When a new business venture is proposed, the first step is to get the business up and running. Our Business Law Department can help you to decide what form that business takes, as making a careful choice is vital as it can contribute to its success or failure.
Questions to be asked, amongst others, include:
- What funds will be used to set up the business, how will profits be taken and what exit plans are in place for the future?
- Who will manage the business and to what extent will those individuals be personally liable for their acts and the debts of the business?
- Where will the business be based and where will it trade?
- What levels of tax will the business have to pay and what accounts must be kept?
Once these types of questions have been investigated fully, our Business Law Department can work with you to decide if your business takes the form of:
Our Business Law Department can help with the day-to-day administration of your business including shareholder agreements, limited liability partnership agreements, changes to articles of association, company meetings, filing of documents at Companies House, share allotments and transfers, director appointments and resignations.
This type of business entity is owned and run by a single person with no legal distinction between that person and the business. The owner has unlimited responsibility for all the losses and debts of the business, and all the debts of the business can be enforced against the owners personal property meaning the owner has no less liability than if they were acting as an individual.
A partnership is a relationship existing between persons carrying on a business in common with a view to make profit which is governed by the Partnership Act 1890. Whilst a partner of the partnership, each partner is jointly liable for all of the business’ debts and obligations. The legal relationship between the partners is usually set out in an agreed partnership agreement signed by each partner to avoid the risk of any disputes arising as to how the business of the partnership should be conducted.
Our Business Law Department has extensive experience in drafting partnership agreements covering aspects such as the agreed nature of the business, the capital contributed by each partner, ownership of property, profit sharing and contributions to losses, partners’ obligations and limitations on their authority, management of the partnership, retirement and expulsion and finally how the partnership can be terminated.
Limited Liability Partnership
The Limited Liability Partnership Act 2000 provides for the formation of a limited liability partnership (LLP) in England, Wales and Scotland. The key features of a limited liability partnership are:
- limited liability for its members;
- it is a separate legal entity from that of its members;
- it is taxed as a partnership so long as the LLP is trading;
- it has the organisational flexibility of a partnership;
- the members agreement is a private, confidential document; and
- its accounting and filing requirements are broadly similar to those of a company.
The LLP owns the assets of the business and is liable for its own debts. The members act as its agents and only have liability up to the amount they have contributed to the LLP. However, in some instances under general law a member may become liable, for example if he gave negligent advice, and therefore insurance should be considered.
Members of a limited liability partnership can enter into an limited liability partnership agreement to set out their rights and duties as between themselves and as between the members and the LLP. This would typically include provisions covering the business of the LLP, the capital contributed by each member, ownership of property, profit sharing, members’ obligations and limitations on their authority, meeting and decision making for the management of the LLP, admission, retirement and expulsion of members and liquidation.
Private Limited Company
Many businesses trade as a private limited company as it allows the owners to separate their personal and business assets by reason that the liability of the shareholders is limited to the amount they have chosen to invest in the company.
Our Business Law Department can assist with the incorporation and day-to-day administration of a private company and by using the team’s expertise and experience, you can avoid typical problems that can arise such as meetings and decisions not being held and made in accordance with the company’s constitutional documents or share purchases and transfers not being correctly recorded.
Our Business Law Department has experience in incorporating companies, filing annual returns, filing accounts, drafting and filing resolutions, issuing and transferring shares, appointing and removing directors, registering charges, company meetings and changing the details of the company such as the company’s name and accounting reference date.
Often the business will have more than one shareholder, and our Business Law Department can work with you to prevent potential disputes arising at a later date between the shareholders due to changes in circumstances. The team can advise you on the best possible content of the company’s articles of association and any potential shareholder agreement giving clarity as to how the business should be managed and inserting important protections for the shareholders.
At the outset it is useful to consider, amongst other things, some of the following matters to give your business the best possible chance of long-term success:
- the circumstances in which new shares are issued and existing shares are transferred;
- the potential sale of the business in the future, and what mechanisms need to be in place to make sure this can be achieved;
- the circumstances in which a shareholder may be required to offer for sale, sell or transfer his shares and the mechanism for deciding the value of such shares;
- the appointment of directors by shareholders;
- the business of the company and any potential alterations of this at a later date; and
- the general management and administration of the business.
A public limited company is a company which has shares that can be purchased by the public and which has allotted share capital with a nominal value of at least £50,000. The liability of a member is limited by the memorandum to the amount, if any, unpaid on the shares held by that member.
In addition to the usual considerations for a private limited company, the public company has greater requirements of financial disclosure, must have a certificate of trading and a company secretary.