Client Testimonials
"As the UK's fastest growing multi channel integrated communications/contact centre business, it is vital for The Listening Company to work with a law firm that understands our business drivers and business model, from both a commercial and legal perspective, can handle our increasing requirements, and has the expertise and experience to support us in contract negotiations with our clients.
Waterfront ... as a whole and Carole Hailey in particular understand the outsourcing sector so well that they actually fulfil the role of an in house General Counsel, bringing expert contract review and drafting skills to bear, with limited briefing from us; and stand up against our client's lawyers in contract negotiation where necessary, often against firms much larger than themselves. They only spend time on the major issues and translate our commercial objectives into a legal framework.
I recommend them without hesitation."
Trevor Brown, Chief Operating Officer, The Listening Company
Business Mediums
To be limited or not to be limited?
That is the question!
So you've got the idea and you've decided to go for it! What next?
Broadly speaking, there are three different business models you can use if you are setting up a new business - sole trader, partnership and limited company.
Sole trader
If you do nothing else except start to trade - by turning your idea into a business you will be a sole trader. You don't need to do anything specific to become one, nor do you need to register with any official bodies.
The advantages of being a sole trader are straightforward: it's easy and it's free! It also means that you get taxed as an individual, so the money you make minus the expenses you incur will need to be included in your annual tax return.
If you don't work already then you will get all the usual individual's tax allowances before you start having to pay taxes on the profits you make from your business.
Partnership
To form a partnership, you need to have a partner! You may want to set out the rights of each partner in a written agreement, but there are also some very old laws that protect partnerships which will still apply in the absence of a written agreement. These provide that your profits will be shared equally. You will also be jointly and severally liable for any risks, which means that if someone has a claim against the partnership, they can sue each of you for the whole amount. If you are the only partner being sued, it will be up to you to try and recover from your partner(s) his or her proportion of the claim.
A partnership protected by law will be dissolved (or ended) if one partner no longer wishes to be part of the business.
Partners can protect their rights far better if they don't rely just on the law, but have a written partnership agreement which sets out the terms on which they will work together.
The advantages of partnerships are that they are very flexible (for example they can accommodate variable numbers of partners) and partners also get taxed in the same way as sole traders.
Limited Liability Partnerships (or LLPs) are a relatively new type of partnership and give partners even greater protection - the potential liability of the partners can be capped so that the position on liability is similar to that of a limited liability company.
Limited Liability Company
Limited liability companies have been said to be the greatest invention of the Victorian age!
As noted above, the significant disadvantage of being a sole trader or a partner is that you are personally responsible for all the acts and omissions of your business. If a sole trader or a partnership gets sued, then it is the individuals running the business who have to dig deep and pay up. The consequences can often be financially disastrous.
The clue to the most significant advantage of limited liability companies is in the name - your liability is limited. Except in certain (very unusual) circumstances if your business runs into trouble, then it is the company who is sued, and your own personal finances can remain untouched. If the company hasn't got enough money to meet the demands upon it, it will be put into liquidation, but the directors and shareholders will not be made bankrupt.
There are certain formal steps that must be taken to set up a limited company (which means that you are allowed to use the words "Limited" or "Ltd" after your business name). There are also certain ongoing obligations upon the directors and owners, and usually the costs of running a limited company are higher than those incurred by a sole trader (aside from the issue of meeting legal claims). However, regardless of whether or not it was the greatest invention by the Victorians, you should certainly consider whether a limited company makes most sense for your business.
© Waterfront Solicitors LLP 2006