When you decide to go ‘limited’ as a small-business owner, you will have two options – limited company or limited liability partnership.
A limited company is available for individuals who want to utilise profit-making activities within a legal framework. Members or shareholders have their liability limited to contributions they have made or invested in the company, therefore, the debts of the company are separate from the shareholders’ debts.
This is made up of two or more people who agree to share a business and have equal power within the company. Each is required to register their partnership with Companies House. This partnership then becomes a company. The newly formed company can operate in a similar way to a limited company.
After this, the shareholders can then opt to pay dividends to themselves and - depending on their tax bracket - they will pay either a net 0% on these or 25% net if they are a higher-rate taxpayer.
The main benefit here is that they can choose not to pay out all of the profits and, therefore, defer tax liabilities to another tax year - which is not possible under a LLP.
Capital Gains Tax
Pay As You Earn:
Tax treatment is always a big concern for many members of start-ups. Therefore, at this stage, you may be thinking what the best model would be for you in terms of tax. Thus, however much profit the company makes (and how much the owners pay themselves) will determine which model suits you best with regard to tax.
Examples of such changes would be amendments to the capital structure or the transfer of shareholdings.
This post was provided by 1st Contact Accounting. The information should serve as a general guideline.
Your ideas are one of your most valuable assets. Whatever the idea, it is your idea and you must protect it. Whether it is a concept, design, sign, symbol, logo or a game-changing invention, it’s something you have created and unless you protect it, you may be forced to watch your intellectual property rights slip through your fingers.
Intellectual property (IP) is an umbrella term used to describe a range of legal rights. Businesses need to ensure they protect what they create, maximise their competitive position and avoid infringing the IP rights of others.
Protecting your IP from conception allows you to:
There are four types of protection:
The Intellectual Property Office (IPO) deals with all applications, for a small fee. Within your application you must prove that the idea, design, logo or invention is worthy of protecting and that no one else has had the same idea. Once the IPO is satisfied what you have is unique, you receive your documents. There are three levels of protection: UK-wide; European Union-wide; and worldwide. This depends on where you intend to do business and is particularly applicable if you are going to sell online.
Consult a legal advisor, who will advise whether an infringement has taken place. If so, IP law dictates you must follow a set procedure.
A new small claims track has been introduced to the Patents County Court, which will make it cheaper, quicker and easier, particularly for small and medium sized businesses, to protect IP rights. This will let copyright, trademark and unregistered design holders pursue basic IP disputes at an informal hearing, without legal representation. Claims will be subject to maximum damages of £5,000.
Wax Noor is a senior solicitor at Brilliant Law, which offers fixed price packages for SMEs covering solicitor’s letters, IP consultations and county court claim forms.
Managing employees is critical to the success of every business, and in these hard times it is imperative that your full team pulls their weight.
In an ideal world, your business will be full of passionate individuals, working together for the overall success of your company. However, it doesn't always turn out like this. Whether the employee lacks the ability to deal with clients and colleagues or is persistently sloppy; the effect of one “bad apple” can have a degenerative effect on your hard-earned success.
Disciplining a bad employee can be a long and painful process, so acting pre-emptively to ensure that both your rights, and the rights of your employee, are covered is essential.
Make sure all of your HR decisions are by the book. Instigate personal development plans with regular performance related targets and establish probationary periods for all new employees to ensure that your new team member is following through with the promises made in their interview.
No! A quiet word may often be all that is needed. This is not to say that managers cannot keep a note of these discussions, and any informal verbal warnings they have given, otherwise this will become an ineffective management tool.
Informal usually has reason to become formal when there is continued poor performance in areas of concern. Common examples include continued:
Every issue should be handled individually — if the matter involves misconduct rather than underperformance, make sure that it is treated as a result of conduct as opposed to a shortcoming in capability, otherwise it may result in unfair dismissal.
This is known in law as “summary dismissal” for gross misconduct, and any of the following actions by an employee may warrant immediate dismissal:
This is the part that tends to baffle most employers — exactly how much investigation is required?
The investigation must be even-handed, and should not simply be a search for evidence against the employee. Evidence in the employee's favour should also be sought.
The employee needs to be given sufficient time and information to form a meaningful response to all allegations. Depending on the results of the investigation, if formal disciplinary action is needed the employer should:
The ACAS (Advisory, Conciliation and Arbitration Service) Code of Practice exists to improve workplaces for both employers and employees — and keep everyone out of costly industrial tribunals.
It’s vital to know exactly where you stand legally before embarking on any discussions or disciplinary procedures with any employee so always consult a law firm.
Wax Noor is Senior solicitor at Brilliant Law.
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Chasing payment is part and parcel of running a small business, but when that tiny niggle becomes a major worry you need to know what power you have.
Before entering into any deal for services or products, having a written contract outlining payment procedures is essential. However, no amount of pre-emptive work can safeguard you from the non-paying client or customer.
So what can you do?
It might sound simple, but you’d be amazed at the power a solicitor’s letter has.
The first action a legal firm will take when instructed by a client on a debt case is to send a letter of claim to the other party — a recovery letter. It sets a specific timeframe for repayment, normally 28 days. And because it comes from a solicitor and not you, it will make the debtor sit up and take notice.
However, if there is no response within the stated time, a legal firm will lodge a claim. For amounts less than £10,000, this would go to the small claims court. Be warned, however, that if you instruct a legal firm at this stage, even if you win you will not get your legal costs back as the court considers the amount involved to be too small. For claims more than £10,000, you do get your legal costs back in the event of you winning the case.
So you’ve gone to court and the judge agrees that you are owed the money you say you are. Getting this judgment isn’t enough. The difficulty is enforcing it.
If more than £750 is owed, you can bankrupt the individual. However, this is a very serious action with long-standing repercussions for the person made bankrupt.
Another route is attachment of earnings. This would apply where an individual has made use of your company’s products or services and not paid. The court would send details of its judgment to this individual’s employer and every month, money is deducted from the employee’s salary until the debt is repaid.
There will always be a hardcore who do not pay up. The most common way a solicitor would proceed here is by instructing, on your behalf, a reputable debt management or debt collection firm. However, there is a third way.
An alternative approach is to instruct specialist agents. They can quickly recover the money owed to clients. Once a judgment is issued, these agents visit the premises or home of the defendant and get what is due.
This direct approach can be effective. I heard recently of an instance where agents visited an individual with a judgment against him. They asked him if the car parked outside belonged to him and what its value was. Within half an hour, a direct debit payment had been made to cover the debt. Getting your solicitor to instruct agents like these incurs a negligible fee and if they succeed, their fees are included in the overall amount owed.
Even the most successful small business can be crippled by non-payment, but swift and appropriate legal action, whether that’s a letter or court action followed up by a visit from reputable agents, can take that worry away. You’ve worked hard to build your business. Your solicitor should work just as hard to make sure you get what’s owed to you.
Wax Noor is a senior solicitor at Brilliant Law, which offers fixed price packages for SMEs covering debt management, recovery letters and county court claim forms.
The internet is vast, it contains more information than any traditional library and it has made the world a smaller place. A person in Leicester, England, can speak freely with a person on the other side of the world in Sydney, Australia, in an instant. Real time pictures can be streamed to friends and people can discover and express new opinions and outlooks on life at the click of a button.
Unfortunately the internet draws people into a false sense of security. There are a growing number of internet users who consider the internet to be a place where the law does not apply or where a softer punishment will befall them if they are caught in disrepute.
This is not the case. Megaupload founder, Kim Dotcom, is currently fighting extradition to the United States from his home in New Zealand for breach of the USA’s various copyright laws for his file-sharing website. Sally Bercow (the wife of the Speaker of the Commons) is being pursued by Lord McAlpine for defamation arising from comments made by her on Twitter. Numerous people found themselves in breach of the ‘super injunction’ prohibiting people talking about the affair between Imogen Thomas and a well-known footballer.
Small businesses that regularly use social media (such as Twitter, LinkedIn and Facebook) need to be aware of the potential consequences for both the owners and employees of falling foul of the law. The simple act of re-Tweeting a defamatory comment could get you and your employee in legal hot water. Make sure you have clear company policies on social media use that all employees are aware of and stick to.
The truth is that no matter where you log on to the internet there are rules and laws that you may have to comply with. While case law is still setting precedent for sentencing and consequences of actions it is still good practice to err on the side of caution and be prudent about what content you upload to the internet.
Edward Webb is a solicitor with Edward Hands and Lewis based on the Litigation team.
As of 1 April this year, the government is hoping to trim some £350m from the £2bn Legal Aid budget by scrapping almost all Legal Aid for private family law cases.
Legal Aid will only be available for Family Law cases involving allegations of domestic violence and abuse. The government is placing new emphasis on family mediation as a way to resolve family disputes, hoping that fewer of these cases will end up in court.
Family mediation is the process by which separating couples can side-step traumatic and divisive courtroom battles, by working with an independent mediator to resolve disagreements over arrangements for their children and how to divide up finances.
The government has said it will increase the amount of money it provides for legally aided family mediation, upping spending by £10m, taking the total spent on mediation to £25m. National Audit Office figures show that, on average, mediated cases are resolved around four-times quicker and cheaper than cases that go to court.
Family mediators are pleased by the change of direction, but worried about how people will access their services. Mediation is still relatively unknown to the general public. How will people know that public funding is available for mediation? And how will people find reputable qualified family mediators?
Judges are concerned that the cuts in public funding will mean there will be a rise in the number of litigants in person who inevitably take up more court time and may increase the backlog of family law cases. And some solicitors say that focusing legal aid on family law cases involving accusations of domestic violence may provide a perverse incentive for these allegations.
As someone who has worked as a family mediator for more than 15 years, I see this April as a time of uncertainty, but also of great possibility that in the future mediation will become the norm. Mediation will be first port of call for separating couples.
Another reason why mediation looks set to grow are rules that came into effect in April 2011, which meant that judges are supposed to ensure that all separating couples who are embarking on the court process have at least considered mediation.
Couples are supposed to try what is called a ‘MIAM’ (a mediation information and assessment meeting), during which the benefits of mediation are explained and the couples' suitability for mediation assessed. In fact, in many parts of the country judges have been ignoring this directive and it is now thought that legislation may be needed to make MIAMs compulsory.
A Ministry of Justice study has shown that when couples use mediation first, before getting to court, they are more likely to be able to continue to mediate their disagreements. The report also showed that fewer people needed further assistance with arrangements for their children after using mediation.
As well as being quicker and cheaper, family mediation can provide solutions to peoples' disagreements that are tailor made to them as individuals, rather than court-imposed decisions that may not suit their needs.
Mediation can get into the small details of how a separation will work, in a way that a formal legal process never could, even to the extent of discussing nurseries, bedtimes, dropping off plans, holidays and extended families. Mediators can also work with parents on how to break the news of separation or divorce to their children.
Research suggests that 12 years after separation, couples who have gone through the mediation process are still reaping the rewards, with both parents more likely to have a good relationship with their children, and an ability to communicate as parents.
So rather than being seen simply as a way to cut costs, or to keep things out of court, the real value of mediation can be seen in the way in which it helps to improve genuine life-long communication between former partners. Divorce and parental separation is a fact of modern life which will not go away. Family mediation provides parents with an effective way of managing the process and its consequences. As one of my former clients once put it: “If it hadn't been for mediation, we’d still be fighting now.”
Frances Place is a qualified solicitor who works as a mediator at Progressive Mediation.