by Angela Taffs | Jan 26, 2022 | Finance, Tax and NI, Growing a business, Legal
Many small businesses with low risk and lower profits start off as sole traders as it is much easier to set up and the financial administration is much simpler. Moving from a sole trader to a Limited Company can be done at any time, although one of the most common times is when profits start to increase significantly.
Things to consider when considering moving from sole trader to a Limited Company are:
Protect yourself
Are you looking to protect yourself as an individual? Should someone suffer financial loss due to advice you have given, you won’t be personally liable if someone makes a claim against you (the business).
Protect your business name
Do you want to add a level of protection to your business name? This could be a useful move for you as your business brand is growing. Registering a company name at Companies House means that the chosen name cannot be registered by any other business
Profit levels
What are your profit levels? There are a lot more tax benefits to be had by moving to a limited company if you are in a higher tax bracket. If not, you need to weigh up the costs involved with a Limited company against the profits you are making as a sole trader. There used to be a general rule of thumb that if your profits were under £30,000 you would be better off staying as a sole trader. However, this is subject to change and a number of other factors so professional advice from an accountant should be taken.
Administration time
Do bear in mind the increased time and tasks you will need by incorporating your business. End of year accountancy fees will also be higher so if your business is low risk and with profits of under £30,000 you may wish to remain as a sole trader. If you are a sole trader it can be easy to do the end of year accounts yourself but as a Limited Company, I would always advise using an accountant.
Credibility
Another benefit to moving to a Limited company is that it makes your business look more professional and can boost your status to prospective clients. It will also put you in higher stead should you look to raise finance in the future.
Take professional advice
It is strongly recommended to speak to a Chartered Accountant or financial adviser before making a final decision as they will be able to advise on your individual business needs.
Taking the next step from Sole Trader to Limited Company
If you have made the decision to set up as a Limited Company, Gov.uk has a step-by-step guide to help you. This guide includes:
- Choosing and registering your business name
- Choosing director and a company secretary]
- Deciding who the shareholders are
- Identifying people with significant control over your company
- Preparing a ‘memorandum of association’ and ‘articles of association’
- What company records you need to keep
- What accounting and financial records you need to keep
- Selecting a Standard industrial classification of economic activities (SIC) code
- Registering for Corporation Tax
If you need further advice, get in touch if you would like recommendations of Chartered Accountants who will be able to help.
by Angela Taffs | Oct 31, 2018 | Business Success, Legal
On occasions, I come across businesses that have to cease trading due to not having the correct terms and conditions in place. They have hit a problem with their client or a service provider, and have run into hot water as terms weren’t agreed in advance.
It’s critical that you have terms and conditions set out with your client to protect yourself and your business. With two businesses I have seen close recently, if they had the correct terms and conditions set out and signed between both parties up front, they would not have run into the trouble that they did.
As a bare minimum, your terms and conditions should include:
- What you are going to deliver
- The scope of the work with a clear definition of what products and services will be provided.
- Timelines for the work to be completed,
- Charges and payment terms
- What is the length of the contract
- What are your costs and payment terms
- Do you need payment up front? If part payment, when is the remainder due? Late payment charges.
- How long does any quote stand for?
- Any additional charges that may occur
- Confidentiality agreement
- Any warranties and prevailing laws
- Limitations and exclusions of liability
- Cancellation terms
- What happens if either party is unhappy and/or wishes to cancel?
NEVER work on trust! This is a recipe for disaster. It may seem a lot to put together but I can guarantee you will wish you had taken the time and trouble to put these into place if you ever do run into trouble.
Without clear terms and conditions, confusion can occur with the client thinking they may be able to pay at the end of a service, but you need payment upfront.
Terms and conditions also make you look far more professional. Personally, I would never enter into an agreement without specified terms and conditions from a supplier and quite a few businesses have lost my custom as they did not have these available.
If you need help setting yours out, SQL legal also have some pretty good templates but always check that they are suitable for your own business needs.
by Angela Taffs | Jul 19, 2018 | Business Success, Legal
Do you have terms and conditions for your business?
If not, go sort them out now!
Not only will this help protect you in the future in case of any dispute but they make you look more professional and can help you gain business. Your clients need to know exactly what they are getting and feel protected from their end also.
Today, I was in the process of booking a photo shoot with a photographer who asked for a deposit up front. I was more than happy to pay this but requested T’s and C’s with contract first. And then came the silence …….
They didn’t have any! This made me feel very aware that I was handing over my money with no protection on my side. What if I needed to change the date or cancel? How long would it take to get the photos after the shoot? What if the photos weren’t good enough?
Hasten to say, I didn’t pay the deposit and cancelled the shoot.
As a bare minimum, your terms and conditions should include:
- The scope of the work with a clear definition of what products and services will be provided.
- Timelines for the work to be completed,
- What it is going to cost and your payment terms
- What happens if either party is unhappy and/or wishes to cancel.
Without clear terms and conditions, confusion can occur with the client thinking they may be able to pay at the end of a service but you need payment up front. Or it may be that they think the service will be delivered to a different timescale than you can work to.
Have you ever encountered any problems with clients in the past? What was that problem? Think how to incorporate terms and conditions that will stop this scenario happening in the future such as a client having to supply you with information required within a given period (this is a huge problem for web designers where they are sat waiting for info before they can complete the project and get paid!).
There are plenty of templates online to use such as at SQL Legal but do make sure that you read them carefully to ensure they cover all you need for your specific business.
by Angela Taffs | Apr 27, 2015 | Legal, Running a Business
Who has copyright ownership of works you commission?
How often do you outsource work or hire freelancers to do work for you? This could be anything from paying someone to design your website, create a logo for you or write some content for your website.
I suspect as a small business owner that the majority will have paid for some work to be done at some point. But when you agreed on this work, did you get terms and conditions signed by both of you and if so, did you check these carefully? Did you ensure that those t’s and c’s transferred ownership of the work and the copyright to you and your business upon completion of payment?
And did these terms and conditions get signed in ink by both parties?
You may be in for a shock!
If not, you may be in for a shock.
As the law stands, and as I learnt from attending an event by the Intellectual Property Office (IPO), even if you pay someone to do work for you that you will use in your business unless you have a written and signed agreement in place to transfer ownership, the person who created the piece of work for you will retain the ownership and copyright.
Therefore, if you decided to change your website designer but keep the same or similar layout, text etc, they could stop you or sue you if you go ahead!! Also, have a read of the article ‘Do you really know who owns your website?‘ for more important information.
The only exception to this rule is if the work completed was carried out by an employee of your business as they would have been deemed to have done the work in the course of employment.
There is a lot more information regarding copyright ownership on the Gov.Uk website.
The real danger of not having copyright ownership
What concerned me more than anything was learning that if a less than honourable person completed a piece of work for you without a signed agreement, they could if they decided to use the work that you had paid for and sell it on to other parties!
I thought in reality a problematic situation probably didn’t happen that often but since speaking to an IPO solicitor and also getting feedback from people on social media, it is a more common occurrence than I thought.
So this is something that every small business owner needs to be aware of and to be on the safe side, with any future work, always get a written agreement in place to transfer the copyright ownership to yourself and make sure both parties sign it. You have been warned!
N.B. If you are in the creative market and need a contract, a site that has been recommended to me (although I have not used it myself so cannot say how good it is) is Own-It. The site has a range of fact sheets and articles along with both paid and free contracts for you to download.
