Legal Aspects for Business Start-Up in the UK - Coursework Example

Legal Aspects for Business Start up in the United Kingdom Starting up a business is easy but following all the laws associated with it can be as difficult as much they can be. Starting up business laws vary from country to country and totally depends on the business type, along with the actual worth of the business. Some countries have strict laws for the business men or the setting up companies while some countries like promoting trade and have laws relaxed for the companies until and unless they pay taxes and the business are listed as the legal one in the country. In the United Kingdom, in order to start a business no permission is needed, although there are strict laws for the business names. One should register the business with the unique name. Otherwise heavy penalties can be imposed if any business violates this law. Moreover you cannot reproduce the already patent product with the new name. It should be noted that no-permission rule is not for every type of business, though it is applicable on most business sectors but certain business sectors like oil and gas, defence and banking require licences and federal permissions. In the United Kingdom, before starting up a business one must go through the Companies Act 2006. It offers a comprehensive discussion and all the required codes of company law. All the legal bases for the business start up have been made clear in Companies Act 2006 (LOB, 2014). Legal Status of the Company: Legal status of the company belongs to the initial business decisions. Legal status will not only specify the type of the business but it will also affect how you are going to run your business. The important part where the legal status of the company plays its role is at the implication of the various types of taxes. It will not only design how you pay your taxes but it will also specify how you maintain your records. The key while setting up the legal status of the business is to be sure, as it is hundred per cent possible to change it while your business is operating but the process is very much costly and disruptive and can cause further challenges in the finance sector or the taxation part of the business (EEN, 2013). Choosing the Right Business Structure: The legal status of the company implements while choosing the right business structure, or says your desired business structure. It is also called as the legal forms of the business (LOB, 2014).. The government of the United Kingdom exhibits various forms of business on their official site. These forms are; Sole Trader: As the name implies sole trader means you are solely responsible for profit and loss of your business. You can keep all the profits but you have to pay the taxes from your profits. It is very important to know that only you are responsible but it does not mean that you work alone. You can hire employee as many as you want. Being the sole proprietor record keeping and taxes payment comes under your responsibilities. Also you have to pay the bills, credits or wages from your earnings. A sole trader has to send a self assessment tax return every year; moreover he has to pay income tax on the profit of the business and the national insurance. In case of sole trader business structure there is unlimited liability. If you are starting this kind of business you must first register with HM Revenue and Custom and then you can start you business (LOB, 2014). Partnerships: Partnerships provide ease while setting up a new business. Partnerships help in expanding the business as the partner can bring his or her expertise to the business, from one product you can sell two products as your partners may have the experience of the other. Also expanded links bring more business. Both the partners have to pay taxes equally similarly profits are distributed accordingly. Both the partners are responsible for the credits or the bill payments. The liability is unlimited and they have to send the partnership self assessment tax also every year. All partners have to follow the sole trader taxes responsibility individually. The major disadvantage of having a partnership business is the disagreement between the partners; which can further affect the operations. When starting partnership business, partners must be registered with the HM Revenue and Custom and they automatically get registered with Self Assessment (EEN, 2013).. Limited Liability Partnership (LLP): In the LLP one enjoys the flexibility of partnership and the personal liability of the partner is limited. There are no restrictions on the number of the partners but two partners must be chosen as the designated members by the other members. On these two members the law places some extra responsibilities. The formation of this kind of partnership is complex and much costly. Also when these partnerships broke up; they cause further confusion and complexity. In case of LLP the partners have to pay the taxes according to their share in the business and they share the profit similarly, so the taxes are paid unequally. These type of partnerships are usually own by the professional services firms and big house companies. Taxes are same as partnership companies and the partners must follow the sole trader taxes path every year. For LLP business start up registration with the HMRC and the Self Assessments is mandatory before you start your operations (EEN, 2013).. Limited liability Company: In the LLC the members can be organizations or people, who own the shares of the company. The LLC is responsible for its own rights means everything is done by any such company comes under its own rights. The profit it makes is completely owned by it after it pays off the corporation tax. Usually such companies are run by the directors, directors normally own shares of the company but it is not a mandatory condition to be the director of the company. A director has to fulfil many legal responsibilities. Usually the financial responsibilities of the shareholder are limited to the value of shares they own. In United Kingdom it is very important for such companies to send statuary accounts every year also send annual return to Companies’ House. If you are staring a LLC you must set the name of the company under the supervision of the Companies House of United Kingdom. Also you must contact HMRC (HM Revenue and Custom) when the company starts it services or activities (LOB, 2014).. Franchise and Social Enterprise: Government of the United Kingdom also allows the franchise type of business. In this type of business the trader enjoys the advantages and sales of the established business. They become the part of the already expanded network, but the biggest disadvantage of holding a Franchise is that the trader has to pay the part of his profit to the franchiser; which reduces the net profit (EEN, 2013).. Social enterprise business often operates for the community and the social purposes. Like a charitable organization or the community interest company (CIC). To set up a social enterprise type of business or the CIC you have to apply to Companies House for further operation. Both type of business can be individual or partnership based. Taxes and name registration rules applies to them also. There are several business legislations in the United Kingdom both for the employees and the employers, violation of any may cause implication of severe penalties or even the cancellation of the business licence. The first and the foremost legislation that has to be followed strictly is the tax law. Tax system in the United Kingdom is same as the tax collection system in other countries but the payable amount of tax depends on the type of company you own; LLC, sole trader etc. Companies also have to register themselves for the value added tax (VAT) and the corporation tax. Limited companies are required to be audited annually if they are big enough to have the 6.5 million British pounds of annual turnover. As you set your company, you have to send the first set of records after the twenty one months of company set up. In order to ensure the complete tax collection, companies are responsible for deduction of the employees’ tax and the national insurance contribution from the employees’ pay. Employment Law in the United Kingdom: The employment laws in the United Kingdom are given special preference in order to ensure that employees’ right are fully delivered. As the United Kingdom comprised of the England, Wales, Scotland and Northern Ireland, these laws are equally applied to all the regions. A business has to follow the basic employment and labour laws of the United Kingdom in order to save itself from difficult situations or penalties. Some basic labour reforms are as follows i) Employment Contracts: Employers within the United Kingdom are free to choose any legal system they wish to be governed by in the employment agreement. If they choose the default one then the resident country law will be applied for the employee. It is mandatory in the United Kingdom to send a written statement to the employee within two months of his or her affiliation with the company. This statement must be valid for the indefinite contracts or the fixed term contracts. It must include all the terms and conditions of the employment long with the following information: Date of commencement of employment and the duration Title of the Job and duties assigned by the employer Pay intervals and the amount negotiated Place of employment Grievance and disciplinary procedures Notice of termination requirements Sick pay Normal working hours Number of holidays allowed Pension entitlement Probationary period (if applicable) Agreement on the above stated points will save both the employers and the employees from any type of conflict in future (Caldwell, 2013) ii) Hour of Work and Wages: The average pay per hour for the employee is set by the National Minimum Wage Act of 1998 of the United Kingdom. Wage per hour vary for different age groups up to the age of twenty one years of the employee. For the employee whose age is above twenty one years, the average pay per hour is 6.19 pounds. Similarly average working hours of the employee depends upon the age of the employee. They have to be set forth in the employment contract provided by the employer. Usually the average working hours set for an adult employee are forty eight hours a week. And if the employee work in excess by his own choice, the employers are not required to pay for the extra working hours unless an agreement is made between them about the overtime. It should also be noted that the minimum wage for all the forty eight hours of the employee should not be less than the limit set by the National Minimum Wage sector (Caldwell, 2013). iii) Discrimination Laws in the Employment: Equality Act 2010 strictly prohibits discrimination and the harassment at the work place. The government of the United Kingdom has specified various characteristics of personality on the basis of which discrimination exists in the corporate sectors and are severely condemned. They include Age of employee Any kind of disability; Gender based or gender reassignment discrimination Relationship status Pregnancy and maternity Religion or belief Sexual orientation of the employee Race, ethnicity, national origin or skin colour; Corporate Activities Part time employment or fixed time employment On the basis of the above mentioned characteristics, an employee can never be harassed. The law severely prohibits the discriminations considering the characteristics in the training sector, pay section, employment contract, job positing, duties and right. The Acts that are designed to maintain the equality among the employees are Equal Pay Act of 1970, the Disability Discrimination Act of 1995 and the Employment Equality Regulations relevant to the age of employee and sexual orientation (Caldwell, 2013) iv) Employment –At-Will Doctrine Law in the United Kingdom: Employment –At-Will Doctrine Law exists only in the United States of America. In the United Kingdom it does not work. Employment –At-Will means that an employee can be terminated at any time with the notice but in the United Kingdom, an employee cannot be terminated unless a valid reason is mentioned in the termination statement. The reason should be valid and justifiable in any case. Bribery and the Corruption Law in the United Kingdom: While establishing a business in the United Kingdom you must follow the bribery and the corruption law that works within the boundaries of the United Kingdom. For the bribery and the corruption law Serious Fraud Office play the role of the lead agency. According to the Ministry of Justice United Kingdom, Bribery Act 2010 following type of money or good exchanges are considered as the act of the bribery and will be an offensive act that will lead to the penalties set. Bribery: Giving money or exchanging goods to influence any act or deal. Commission: This is the serious kind of offense in the United Kingdom. An official is never allowed to accept goods or money for the security of any commercial contract. It further applies to obtaining any government contract through bribery. Corporate Espionage: It is the type of corruption in which the subject obtains or tries to obtain the trade secrets, hurts privacy, alters copyrights or reproduces any patent product with the new name. Theft of the government property through fraud is also included in this category of bribery act 2010. Extortion: This serious offence is very common in the developing countries but in the United Kingdom extortion is listed under the serious acts of corruption. In extortion usually a sum of money is demanded against the safety of the subject’s life or business property. Subject is being threatened with the business loss or the physical harm. Kickback: Demanding a sum of money for the assignment of any government project or revealing the right bid before time against money is known as kickback. It is strictly prohibited in the U.K. Illegal gratuity: It is another act of corruption present in the bribery act of 2010. According to the government invalid confirmation of the transaction or the giving or receiving something when the transaction is closed comes under the category of illegal gratuity. Conflict of Interest: If the employee holds some extra ordinary and invalid interest in the government’s project either economically or personally it will considered as the conflict of interest (SFO, 2014). i) Overseas Corruption: Overseas corruption is also included in the bribery and corruption act of 2010 of the United Kingdom. Any illegal transaction from overseas or earning from the company based overseas without necessary taxes, are considered as the corruption against the country. All money transfer should be through valid routes and should be registered with the rightful authorities (SFO, 2014). Work Cited Enterprise Europe Network. Start-Ups. Updated 2011. Web April 14, 2014. < http://europa.eu/youreurope/business/start-grow/start-ups/index_en.htm#united-kingdom_en_setting-up> Amanda K. Caldwell. Employment Law in the United Kingdom. Published: April 9, 2013. Web April 14, 2014 < http://www.lexisnexis.com/legalnewsroom/labor-employment/b/labor-employment-top-blogs/archive/2013/04/09/employment-law-in-the-united-kingdom.aspx> The Library of Birmingham. Business Start-up: The Legal Aspects. Web. April 14, 2014 Serious Fraud Office. Bribery & Corruption. 2014. Web. April 14, 2014 < http://www.sfo.gov.uk/bribery--corruption/bribery--corruption.aspx> Read More