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Forum Start-up Guide 2017 For our members, not for profit SU001 NOV2016

Forum of Private Business Start-up Guide First edition published


Published by

Forum of Private Business Limited

Ruskin Chambers Drury Lane Knutsford Cheshire WA16 6HA Telephone 01565 626001 Email Website Copyright

Š The Forum of Private Business 2017

ISBN 978-1-871929-46-0 All rights reserved other than templates. No part of this publication may be reproduced in any material form, whether by photocopying, scanning, downloading onto computer or otherwise, without the written permission of the copyright owners, except in accordance with the provisions of the Copyright, Designs and Patents Act 1988. Subscribers to the Guide have paid for an update and information service, which is non-transferable. The document itself remains the property of the Forum of Private Business. Any unauthorised or restricted act in relation to this publication may result in civil proceedings and/or criminal prosecution. Disclaimer The Forum of Private Business has taken every possible care to ensure that the information contained in this guide is accurate at the time of going to press, and the publishers cannot accept any liability for errors or omissions, however caused. The information given by this Start-up Guide cannot be taken as an authoritative interpretation of the law. Such an interpretation can only be given by employment tribunals and the courts. Before taking any further action, you may wish to consider taking legal advice. The information contained in this guide is based around the employment rules and regulations as they apply in England. While generally the same regulations apply to Northern Ireland, Wales, and Scotland, please contact the Forum of Private Business should you have specific issues in those areas of the United Kingdom.

Forum of Private Business

Foreword Dear Forum member, As a member of the Forum of Private Business, you will be aware we are a not for profit organisation that are constantly reinvesting our profits into improving the products and services for you, our member. We have been working towards offering a membership for the entrepreneur’s and that were in the start-up phase of starting a business. At the Forum we know how important it is to support a new start-up business in the early part of their operation, as over 90% fail in the first 3 years of trading. Your Forum Start-up Guide will give you and introduction into where you need to start, what you need to be doing to be compliant along with running your business. Would you know how to register your business and whether you need to be a sole trader or a Limited Partnership? We can tell you within this guide. This guide has been put together in conjunction with our legal partner Rradr and The Association of Company Registrations Agents. I believe it is critical to have the right support, advice and protection in place and that means to be more than just the average one size fits all businesses advice that is currently available. Most business owners find that after a few months of trading, they come up again things they didn’t know and need help to overcome them, but where do they go? By becoming a member of the Forum you will have joined an organisation that is celebrating 40 years in business in September 2017. Our experience in helping small business owners face all different types of challenges has changed dramatically since 1977 too, but whatever the business challenge we are here to help 24/7. As a business start-up, I want your business to be successful and profitable and will give you and your new business the best chance of succeeding.

Ian Cass Managing director The Forum of Private Business



Forum Start-up Guide 2017 Contents Section 1 - Trading Vehicle


Introduction 13 Private Company Limited by Shares


Sole Trader 16 Limited Liability Partnership 18 General Partnership 19 Limited Partnership 21

Section 2 - Starting a Company


Introduction 27 Private Company Limited by Shares 27 Before you set up a company 28 Choosing a name for your company


Incorporating your company 30 Directors 32 Director Duties 33 Articles of Association 33 What should I do after incorporation


Section 3 - Shareholder Agreements


Introduction 39 Play ‘what if…’ 39 Do I need a shareholders agreement?


Other considerations 11

Section 4 - Tax and Accounting


Income Tax 46 Corporation Tax 46 Accounting Records 47

The Forum Start-up Guide 2017


Company Accounts 47 Time period for filing company accounts


Offences and Directors Liabilities 48

Section 5 - Opening Bank Account


Introduction 55 Setting up a bank account 55

Section 6 - Paying yourself


Sole Trader & General Partnership 59 Incorporated Companies 59 Employee 60 Director 60 Shareholder (or member) 61

Section 7 - Legal Compliance


Introduction 66 Company Law 67 People with significant control (PSC) 68 Event driven returns to Companies House


Meetings, Minutes and Resolutions 70

Section 8 - Employing people


General 76 Types of employee 77 Employment Status 78 Before employing your first employee 79 Background checks 79 Permission to work 80 Contract and implied Terms of Employment


Auto enrollment Pension 84 Minimum Wages 85 Restrictions on working time 85 Illness and injury 85 Rights of Parents and Carers 86 Flexible working requests 87


Forum of Private Business


Data Protection 88 Discrimination and Harassment 88 Dismissals 89 Redundancies 90 Your liability as an employer 91 Who owns intellectual property rights (IPR) in work created by your employees?


Restraint of Trade Agreement (restrictive covenants)


Section 9 - Trading 93 Introduction 95 Selling goods, services or digital content to consumers


Where do you sell? 96 How you sell 97 Selling goods, services or digital content to businesses


Buying goods, services or digital content


Competition Law 99 Intellectual Property 100 Other considerations 101

Templates 102

The Forum Start-up Guide 2017



Section 1

Trading vehicle

“SME’s importance to the economy makeup 99% of businesses in the UK and create 15.06 million jobs, having a collective turnover of £1.753 trillion. Small businesses are the back bone of the UK economy.” Jo Thornber, Forum Marketing Executive


Section 1 Trading vehicle

Trading vehicle Introduction When starting a new business you need to decide what type of company you want to set up, there are various trading vehicles to choose and over this section, we will explain each of them. How you make your decision should be based on two key factors, risk and tax. The risk being to yourself and the potential loss of your personal assets. The vehicle you choose could either increase or decrease the risk of this happening. You should also speak to a tax adviser as they will be able to guide and advise which is the right trading vehicle for you and your new business. You can set up and register (if necessary) all businesses yourself through HMRC or Companies House. However, the Forum of Private business recommends you set up your business through an ACRA accredited registration company. Not only will they take care of the set up for you but they offer additional advice, support and help with legal requirements once your business is set up. You will not get this additional help if you register yourself through Companies House. The main trading vehicles available when setting up business are: • Private company limited by shares • Sole trader • Limited liability partnership • General partnership • Limited partnership The trading vehicle you choose will depend on a variety of factors, including: a) how you will be funding your business; b) your approach to risk; and c) your future plans. Please note, this guidance does not provide information about: • Public limited companies • Charitable corporations • European companies • Companies limited by guarantee • Unlimited companies • Unincorporated associations Any business plan you prepare will take account of the chosen trading vehicle as each has different costs and tax implications.

The Forum Start-up Guide 2017


Private Company Limited by Shares Formalities The main source of law that regulates companies is the Companies Act 2006. This is a significant piece of legislation containing almost 100 offences which a company and its directors can commit. There is a specific statutory procedure for setting up a Private company limited by shares which must have ‘articles of association’ setting out its management and administrative structure. More information regarding ‘articles of association’ can be found in section 2 Starting a company. The company must have at least one director (who must be a natural person) and one share in issue/one shareholder (who must be a natural person ). Shareholder(s) (also called “members”) will be allotted shares in return for payment which can be in money or ‘money’s worth’.

Business name You can choose any name, subject to ‘sensitive names’ and ‘same as’ rules. Generally, the name should have “limited” or “Ltd” (or Welsh equivalents) in its name. A registration agent will advise on your chosen name and ensure it can be registered.

Tax You will pay Corporation Tax on the profits chargeable to corporation tax. The company must register with HM Revenue & Customs for Corporation Tax within 3 months of incorporation. The tax is payable 9 months and 1 day after your companies accounting year ends, if your profits are £1.5 million or less. Profits above £1.5 million must be paid in instalments. See the Tax and Accounting section of this Start-Up guide for more details. You will also be required to register for VAT if your taxable turnover exceeds the threshold which, as at 1st April 2017, is £85,000.00.

Risk There may be a separation of the ownership and management of the company as a company may be managed by directors (who may, or may not, also be shareholders). Directors have fiduciary duties, duties under the Companies Act 2006 and other statutory obligations (e.g. under the Insolvency Act 1986).

Assets The company will be able to own assets and enter into contracts in its own right.

Funding the business The company will be able to raise debt finance (e.g. a secured or unsecured loan) or capital finance (in return for shares).


Forum of Private Business

Section 1 Trading vehicle

Stationery The following information must be displayed on all company stationery:

• • • •

Your company name, exactly as registered at Companies House The registered office address The country in which the company is registered

The company number allocated by Companies House (shown on your Certificate of Incorporation)

• The Company may either show either all the directors or none at all. • If registered, your VAT number

Other benefits The company will have a distinct legal personality separate from you and any other person who owns or manages the company. The company can therefore sue and be sued. The company will be responsible for its own debts. The liability of the shareholders is limited to the amount unpaid on its shares. This limited liability is considered to be a major advantage of trading via a limited liability company. Subject to the Companies Act 2006, a company will make distributions to shareholders. Selling your business will be the last thing you’re thinking of when setting up your business, but it is important to understand that by using this vehicle, instead of sole trader makes your business easier to sell in the future. The shareholding of a limited company determines its ownership and the business can be transferred in part or in whole to other owners by a simple transfer of shares.

Advantages of a private company limited by shares

Disadvantages of a private company limited by shares

Company is a separate legal entity. Company has its own legal personality therefore the only liability for shareholders is their initial share value.

Initial incorporation fee. Procedural obligations at incorporation such as implementing the articles of association.

Company appears more established as opposed to not incorporating.

Corporation tax requirements.

Having the word “limited” after your business name could make it seem more appealing to others such as customers, banks, potential business relationships etc.

Annual filing and accounting obligations.

The Forum Start-up Guide 2017


Our expertise is your expertise For more information on how we can help your business with simply contact our helpline team on 01565 626001, visit our website or email us

Forum of Private Business Limited Ruskin Chambers, Drury Lane Knutsford, Cheshire WA16 6HA Registered in England and Wales: 01329000

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