Business Organizations and Setup

Business Organizations

• The main forms are sole trader, company, partnership, and LLP.
• When advising, consider relevant factors and use an advice framework.

Advising on structure Choice

• Covers different structures, explaining factors to consider.

Setting Up a Business

• New companies can be registered with custom documents or purchased pre-incorporated.
• Registration requires fulfilling specific Companies House processes.

Setting Up Procedures

• Application form submission plus fee.
• The name cannot be misleading or similar.
• Submission of a memorandum which confirms subscribers' wish to form a company.
• Articles of Association can be submitted, amending or replacing the MA.
• Payment of fees are a must.
• Optional step is the Shareholders’ Agreement which should not be filed
• Outcome yields certificate of incorporation and placement in the London Gazette.

Post Incorporation Considerations

• Includes a first board meeting with approvals for formation and costs.
• Company books encompass minutes of BMs and members' GMs and must be maintained.

Regulatory

• Registers with minutes must be kept for ten years at the registered office.

Statutory Registers

• Required registers include members and people with significant control changes.
• PSCs are persons who directly/indirectly have more than 25% shares or voting rights, or control over the firm.
• Changes have 14 day update times.
• The registers must be kept at registered address or on SAIL.
• Companies can elect to keep details on central register at Companies House rather than their location, unless protection is needed.
• Many companies keep more registers like Registers for Allotments
• ECCTA is introducing company registers.
• In short, companies will no longer be required to keep own registers; instead, the information should be submitted and kept in a register
• The option to keep member details on register will be removed as companies must keep them on their end.
• A series of transitional provisions are in place and must be accounted for

Forming a General Partnership

• No formalities are needed to create a partnership although no documents need to be registered or filled
• Two or more can form a partnership by carrying on a business with the ultimate goal of profit
• Partners must conform to name compliance rules

Partnership rules

• Where under a business name trading disclosures, name, and service names must be displayed
• Document needs to state inspection information

Register with HMRC

• A nominated partner must be chosen for partnership agreement

Set up a Limited Liability Partnership (LLP)

• It is a hybrid organization that is a company and traditional partnership
• A member’s liability is limited but relationship governance needs to be private agreement

Measures to Protect Assets Considerations

• A firm's structure entails separate personhood becoming distinct.
• Members are obscured by the corporate veil when trading.
• Strategies for asset protection need to establish organization structures, depending on creditors.
• An example exists of two limited companies in which one is owned by another

Scenario

• Client incorporates two limited companies where one owns the other.
• The former becomes a holding company and subsidiaries of the organization.
• A chain forms using major assets ringfenced from trade risks.
• Major assets are secured within trading companies and subsidiaries
• Creditors have no rights if the subsidiary is liquidated

Considerations

• A group structure may not be appropriate for smaller organizations as returns are complex
• When it makes mitigates the costs
• An exception exists if there is wrongdoing when breaking the ‘limited capacity

Decision Making Processes

• Shareholders and directors have the following
• What comes next

Role

• Shareholders own the business and Articles that are essentially reserved for important procedures
• The directors manage the business

Power

• Shareholders exercise power by voting, giving members the power through special resolutions.
• This is why Articles are checked as standard

Power dynamic

• Directives' power is mostly identified by decisions with management actions
• Must have powers but not restricted

BM Notices

• MA 9 gives any director to call a BM by the company if the time is set
• Communication has to be efficient in order

Valid Quorum

• Required minimum attendants have to be met
• Unless by default, in the same period 2 members must meet but not on each other’s ends
• Inquorate has number-based directors

Other factors

• Article 14 prevents directors from having interest but being available or giving rising conflict
• A trustee must not count what the interest is
• Must follow the rule

Voting on Decisions

• A BM passes through majority vote but communication may also affect the matter
• This may only be required to convene a GM if the reason is a notice
• Directors may not also be present for vote

Administration

• A common occurrence is to report steps by reporting and finalising
• Directors can also amend
• Once the board is correct with the matter it's their matter

General Board Meetings

• Article restrictions also apply
• Members have to be able to demand GM by procedures

Written Content

• Content must specify time proxy etc to make it valid

New Regulations

• New private companies can set up regulations

What must you be aware of?

• If some Articles prohibit auditors, you need to look at how these decisions are made

Can a Member Force Things?

• Yes the rule applies

General Business

• If a partnership does not involve the business for one it’s not worth it

Director Appointment

• Almost anyone can apply (Article 17) but they must be made before the vote
• Contract over 2 years must be followed with some regularity
• The person must have consent before the vote