are no real formalities to trading in such
a manner.
You
will be fully liable for all the debts and liabilities
of the business and equally the sole person entitled
to the profit!
BACK
TO MAIN SUBJECT MENU
