SMALL BUSINESS LEGAL ADVICE AND ALTERNATIVE DISPUTE RESOLUTION
We all make mistakes but sometimes the law is not very forgiving – ignorance of it has never been a defence. Here are a few common pitfalls to watch out for in business.
Avoid partnership perils.
A partnership is formed when two or more people get together to start a business, sharing the workload and investing capital to get things going. It is always wise to have a written partnership agreement and get it checked by a solicitor.
If you don’t have a proper agreement and it all goes wrong, the partnership will be covered by the Partnership Act 1890 whose provisions may not always seem fair. For example, under it, a partner can withdraw immediately, without giving notice. This could mean they insist on the return of their capital and the business closes down.
Clarify relationships.
You can find yourself in a partnership without realising it, for example, if you run a business with somebody but don’t employ that person (often the case with husbands and wives).
In a partnership, partners are each responsible for business debts incurred by other partners and there is no limit to their liability.
Put it in writing.
Contracts are the basis of all business relationships. A contract will include four key components: Consideration – an obligation to pay or a promise to provide something in return for something of value. Certainty – the contract must clearly state what is expected of all parties.
The intention to be legally bound, an offer and an acceptance. However, contracts can be oral and it isn’t always clear when one has been made. Confirm every agreement in writing so everyone knows where he or she stands. What is the brief? Who will pay? When? How much? Are expenses included? What are the acceptance criteria? Who will own copyright?
Give workers contracts.
Have a contract of employment in place from day one for all employees. Make sure that all new employees are entitled to work in this country, or you could face heavy penalties.
Watch out for employment law.
Before you fire someone, make them redundant or change their terms and conditions of employment, take legal advice. If you don’t, you could find yourself open to claims for unfair dismissal, discrimination or breach of contract. Also warn employees that discrimination, sexual harassment and other illegal acts will not be tolerated.
Stay healthy.
If you fail to carry out your health and safety duties you may face prosecution, your insurance premiums may rise and you may find difficulty in obtaining insurance altogether. Information packs are available from the Health & Safety Executive spelling out requirements.
See material on health and safety
Ensure you’re insured.
Insurance is vital from a purely pragmatic viewpoint. There are also legal requirements for employers and public liability insurance. If you sell products, product liability insurance will protect you if someone injured by a defect in your product successfully sues you.
See material on insurance
Cover yourself.
Many professionals find it hard to imagine a case where work they have done results in a claim for hundreds of thousands of pounds. However, most people only contribute a link in a chain, so the effects of a mistake can be out of all proportion to their individual contribution.
If you offer services or advice, get adequate professional indemnity insurance. Indemnity cover is needed for years after the work has been done, because it has to cover when the claim is made.
Make them pay.
If you don’t spell out your terms and conditions of trade (T&Cs), you are asking, in effect, for customers to pay you when they feel like it. And if they go bust before paying up, you may not be able to reclaim your goods if you do not have a Retention of Title clause in your T&Cs.
So draft some suitable T&Cs for your industry and ask a solicitor to check them. Then ensure your customer agrees to them, and ideally, signs them, when placing an order.
Information rules.
If you keep information about identifiable individuals, you may need to notify the Data Protection Commissioner. This is not expensive (£35 per year) and simple to do. However, it is a criminal offence to break the law on data protection. If you are caught, you face a fine of £5,000 plus costs in a Magistrate’s Court, or an unlimited fine in the High Court.
Read the small print.
Read loan and overdraft agreements carefully and ensure you understand what you are letting yourself in for. Be wary of signing personal guarantees. Banks often seek to ‘over secure’ their lending.
Property pitfalls.
Be careful when signing lease agreements, especially for property. Even if you move and sell the lease on, you could find yourself liable if the next person defaults. Check whether you will be liable to repair and improve the property under the terms of your lease.
DO YOU OWN A BUSINESS WHICH IS IN DISPUTE WITH ANOTHER, GET LEGAL REPRESENTATION BEFORE YOUR OPPONENT DOES, IT COULD MAKE ALL THE DIFFERENCE?
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