Some people decide to start up a business. However, to initialise this you will have to make many important decisions. It is advised that you seek professional legal help if you decide to start up a business. The decisions to be made depend on the type of business and the size; you will need to consider issues regarding structure, administration and finance resources to name a few. The time spent in making the decision and thinking through your plans will minimise the chance of failure.
When deciding to start up a business, the business plan is the key to success. You should not just see it as an exercise to satisfy the bank manager. It should be seen as a thorough examination of the way in which the business will begin and develop. The plan should describe the business, product or service, market, mode of operation, capital requirements and financial results. It is best to treat this plan as a confidential document as it may contain crucial information; but you can safely discuss it with financial and legal bodies.
When you start up a business, there are various options to base your business structure on. It is important to distinguish which avenue you wish to take as each option comes with its own liability results. If the business you intend on opening is small, then the sole trade option may be best. If there is more than one of you, then a partnership can fulfil your requirements. However, for clarity a partnership agreement is vital; but how do you decide what action to take if a partner left the business? How would you split the assets and debts?
Alternatively, there may be advantages to creating a company, even if your business is not large. However, there are formalities that you will have to abide if you decide to take this option. Using a professional service will ensure that you do not make mistakes. Furthermore, you could consider purchasing a ready-made company, but again formalities need to be met.
When you start up a business you will need to consider how you are going to tackle employment of staff. You will need advice on employment contracts of the staff to ensure maximum cash flow with the best employees. If you buy a ready-made company, do you know the obligations to the existing staff? Furthermore, PAYE and National Insurance will have to be considered and correctly administered.
Tax is a massive liability when creating a business. Tax is taken from profits, National Insurance must be paid, Value Added Tax must be considered and capital tax are just the basic overview. Have you considered ways to reduce your tax burden? VAT regulations impose formalities, will you need to be registered or do you know the advantages to making a voluntary registration? In order to take full advantage of these taxes, professional legal assistance is advised.
Creating a business requires finance. Do you know how you are going to finance the business? You can take the approach of raising capital or will you agree to an overdraft facility? Be aware that both of these options carries a risk.
If you raise capital through the bank, they may require you to give a personal guarantee or put your assets as security. These are important documents and you must understand the agreement you are being asked to enter. For example, if you have a spouse with an interest in your home, they will need separate independent legal advice if you place your property as a guarantee.
If you are raising capital from other sources such as family and friends, have you agreed the terms of the loan and whether they will acquire shares? How do they get a return on their investment? Agreements will need to be drawn up and our professional services will ensure that you receive the correct advice.
With your business, when you start trading with clients are you going to incorporate a Standard Term Contract? If so, what terms are you going to include and you should seek professional advice to ensure that the terms and conditions are both enforceable and protective. We can tailor a standard terms and condition to meet the specific needs of your business.
You may consider buying a franchise rather than to start up a business from scratch. If you purchase a franchise, you will need to fully understand all of the covenants and promises included in the Franchise Agreement. You will need knowledge of the cost if you close the business or return it to the owner.
Unless you intend to run your business from home, you will need to lease or purchase business premises. You will have terms within the lease that you will need to ensure are fair and reasonable. The landlord will usually require a personal guarantee to cover the event of non-payment of rent or breach of covenants. The length of the lease is important; you need to weigh it up against the potential growth of your business. If it is long-term you need to ensure there is a rent review clause to protect you financially.
Furthermore, insurance will be required for your premises and stock. Employer’s liability insurance is a legal requirement to cover claims by employees who suffer injury as a result of employment.
Other matters that have to be taken into account when a business commenced include business stationary. As a minimum, stationary should detail the business address and the owners. You will also need to keep records to monitor and control the business; this is a lot more strict if your business is a company.
This page merely touches on the issues that need to be considered if you are contemplating to start up a business. It is important that you seek specialist legal advice which here at Seatons we can provide.