Corporate

There are different ways to start your business and in most cases you are not required to use a particular business structure. Some examples are:

• Sole traders – working as a sole trader means all profits are earned by you and kept by you as an individual. This is often the simplest structure;
• Partnership – if you have a “business partner” the law may treat you as being a partnership, if that happens you will be jointly liable for all the business’s debts and obligations even if incurred by your partner. Of course, you could intentionally decide to set up as a partnership, but if you do make sure you put in place a partnership agreement to avoid disputes later on;
• Limited liability company – whether you decide to use a limited liability company will depend upon your circumstances. There are a lot of factors to consider such as the increased burden of having to publicly file information and the two-tier tax treatment: one tax for profits earned by the company (corporation tax) and a further tax on passing those profits to the shareholders. On the other hand you can limit your personal liability by using a company;
• Limited liability partnership – this is a hybrid of a partnership and a company.

We can guide you through this decision process so that you can be confident that from a legal point of view you have selected the right structure for you.

The source of finance will depend on various factors including the amount required, the type of business, ability to offer security etc. Options can include:

• Loans from family/friends;
• Loans from banks;
• Government grants and funding. There are hundreds of government backed-support and finance. A list of available support which allows you to search my the type of funding required, by area, size and activity can be found here;
• Private equity and venture capital investors;
• External funding by an investor in exchange for shares in the company and the opportunity to share in the growth of that company.

We would always recommend that if you are operating in partnership or have a limited company your intentions for your business are formalised in writing in case of any disagreement in the future and to provide certainty for your new venture. Examples include shareholders agreements if you are setting up a company, or a partnership agreement, if you are setting up a partnership. We can advise you on the sorts of provisions which you should consider including depending on your business and any specific concerns you may have.

Director’s duties can be quite onerous, so if you are thinking about becoming a director you should consider your duties carefully. Remember, you don’t actually have to be validly appointed for the duties to apply. The courts also identify two other classes of people, shadow directors and de facto directors, who are also subject to most of the same duties and responsibilities.

You don’t need to become an expert in every aspect of company law; however, it is clearly a good idea to be mindful of each key area. The main general duties that a director owes to their company are:

• Duty to promote the success of the company;
• Duty to exercise independent judgement;
• Duty to exercise reasonable care, skill and diligence;
• Duty not to accept benefits from third parties;
• Duty to avoid conflicts of interest (known as situational conflicts); and
• Duty to declare interest in proposed transaction or arrangement with the company (known as transactional conflicts).

Your duties can appear daunting, but we are here to help every step of the way.