Island Life Magazine Ltd August/September 2010 | Page 34

property

Island Life - August/September 2010

LEGAL ISSUES
Starting a business
on the ‘right footing’
and with a considered
structure.
Part 1
Photo: Mark & Terence Willey

Terence Willey & Company., Lawyers and Commissioners for Oaths (incorporating Malcolm
Daniells & Company and The Bembridge Law Practice) Contact Terence Willey 01983 875859
or Mark Willey 01983 611888. www.terencewilley.co.uk

I have often been asked by clients whether

in respect of liability arising this can prove

or not there is a right time to set up a

onerous if the number of partners is reduced

business. I suppose one could argue that the

and there are fewer than two designated

best time is not in a recession, but ironically

‘members’ remaining. Effectively in this

it is the businesses who are bold enough

scenario each partner would deem to be a

to commence trading in a recession that

designated ‘member’ for the purposes of

inevitably survive and prosper, on the basis

responsibility.

that “the only way is up”.

that partnerships in the main will only

There are various basic legal structures upon

survive on absolute trust, transparency and

which you can commence your own business;

openness between individuals, who should

that being of a Sole Trader, a Partnership, a

have regular interaction by designated

Limited Liability Partnership (LLP), Franchise,

partnership meetings to discuss the progress

Social Enterprise or a Limited Liability

of the business. Time should be expressly

Company. The latter of which I will deal with

reserved for this purpose and often partners

in part 2.

find themselves so busy, during the course

The main advantages of being a sole trader
is that of independence and the initial set

of trading, that they do not place significant
emphasis on partnership meetings.

up and running costs are usually less with all

Often individuals consider taking on

the profits of the business going to the sole

franchises which are usually purchased

trader. However, there are disadvantages

from an established business with relevant

in respect of lack of support, unlimited

support networks.

liability, and the fact that in a case of a sole

the security of a wider network but at the

trader there is personal responsibility arising

same time your own freedom to manage the

in respect of any debts arising during the

business is limited to the extent of the terms

trading of the business. The clear advantages

of a Franchise Agreement. Very often under

that surround partnerships include the

such Agreements the business is required to

various range of skills that may be introduced

pay a share of the turnover to a franchiser

to the business by you and your partners but

and this has an effect of reducing the overall

there needs to be a clear understanding at

net profit of the business.

the outset in terms of personal liability. In

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I have always considered

A franchise often affords

Finally, consideration can be given to a

the cases of a LLP there must be at least two

social enterprise business that trades for

individuals who are designated as ‘members’

the purposes of social purpose and usually

and the law places extra responsibility

represents quite diverse business activity

on them appropriately. To form a LLP is

across the Country, but those individuals

invariably more complex and costly than

that wish to trade on the basis of such

that of a straight forward partnership and

enterprise whilst is indeed commendable, it
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