Successfully reported this slideshow.

WBS Entrepreneurship Mentoring Workshop -28 July 2011 - Steve Janes

789 views

Published on

Establishment of a business
What is the right structure?
-Ownership -v- management issues
- Tax implications
- Legal risks & responsibilities
- The things that sometimes go wrong

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

WBS Entrepreneurship Mentoring Workshop -28 July 2011 - Steve Janes

  1. 1. Establishing a BusinessThe optional dynamics of structure, organisation/management and related factors<br />Steven Janes<br />Partner<br />28th July 2011<br />
  2. 2. Wright Hassall LLP<br /><ul><li>Full service commercial law firm
  3. 3. 33 partners and over 200 staff
  4. 4. Turnover in 2010: £13.1 million
  5. 5. Sectors: financial services, technology, logistics, charities, education, sport, social housing & agriculture</li></li></ul><li>Selecting a Business Structure <br />Key characteristics of a good business structure are: <br /><ul><li>Flexibility to accommodate changing circumstances with minimum consequences
  6. 6. Protection against business risks
  7. 7. Minimization of costs, including tax
  8. 8. Efficient distribution of profits</li></li></ul><li>Common Business Structures<br /><ul><li>Limited company
  9. 9. Partnership
  10. 10. Limited liability partnership
  11. 11. Sole trader</li></li></ul><li>More Exotic Business Structures<br /><ul><li>Social enterprises
  12. 12. Joint ventures
  13. 13. Franchises
  14. 14. Charities
  15. 15. Trusts
  16. 16. Hybrids</li></li></ul><li>Ease of Starting Up<br /><ul><li>Sole trader is the easiest structure to adopt
  17. 17. BUT electronic company formations has simplified setting up other structures
  18. 18. Understand costs involved in setting up and maintaining your chosen structure. Bear in mind that:
  19. 19. Corporate structures are more expensive
  20. 20. Trusts, hybrids etc are more complex</li></li></ul><li>Purpose of the Business<br /><ul><li>Market sector in which business operates may help to decide which structure to pursue
  21. 21. Consider if assets should be divested to protect them from creditors
  22. 22. Business structure may influence eligibility for subsidies and grants</li></li></ul><li>Extraction of profit / earnings<br /><ul><li>You are in business to make money so consider most tax-effective way of withdrawing funds:
  23. 23. Salary
  24. 24. Bonus
  25. 25. Benefits in kind
  26. 26. Profit shares
  27. 27. Royalties (IPRs)
  28. 28. Dividends and loan repayments</li></li></ul><li>Strategic Factors<br /><ul><li>Consider your business in the context of your overall ‘financial life’:
  29. 29. Is the business your main source of wealth?
  30. 30. Do you want the business to pay for your retirement?
  31. 31. Do you want it to provide other financial benefits?
  32. 32. Do you want to pass it on to family members or sell?</li></li></ul><li>The Cast List<br /><ul><li>Who else needs to be accommodated within the business?
  33. 33. Family or friends?
  34. 34. Providers of capital?
  35. 35. Partners?
  36. 36. Key collaborators?</li></li></ul><li>Taxation<br /><ul><li>Tax liability may be calculated differently for each structure. Considerations include tax on:
  37. 37. Profits and VAT
  38. 38. Stamp duty
  39. 39. Capital gains tax
  40. 40. Capital allowances
  41. 41. Business rates
  42. 42. PAYE/ ‘payroll tax’ and other taxes</li></li></ul><li>Liability / Exposure of Personal Assets<br /><ul><li>All businesses carry an element of risk. Identify risk factors in order to minimise liability
  43. 43. Sole traders and partnerships do not carry legal protection for owners. Proprietors are personally liable for debts and liabilities and partners are joint and severally liable.
  44. 44. Limited companies allow business debts to be ring-fenced from owners’ personal finances. Shareholders’ liability limited to their share in the equity.</li></li></ul><li>Capital & Finance<br /><ul><li>Most businesses need an injection of capital at some point:
  45. 45. Personal wealth (often the only option for sole traders)
  46. 46. External sources
  47. 47. Non-participating investors (e.g. business angels)
  48. 48. Stock exchange listing</li></li></ul><li>Other Factors<br /><ul><li>Business tradition
  49. 49. Formality / regulation
  50. 50. Borders
  51. 51. Necessity</li></li></ul><li>Evolution of the ‘Owner Manager’<br /><ul><li>Who are the owners?
  52. 52. Who controls the business?
  53. 53. Which is the necessary condition – ownership or management/control?</li></li></ul><li>Management Separate from Ownership?<br /><ul><li>“In the real world no owner is going to let someone control their business. Non-owner managers can make contributions, but complete control will always rest with the owner”
  54. 54. “If non-owner managers do not feel that they possess ownership in the business, then they will be less effective managers”</li></ul>[Source – Linked-in forum on business management, 2010]<br />
  55. 55. Ownership Management Performance <br /><ul><li>Does private equity create better-performing companies?
  56. 56. Is private equity good because it defuses conflict between owners and managers?
  57. 57. Are professional investors more detached and less emotional about the business?
  58. 58. Does professional investment inevitably lead to short-term profits over long-term investment?
  59. 59. Is there a model for ‘Sustainable Capitalism’?</li></li></ul><li>Corporate Governance ‘101’<br /><ul><li>The constitution – ‘articles’; share types; shareholders’ agreements
  60. 60. Roles of the board and shareholders
  61. 61. How shareholders can:
  62. 62. Convene meetings
  63. 63. Influence the agenda
  64. 64. Affect board decisions
  65. 65. How voting takes place</li></li></ul><li>Stakeholder & Other External Factors<br /><ul><li>Customers
  66. 66. Suppliers
  67. 67. Competitors
  68. 68. Neighbours
  69. 69. Regulators
  70. 70. Employees</li></li></ul><li>Legal Risks: if you can’t stand the heat…<br /><ul><li>Don’t become an entrepreneur
  71. 71. Stick to National Savings
  72. 72. Don’t go out without your lawyer
  73. 73. Avoid birds, pigs and any other viral sectors</li></li></ul><li>Key Moments of Business Structure Risk<br /><ul><li>Hiring employees
  74. 74. Selling a manufactured product
  75. 75. Giving advice
  76. 76. Winning a major new contract / customer
  77. 77. Eureka moments – new inventions
  78. 78. Marriage & divorce (aka mergers and acquisitions)
  79. 79. Exits</li></li></ul><li>Recipe for a Peaceful Night’s Sleep<br /><ul><li>Write everything down
  80. 80. Keep legal documents simple
  81. 81. Put your trust in written agreements
  82. 82. Good lawyers (& accountants) are priceless
  83. 83. Don’t forget what insurance is for…
  84. 84. When assessing risk, think ‘feline’: </li></ul>Avoid <br />Control <br />Accept or<br />Transfer<br />
  85. 85. Steven Janes<br />Partner<br />steven.janes@wrighthassall.co.uk<br />01926 880752<br />Any Questions?<br />

×