Frettens’ Commercial Team guides businesses from a start-up right through to decisions about selling and assist with many things in between.
All business owners realise that, on some level, it is vital to protect their business, and most appreciate that it can be a false economy to avoid spending on putting the right protection in place. Karen Edwards, Solicitor and Associate in the Commercial Team was asked to speak at a recent networking event for female entrepreneurs, giving an overview on elements to consider to protect the business and how to protect yourself in business.
Last month we provided a summary of her guidance in protecting the business and here is her advice on protecting yourself.
- Consider becoming a Limited Company
This means that the liability rests with the company, rather than you personally, and also you may pay less tax overall.
- In a partnership, put a partnership agreement in place
It is an extremely healthy process for business partners to formally set out the “rules” of their business relationship and can avoid hugely disruptive disagreements further down the line. Without a partnership agreement, your business is automatically a ‘partnership at will’ which means that relations between partners are governed by the Partnership Act 1890. This archaic piece of legislation rarely caters for modern business practices, let alone catering for your particular requirements and arrangements. Read more on partnership agreements.
- In a company, put a shareholders agreement in place
This contract governs the relationship between shareholders to avoid future disagreements. It includes the shareholders rights and obligations, describes how the company will be run (payment of dividends, salaries, decision making etc.), arrangements on repaying money loaned to the company and what happens if business decisions are not unanimous. Read more on shareholders agreements.
- Cross option and life policies
Secondary to shareholders agreements, this document deals with what happens if a shareholder dies, allowing the company to keep control rather than beneficiaries of the deceased’s estate becoming involved. A life insurance policy needs to be in place to allow the company, or the remaining shareholders, to use the proceeds to buy the shares back, thus avoiding a situation when a family member who does not understand the company is suddenly in a position to vote on how to run it.
Karen comments “There may be other aspects to consider which are specific to your particular business and circumstances. These are some basics which every business owner should have in place. We are here to talk through these and help you to protect yourself and your company for a successful future.”
Our Commercial Team is happy to discuss any issues that this raises for your own business. If you have any questions, you only have to ask us at Frettens. Please call 01202 499255 and Karen or her team will be happy to chat about your situation and your particular requirements.