INTRODUCTION
Starting up a new business venture will require you to make a great many important decisions. Some of these may be more difficult than you imagined and you may feel that you need professional help. We would always recommend that legal advice is sought before committing yourself to a business venture.Depending on the type of business you are starting and its size you may have to consider a number of issues relating to its structure, administration and finance. We can advise on many different aspects of business and company start ups and we have set out below some of the more important things that you may need to ask yourself when you start out with a new business.
STRUCTURE
There are a number of different ways that you can organise your business and deciding on the best structure may not be straightforward.If you business is small it may be most appropriate to operate as a sole trader. If you are going into business with someone else (or with a group of people) then you may want to consider a partnership. Alternatively there can be advantages to forming a company, even if your business is not very large.
If a company is your best option, do you know how you can form one or how to buy a ready-made company?
If you are going into partnership have you considered a partnership agreement?
Do you know what you would do if one of the partners left the business or retired?
Would they be entitled to a share in the value of the business?
STAFF
You may need advice on staff contracts. You may also need to consider whether or not there would be any advantages to having a self-employed work force.If you are buying another business then do you know what your obligations are to any existing staff? Can you make any of them redundant and, if so, how much will it cost you?
TAX AND VAT
Have you considered what you can do to reduce your tax burden? Have you thought about VAT; do you need to be registered or are there any advantages to making a voluntary registration.FINANCING
How is your new business going to be financed?Do you need to raise capital or will you need to agree an overdraft facility?
Have you considered the risks this might involve?
Have you been asked to give a personal guarantee or put up your home as security?
If so, do you understand the agreement you are being asked to enter into?
Do you have a spouse or partner with an interest in your home? If they are asked to stand as a surety or guarantor or your home is going to be subject to a mortgage or charge then they may need separate independent legal advice.
Are you borrowing money from friends or family or are there other investors?
If so, what have you agreed with them?
Can they demand their money back at any time and jeopardise the success of your business?
Are they entitled to interest?
STANDARD TERMS OF TRADE
When you trade with clients will you need a Standard Term Contract?If you do, what terms should be included in it and can you be sure that the agreement is both enforceable and that it provides you with the protection you need?
A contract can always be drafted to meet the specific needs of your business.
BUYING A FRANCHISE
Are you buying a franchise?If so do you fully understand all of the covenants and promises that you are being asked to make?
Do you know how much it will cost you if you close the business or sell it back to the owner of the franchise?
Can you sell the franchise to someone else?
BUSINESS PREMISES
Unless your business is based in your home you will need premises.Have you considered the terms of any lease you may be asked to enter into?
Are they fair?
Landlords normally require a personal guarantee to cover payment of the rent and performance of the covenants (e.g. decoration and repairs). With this in mind you need to consider the length of any lease you are entering into.
If the lease is for anything more than two or three years there may be a rent review clause; is it fair?
What about any repairing covenants?
Are these fair or are you being asked to agree to something, which only benefits your landlord?
Can you leave the premises before the end of the agreed term if your needs change and, for example, you find that you need larger premises?
If so, is there a break clause?
