If you check on your business now and again online and suddenly see another business ranking next to yours after copying your content its time to talk to us. We provide a service to tackle the copyright infringer, contact their host and a range of other measures to get this resolved for you. Call us now on 0844 357 3590 or email to info@limeone.co.uk for further details.

If you are accused of copyright theft we can help you too, just see our other services here.

UK trademarks at a fixed cost

Lime One’s UK trademark service provides:

* Fast application online

* Single price

* Easy to use

* 24/7/365 availability of service

* Affordable legal fees

* One legal fee for application and up to 6 classes

* Fast Turnaround 3 working days to process the application and submit to IPO

* 100% success rate for registration by us

Legal Fees Only for trademark application in up to 6 classes

NB Application fees are payable in addition to these legal costs and will be invoiced online at the time the application is made for you.

BUY NOW £720 Inc VAT

Lime One will be launching its online International trademark service on the 1st October, if you want a global application before then please email us for a direct quote to info @limeone.co.uk

Trademarking- Should I bother?

What is a Trademark?

Obtaining a Trademark is a way of making sure that you register exclusive rights to use your logo or ‘mark’  and enables you to use the ® symbol. It is a unique identification of your services and/or products. Without registration you can only use the initials TM and have more limited choices to tackle copiers of your logo or mark. You can even insure a trademark as an asset to cover you for legal claims you may need to make.

Trademarks are based on the Intellectual Property Office’s classification of your goods/ and or services and in the UK there are currently 34 classes of goods (classes 1 to 34) and 11 classes of services (classes 35 to 45) available to choose from.

What can you Trademark?

A Trademark is simply a form of intellectual property (IP) and generally covers a word, phrase, name, symbol, logo, images and pictures, or design or a combination of them. It also covers non-traditional/non-conventional Trademarks such as colours, smells, sounds, 3D forms or a combination of any of them. Provided it can be graphically registered and can be used as a distinguishing mark, then it can probably be Trademarked.

Examples of Trademarks include the turquoise shade used on Heinz beans which can only be used on those beans, the NatWest logo, the Chanel No 5 bottle shape.

You can register Trademarks in UK, EU, USA and in individual countries.

What is the value of registering a Trademark?

Having a registered Trademark mark gives you an exclusive right to use your mark and serves as an indicator to others that they can not use your unique mark. Registering your Trademark means there is no doubt as to ownership, age/date of registration etc.

Without registration you do have a common law right to protect your mark but this is limited. For example, you may only be able to take action where your mark is used and confuses a buyer that they are buying your goods and/or services. However, you will need evidence to prove ownership, age/date of registration. This is so much easier to prove with a registered mark and so many businesses consider it an investment against future hassle and theft.

Part of the Trademark process involves a search to ensure the Trademark you wish to register is not already in use, and this in itself is a valuable method of checking you are not actually infringing another Trademark.

Trademarks will also assist in counterfeiting which is particularly relevant if your branding grows as infringing trademarks by counterfeiting is also a criminal offence.

Is there any benefit to incurring the cost of registering a Trademark?

Provided that the Trademark is not unused for a continuous period of 5 years, registration lasts indefinitely but must be renewed every 10 years. However, once you have incurred the cost, there is simply a renewal fee to pay. Compared with the cost of litigation over unregistered IP it is a small price to pay.

There are distinct costs benefits to registration not only from the search process and protective as above but since a Trademark IP is a commodity of value, it will normally have an element of goodwill and so can be sold etc.

Geographical types of Trademarks

Trademarks can be registered

ü  a UK Trademark which solely covers the UK

ü  a Community Trademark (CTM) covers all member states of the EU

ü  an International Trademark – a procedure allows you to register a Trademark with the World Intellectual Property Organisation (WIPO). There are currently 66 countries (please see the table for included countries) which have signed the Madrid protocol and if you have a Trademark registered with one (or more) of those countries you can extend your protection to cover other WIPO countries more easily than doing it on a country by country basis.

ü  If you want to cover other countries not within WIPO, then this can be done on a county by country basis.

Before proceeding with an International Trademark you do need to at least have a Trademark pending in UK and/or EU.

How long does it take?

We can only provide approximate guidelines as follows

UK – 4-8 months

USA – 20-22 months

Ireland – 18-24 months

BASIC PROCEDURE

Step 1 – Initial Consideration and Search

ü  View what is to be trademarked and what aims are and what hope to achieve by obtaining a trademark

ü  Search for other similar Trademarks either in UK or EU (Office for Harmonisation in the Internal market in Alicante and not individual member states) or USA

Step 2 – Pre- Application

ü  Checklist of criteria  including common mistakes

Step 3 Completing Application

ü  Complex forms

ü  Registration fees are payable to the registering bodies

Step 4 Dealing with Objections

ü  If and as raised by Examiner

Step 5 Dealing with Oppositions

ü  If raised following advertisement

Step 6 Finalising  Process

COSTS FOR ONE CLASS Lime One valid May 2011

1          OUR SEARCH FEES: Step 1

Each search – £250 for the first search with each additional search costing £175 ex VAT

2          OUR LEGAL FEES FOR APPLICATION AND REGISTRATION – Steps 2, 3 and 6

UK – £550

EU – £600

Ireland - £600

USA - £1000

All EX VAT

International - £1000 per EACH of the 66 countries you require registration in

3          OUR FEES FOR each ADDITIONAL CLASS –  £400

4          PLUS APPLICATION AND REGISTRATION FEES

Please note that we have listed approximate guidelines only below. Due to variations of fees and exchange rates etc, if you wish to proceed we will provide you with an exact amount to be paid 7 days prior to the fees being required.

UK – £200 application & extra £50 for each class (currently 45 classes)

Ireland – £200 application & £100 registration for each class

EU –approximately £450 per class (payable in Euros) for 1^st 3 classes and thereafter cost is about £240 per class, but can be reduced with on-line filing

Ireland – £200 per class

USA – approximately £200 per class

International – payment for each of 66 countries (varies according to exchange rates) and varies between approximately £35 and £295 per county

It is impossible to provide a truly worldwide solution. You must establish which countries you actually need to register in and provide a list to us.  Where as country is outside UK, Ireland, USA and is not one of the 66 WIPO countries we will provide you with a bespoke quote.

The 66 WIPO counties are as follows : –

Cookies are everywhere and track our online useage and internet habits. They are the little pieces of code that spy on our machines and monitor our online useage and visiting routines. Well, at least they do until the 25th May 2011 when the new e-privacy directive is adopted into UK law. The directive requires for positive opt-in, so it will be very interesting to see how this pans out and is integrated into web sites and browsers to comply with the law, or indeed if it is at all.

With privacy being eroded daily by the ever watchful satellite tracking, Google mapping, even our good old Sony playstation having problems with security of data, we will be watching for more information on how the UK is likely to adopt this piece of legislation. We do wonder where the cash is coming from to police breaches! Despite the reservation we are letting all our clients who are now out of our 12 month guaranteed updating service since purchase that they do need to get their privacy policies overhauled. At the order online cost of just £125 ex VAT for a brand new policy its going to keep you safe and compliant with whatever they throw at us.

NEW PRIVACY POLICY UPDATE

£125 ex VAT BUY NOW

Do I need Terms & Conditions for my business?

What are terms and conditions?

Terms and conditions allow a business to set out some “rules” on which they will do business with their clients and customers, whether it be supplying goods and/or providing services.

Why have terms and conditions?

There are many reasons why terms and conditions are vital and we have just listed a few of those reasons below:-

*To Set out the basis upon which you will supply and/or work for your clients and customers

You can specify how long the customer can have to pay you, your delivery policy, your returns policy, exactly what your services will cover (and what they won’t). Without terms you can be left arguing petty, and time consuming issues with your customers.

* Work within the law.

English law imposes many duties on businesses so avoid penalties by laying the law down within your terms. This way everyone knows where they stand.

If you are selling goods and/or services from a website then you may have to comply with the Distance Selling Regulations. These regs include cancellation rights on orders. If the seller has not advised the customer about their cancellation rights, this can mean that the customer’s usual 7 day rights can been extended to 3 months. For a small business with 50 customers who each take 3 months to cancel their order once received this situation could be disastrous.

*Protect your business

If things go wrong, both you and your clients and customer will understand your position (for example if customers default on payment) and your liability more easily.

*Move your business forward

Other businesses that you work with require your terms and conditions-it’s more professional. When you are setting up facilities with your bank to accept credit card payments, the bank will insist on seeing your terms and conditions before they can provide that facility to you.

*Create a professional image

Presenting your terms and conditions at the outset makes your business look and be efficient.

*So, the short answer is?

Yes! – Terms and conditions are essential to every business from the start. Often when setting up a business terms and conditions are overlooked, they should be the first thing you consider to take away potential headaches. With Lime One terms and conditions start from just £40 plus VAT. A very small cost to ensure your business knows and plays by the rules.

Talk to us now or email to info@limeone.co.uk for more details.

Partnerships, LLPs and getting into bed with someone you don’t know

I bet the title got your attention, didn’t it? For a variety of reasons, after we leave adolescence, most of us at least think about whether we should or should not just sleep with someone we don’t know and think of the ramifications (even if it’s only will the other half find out).

Why then, when we are in business do we hardly ever give a second thought to who we hook up with?

It’s often a case of having an idea, think it might be a business and “oh, I know, let’s form a partnership”. From my point of view, that’s great. I can flick through a magazine and just wait for you to call me, knowing that your fees when I sort out the inevitable mess will pay the mortgage for the next few months. Not because I’m expensive I hasten to add (credit crunch etc) but because I know that you won’t have a partnership agreement (or even better you’ll have one you’ve adapted from someone else’s who owns a dog farm in Siberia from the internet) and there will be a huge mess to sort out. From whom actually owns what (great when it comes to intellectual property) to the falling out and the little tricks that you can pull over the other withdrawing all the cash from the bank account) it’s a lot for me to sort through.

If you don’t actually like the idea of paying my monthly mortgage for some time to come and would just prefer to pay a bit extra towards your own you could think about actually taking some advice before you start up. Rather disappointingly for me, I can offer a fixed price so you are in control of what you pay for and only get advice on areas which you actually need it.

If you are going to go ahead in partnership then I can draft a partnership agreement for you or, if your budget is really tight, then you can buy a template partnership agreement so that you will have the basics in place. Sadly, we should cover most aspects which can be dealt with, such as if something goes wrong and the business hits financial problems or you fall out with your partner(s).

As part of our advice, you may also want to talk about liabilities. As a partner you are likely to be liable for what you do, but also what your partner does and that of course can hit the old pocket fairly hard. We can remove the smokescreen around limited liability partnerships (LLPs) and show you that you don’t have to rush into forming a limited company with all the draconian formalities (public inspection anyone?) and can actually get protection within a partnership. You may feel that becoming a company director, with all your statutory duties (sue me because I made a decision on a business opportunity on behalf of the company why don’t you?) doesn’t suit you whereas you feel too exposed as a partner. Perhaps a limited liability partnership midway between the two will suit you best?

Don’t forget though, to make my day, just stroll into a partnership without having thought it through and don’t bother with an agreement. You can then seriously just boost my mortgage payments and at least make my banking team happy even if you and your bank aren’t!

LEASES OR LICENCES BENEFITS AND DETRIMENTS

Understanding the differences between a lease and a licence is a complicated legal issue. This article points out firstly how the law determines the difference between licences and leases, no matter what label or name is actually attached to them and looks at just some of the things that you need to consider when considering the benefits and detriments.

Leases create a legal formal agreement and, as a result, impose obligations on both parties but afford some protection to tenants.

Often parties actually call a document a licence when it is actually a lease. One of the landmark cases, which although it relates to a residential property the same principles apply to business property is that of  Street v Mountford [1985] AC 809. The court decided that when trying to decide between a lease or a licence, it will look at the arrangement that actually existed between the parties and not just the name or label given to that arrangement. In that case the parties had called it a licence but the Court determined it was a lease. The Court explained that the parties cannot deliberately make a licence by calling it as such when it is actually a lease.

A tongue in cheek look at some of the issues we have been asked about over photographs and Intellectual Property Law.

INTELLECTUAL PROPERTY IN PHOTOGRAPHY & WHAT TO DO WITH IT

(AKA DO I OWN THE PHOTO OF MY OWN FACE?)

Lime One

Now I have to be honest and say that anyone looking at my photos wouldn’t be in the slightest bit interested in who owned the copyright / Intellectual Property (IP) in them. Great Aunt Ethel on Christmas day with her Happy Christmas cracker hat at a jaunty angle, after too much sherry with the added bonus my finger poised over half the photo wouldn’t have much appeal. However, I do often get asked who owns the IP in photographs. Is it me, because I took the photo with my camera, or is it Great Aunt Ethel and my finger who take centre stage because they are the “star” in the photo?

Actually, it’s not quite that simple.

Let’s assume that the photo was taken last Christmas (or anytime after 1/8/1989). Unless I’d agreed something different with Great Aunt Ethel etc before taking the photo, if I am in control of taking the photo and I create it, then I’m the first copyright owner. Things get more complicated if say my brother Dave was involved and Dave had helped set up the photo (such as shouting “take it from the left, I’ve set the light right now”) then Dave and I would be joint owners and I’d have to get Dave’s permission before using the photo.

However, let’s change the scenario. I’ve now risen to the heights of a professional photographer working for a newspaper (presumably after an excellent yet lengthy training course). I’ve taken a photo during the course of my work, so who owns the photo then? In those circumstances it is owned by my employer because that’s what I’m paid to do. Actually, it doesn’t actually matter whether I’m a photographer or not. My employer will own the photo if I’ve taken it as part of my job or my employers have asked me to take it on their behalf.

Let’s change the scenario again. I’ve decided to spend my hard earned cash in commissioning a photo my other half and I, to be placed, for posterity, above the fireplace at home. Unless I agree something different with the photographer (and professionals do have a way of sneaking this into their terms and conditions so that the copyright is assigned to them) I actually own the copyright. This means that I can decide whether or not the photographer can show it to the public, make copies etc. However, if the photo is for commercial, rather than domestic, purposes then this can change again and the photographer owns it, unless of course I get the copyright assigned to me.

The golden rule is that you should always get the written permission of the copyright owner before you use it. Whilst it might not occur to Dave to do anything when he sees the photo of Great Aunt Ethel that he and I jointly took together on this years’ Christmas cards, copyright owners can enforce their rights and this involves a very unpleasant dispute and you will probably end up paying quite dearly for the use of the photo.

A SHORT NOTE ABOUT OLD PHOTOGRAPHS

For photos taken before 1/1/1945 – generally the copyright will have expired. However if copyright is revived then if the first copyright owner was alive on 1/1/1996 then they own the copyright. If the first copyright owner was not alive on 1/1/1996 then their estate owns the copyright.

For photos taken after 1/1/1945 but before 1/8/1989 – if you are the owner of the material on which the photograph was taken, then you are the first copyright owner. Subject to any contrary agreements, you would’ve also been the first copyright owner if you commissioned the photo. If you took the photo whilst in the course of your employment, then your employee would have some rights, but you would hold some too.

Talk to us about your questions on IP. Info@limeone.co.uk

DISTRIBUTION, FRANCHISING, LICENSING

For many businesses as they expand there comes a point where they consider allowing someone else access to their ideas or part of their business to enable controlled expansion. There are 3 common ways for someone to consider this option – Distribution, Franchising, Licensing and this article briefly explains  some of the initial differences.

Distribution

This situation usually occurs where you manufacture, make or supply goods and you are happy to allow an independent person or organisation (the distributor) to buy those goods from you as a discounted rate and resale, to sell it on to others. The goods can be anything at all from handbags to software.

The distributor will enter into an agreement with you for you to supply the goods and enabling them to buy from you at favourable (lower than you would normally sell) prices. However the distributor will always remain an independent business to your organisation so you effectively don’t have control over their business. Of course, in the agreement you will have some say about certain aspects connected with selling and promoting your goods so, for example, you will place limits on the advertising (to ensure that your product is not misrepresented) and because the distributor can buy from you at a lower rate than you would usually charge you will ask them to purchase minimum levels of products from you in a given period of time.

Agreements usually linked to specific geographical areas (referred to as territories) and can be exclusive so that only that distributor can sell your products in a particular territory although you must consider this carefully because limitations in this way may limit your expansion.

Other points you should consider including in the agreement will include incentive schemes (to promote sales levels), liability levels, confidentiality, shipping, insurance and when the title (ownership) of the goods will pass.

Franchising

To some extent franchising takes the ideas behind distribution further. With franchising the franchisor (organisation allowing their business to be franchised) allows the franchisee to actually use their business idea, its name and brand, trademarks etc and so has control over the franchisee. Franchisees usually see the main advantage in getting in a franchise is that they are starting up a business with an already proven track record and typically, statistics show that franchises have a lower failure level than other start up businesses. However, conversely the restrictions may place a ceiling on the Franchisees earnings level.

Again both parties will enter into an agreement and usually there is an initial payment for purchasing the franchise (i.e. the right to use the brand name etc) but also because the franchisee has continuing support from the franchisor there will be a continuing payment (usually based on a percentage of revenue) from the franchisee to the franchisor.

In addition, there are more extensive obligations from the franchisor who will usually providing training, premises or assistance with locating them, assistance with set up and then with improving the business as well as certain business support such as aspects of management and accounting. In return, in order to protect their brand, the franchisor will have greater control over the franchisee’s business and will monitor the franchisee’s performance.

Like Distribution Agreements, Franchise Agreements will cover specified territories and can be exclusive. Other points you should consider including in the agreement will include exit strategy, restrictions, and clearly define the level if support.

Licensing

This situation occurs where you own rights, including intellectual property rights (the rights of ownership over ideas, design, inventions, artistic expressions etc and as protected by copyright, patents, trademarks etc) and you are happy to allow an independent person or organisation (the Licensee) to buy that right to make and/or use those intellectual property rights to, as appropriate, make, sell, market and goods or services.

This means that the owner (licensor) allows the licensee the right to use the intellectual property rights   whilst still retaining ultimate ownership. Licensing Agreements will be for a fixed time (the term) and like the other agreements can be exclusive.

In a licensing agreement, the licensor’s control over the manufacture and sale of goods etc will be much less but there is usually a very limited or no level of support offered to the licensee. As well as an initial payment for the license, the licensor will pay the licensee a continuing payment, usually a royalty which will be based on production etc.

Other points you should consider including in the agreement will include whether you will allow sub-licensing, taxation on royalties, quality controls, and as applicable product liability indemnity.

Conclusion

All of these agreements are potentially suitable whether you manufacture or make goods or supply services. Initially, you need to consider the levels of control that you wish to maintain.

All of them however do depend on you having properly protected your “business” be that the idea, the product, the services or intellectual property rights with the appropriate trademark or patent. Although at the start of the process you all potential parties to any such agreement should  sign a Non-Disclosure Agreement (NDA) you will still be releasing your very valuable business “secrets and know-how”.

It is vital that whichever option you explore that your final agreement is written so both parties understand the obligations and boundaries of the agreement.

Most of our clients considering their options take advice from us before entering into any agreements above, for an affordable fee peace of mind is so much better than untangling the mess after you have paid out money to enter into something that just looked good on paper but is not bringing you in any money.

Do you form a company or continue trading as a sole trader? A brief overview of the law involved and what you need to know about the terms used and the responsibilities of owning a business.

FORMING A COMPANY IN ENGLAND & WALES

Relevant Law

Companies Act 1985

Companies Act 2006

WHAT IS A COMPANY?

A Company is an independent legal body with its own legal identity which stands of its own right and is created by incorporation at Companies House. On incorporation, the Company gets its own identity, complete with a Company registration number. Since it has its own legal identity a Company can, in its own name, undertake such activities as buying property, entering into contracts, and litigation in the Company name. The profits, losses, assets and liabilities belong to the Company.

WHAT ARE ARTICLES AND A MEMORANDUM?

When a Company is formed in England & Wales, it needs its own constitution to regulate the shareholder’s rights and the Company powers. The constitution is made up of:-

• Memorandum of Association – deals with name, location, objects of the Company, contains a statement as the liability of its members and details of its share capital and the shareholders’ names

• Articles of Association – deals with the Company rules for internal regulation and management, including the Director’s powers.

The introduction of the Companies Act 2006 (currently this will be from October 2008) sees the availability of simpler “model frameworks” to make things easier for private companies  when starting out.

WHO HAS AN INTEREST IN THE COMPANY?

• Shareholders- who are also known as members, make investment into the Company by buying shares in it and as such have a financial interest in it and there are to members because of that shareholding. Rules relating to shareholders are quite complicated but a private Company can not just have one shareholder.

• Shares – The number of shares that can be issued in a Company is limited by the authorised capital, although this can be raised at any time and to any level, subject to agreement of the members. There is no set formula for how many shares to issue, save that at least one share must be issued on incorporation. In practice, this is usually quite easy since the shareholding of a Company determines its interest and “ownership”. Naturally, the more shares a person holds, the greater their rights are. For example, generally a holding of more than 50% of the issued shares in a Company will be sufficient to control the Company, determine the Board of Directors and the day to day running of the Company.

WHO RUNS THE COMPANY?

• Directors - are person appointed by shareholders, or on their behalf, to run the Company.  A Company must have at least one Director but there is no legal limit as to how many Director’s there can b, subject to the Company’s own rules which it has set and may state minimum and maximum numbers of Directors. Directors effectively deal with the day to day running of the Company. The introduction of the Companies Act 2006 sees the setting out of a statutory statement of directors’ general duties, including a duty to
  • promote the success of a Company,
  • · to exercise independent judgment
  • · exercise reasonable care, skill and diligence
  • · avoid conflicts of interest
  • · act within their powers

and a duty NOT to accept benefits from third parties

In addition, the new Companies Act now allows shareholders to sue Directors for negligence and other “defaults”.

• Company Secretary- deals with ensuring that the company complies with its legal and regulatory requirements by completing documents, keeps board members advised and informed as to legal responsibilities, and deals with the administration of calling meetings and ensuring implementation of decisions. Provided that there are at least 2 Directors, one of those Directors can also the Company Secretary. However, under the new Companies Act 2006 , a private Company will no longer need to have a Company Secretary.

The introduction of the Companies Act 2006 simplifies decision-making processes in private companies and removes a statutory requirement of holding Annual General Meeting (AGM) and makes it to take decisions by written resolutions

ARE THERE DIFFERENT TYPES OF COMPANY?

There are 4 main types of Company

1          Private Company limited by shares – this means that a members’ liability is limited to the amount unpaid for any shares they hold.

2          Public limited Company – this means that the Company offers its shares for sale to members of the general public, but like the private Company limited by shares, again a member’s liability is limited to the amount unpaid for any shares they hold.

3          Private Company limited by guarantee – this means that a member’s liability is limited to the amount they have agreed (guaranteed) to pay as a contribution to the if the Company is “wound up” (brought to a close, such as on liquidation when a Company is unable to pay its debts).

4          Private unlimited Company – this means that there is no limit to a member’s liability

HOW DO I FORM A COMPANY?

The introduction of the Companies Act 2006 saw some changes with Company formation to simplify the process. A Company can be formed by submitting the following documents to Companies House

• Memorandum of Association
• Articles of Association
• Form detailing information regarding the first Directors, Company Secretary and Registered Office details
• A declaration confirming compliance with legislation relating to the current Companies Act.

Companies House will then register the Company and allocate the Company registration number.

Once the Company is registered there are, quite naturally, a number of other legal obligations which include:-

• Advising HMRC (for Tax, and where applicable, Employer and VAT purposes)
• Displaying the Company’s name at its premises
• Displaying the Company’s name, place of registration, registered number and registered office address on stationery and communication.

WHY FORM A COMPANY?

Such an important decision as to the legal structure of an organisation can not be taken lightly and legal advice should always be sought. However, there are a number of benefits to forming a Company, which include

Limited liability – this is often considered the main benefit to structuring a business as a Company, although this is changed somewhat since the advent of Limited Liability Partnerships (LLP). Liability limitation is important when a Company is would up. As we have already explored, with a Private Company a member’s liability is limited to the amount unpaid for any shares they hold (if limited by shares) or to the amount they have agreed (guaranteed) to pay as a contribution on winding up (if limited by guarantee). Likewise, shareholders are only liable for the amount of any unpaid shares. In practice,  most shares are paid for when issued. For the difference regarding liability for Sole Traders and Partnerships, please see the following section. However, it should be noted that, with small Companies, banks often try and get around this limitation in liability by obtaining personal guarantees from Directors/Shareholders, including legal charges on private houses, so beware!

Tax – tax benefits, include on reinvestment and the ability to issue tax-free benefits to shareholders by paying dividends. Additional previous benefits for very small Companies have included the first £10,000 of profits being not subject to tax but this is not applicable on current legislation, but of course, such legislation changes so you must be sure of the current position when reaching a decision about structuring a business.

Perceived Respectability – this is often a perceived comfort with the ability to work behind the Company structure, with the guarantee of perpetual succession.

Share “ownership burden” – this can be spread widely by issuing shares to shareholders

However, some disadvantages include

Administration – there is a higher administrative burden for compliance for Companies than with alternative methods of running a business

Accounting – Annual Accounts must comply with the requirements of the current Companies Act and be filed with Companies House and so are on public view, although a statutory audit if often not required for small companies.

PAYE Tax – Directors are employed by the company and so salary is subject to PAYE

Trading Losses – individuals have more flexibility to deal with trading losses

Director’s Liability - Company directors are more at risk of both criminal and civil penalty proceedings, such as by failing to submit accounts on time. Please also see above for forthcoming changes structuring Director’s duties with the 2006 Act.

Capital Gains – Companies pay tax on capital gains at their corporation tax rate

OTHER ALTERANTIVE TYPES OF BUSINESSES?

Although each and every business must be examined very carefully, taking into account all needs and requirements, we have listed some of the main points to take into consideration when looking at alternatives ways of structuring a business, other than Company formation.

SOLE TRADER

Own “boss” – perhaps one of the best things about a sole trader is that you stand alone. Certain types of people prefer to lead a business alone.

Profits – a sole trader gets to keep all the profits.

Less administration – sole traders have to do the least reporting, particularly to the Government

Tax - self-employed people have to pay income tax at the personal rate.

Work-load Intrusion – On the down side, there is no-one to share experiences with and so may mean intrusion into personal privacy, and practical problems, such as organizing sickness and holidays.

Bankruptcy – sole traders have unlimited liability so that creditors have access to all their personal assets, and, if assets are insufficient to meet liabilities, a sole trader could be declared bankrupt

PARTNERSHIP

Partnerships are formed less formally than Companies but even in the case of just 2 partners who are also friends, a Partnership Agreement (this is a legal documents which sets out the terms of the partnership such as who can draw money and what happens upon illness and death etc) is always advised.

In smaller partnerships, many of the same benefits and disadvantages apply as to those we have listed for Sole Traders. However in a partnership which is not clearly structured and has no Partnership Agreement, one may partner to deal with a “difficult” partner, along with all their other business concerns.

Partners are “jointly and severally liable”. Effectively, if you are in business with a partner and that partner causes concerns and problems (such as ordering partnership business goods you can’t afford to pay for) then it becomes your problem. Taking this further, if you have assets and your partner does not, the “jointly and severally liable” may mean, for example, that you take on the whole burden of a debt.

LIMITED LIABILITY PARTNERSHIP (LLP)

This is often seen as the “real” alternative to structuring a business as a Company. This is a partnership, consisting of members, which is incorporated by registration at Companies House. Benefits include

Limited Liability – in much the same way as in a Company, a member’s liability is limited to in that the LLP itself takes responsibility for debts.

Management flexibility – however, unlike a company an LLP have much greater flexibility in that they can organise the running of their business, particularly the internal structure and tax arrangements in the same way as an ordinary partnership.

Disadvantages include

Disclosure – similar disclosure of accounts to a Company

Administration – LLPs have to file an annual return, notify Companies House of changes etc, in much the same way as a Company

If you are considering starting a business, then talk to us and email to info@limeone.co.uk