Archers can provide comprehensive and specialist legal advice to clients wishing to start up in business.
We provide the following services to our clients:
- Advice on the various ways that businesses can be formed and operate;
- Advice regarding the types of company formations to use (i.e. a limited liability company, sole trader, public limited company, management company etc) and we can help you to consider all the advantages/disadvantages of each to enable you to reach an informed decision;
- Drafting company documents i.e. the Memorandum and Articles of Association
We can also provide start up businesses with advice and support in relation to fundraising, customer contracts, intellectual property, real estate, employment and other issues arising out of the day to day running of the business. In addition we can draft and provide advice on straightforward shareholder agreements, joint venture and partnership agreements.
What legal form should the business take?
This is one of the first things to decide when setting up a new business. There are essentially four basic forms that a business can operate through. These are sole trader, partnership, limited liability partnership and limited company.
Each structure has it’s own implications in relationship to the ownership of assets, liability and taxation. It is important that these issues are considered in order to decide which structure is most suitable for your business.
Set out below is a brief description of each type of business structure;
This is the most basic form of business structure. An individual simply commences carrying on a business in his or her own name. There are no legal formalities to be complied with and, therefore it can be a cost-effective format. All income generated by the business is taxed as the individual’s income and the individual will also bear personal liability for the business’s debts and contracts.
Where two or more people are involved in setting up a business a partnership is automatically formed. If this is to be the case then It is advisable that a formal partnership agreement is drafted to regulate the relationship between the partners (e.g. how much money each partner puts in and how much each can take out, which partners will be responsible for doing what and what happens if the partners fall out.) The partnership will be taxed on the basis of each partner receiving a slice of the profits (as determined by the partnership agreement) and paying personal income tax on that sum. Each partner will be responsible for the actions of every other partner and will be personally liable for all debts incurred by the business and any other obligations entered into by it.
Limited liability partnership
This is the same as a straightforward partnership with the exception that the partnership agreement governing it and its annual accounts must be open for inspection by the public, the same as in limited company situation. This is done by lodging the documents at Companies House. The partnership can limit the liability of each individual partner to a set amount.
A limited company has its own separate legal identity and is owned by the shareholders. The running of the business by the company is governed by the Board of Directors and all income generated by the company is subject to corporation tax rather than income tax. It is the company itself that is responsible for any liabilities.