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READING SOLICITOR SMALL BUSINESS FAQS

Reading Start-up/Small Business FAQs

How can I secure finance for my new business?

If you are a relatively new business and your business is structured as a Limited Company or Limited Liability Partnership, you may have to provide a personal guarantee for finance.  Whether you have to provide a guarantee depends on how long you have been trading, the size of the loan relative to the funds that are coming into the business, your credit history and the bank’s terms and conditions.

If you do have to provide a personal guarantee, you should try and negotiate with the lender.  You want to try and limit the extent and length of the guarantee, although this may prove to be impossible where the lender rigidly applies their standard terms and conditions.  You should also avoid entering into a personal guarantee with others where you will be jointly and severely liable with others who have given the guarantee.  If the others cannot pay the debt, you may be personally responsible for it all.

Do I have to follow any formal procedures to start a business?

If you start a sole tradership or a partnership, you do not have to follow any formal procedures and can start trading straight away.  However, if you start a sole tradership or a partnership, you will be personally liable for the business’s debts and liabilities, meaning your personal assets and property could be put at risk.  In the case of a partnership, you will be jointly and severely liable with the other partners.  If one or all of the other partners cannot pay, you may be solely responsible for the business’s debts and liabilities.  This can, however, be modified where a partnership agreement is used.

If you wish to start a limited company or a limited liability partnership, you will have to make a formal application to Companies House.  Whilst the procedure can be relatively quick (particularly where you do not wish to draft your own articles of association – the rules which govern how your company is run), you will have to follow certain legal requirements when running your company.  For example, you will have to file an key financial information with Companies House annually.

Why do I need terms and conditions of trading?

It is a good idea to have your own terms and conditions of trading in order to:

• State your business’s position on quality control, payment, delivery and liability
• Create certainty
• Circumnavigate some aspects of contract law – subject to Unfair Contractual Terms legislation, you might be able to limit your liabilities, and you can retain ownership of goods until you have been paid.

Bear in mind that many statutory laws, particularly consumer laws, cannot be opted out of and where your terms and conditions contradict legislation, the statutory terms may be automatically implied.  It is therefore important to have a solicitor draft your terms and conditions.