What is the difference between sole trader status and partnership?

A sole trader enjoys no distinct status between themselves as an individual and in their trading capacity.  In Scotland partnerships are deemed legally distinct from their individual partners.

What is a limited liability partnership?

So called “LLPs” are, unlike ordinary partnerships, able to restrict liability of individual members/partners for business debts and liabilities.  To be valid a limited liability partnership must be set up in accordance with strict formation rules and registered with Companies House. 

When should a business incorporate as a limited company?

There is no hard and fast need to incorporate a limited company but as businesses grow it is often felt preferable to incorporate. A Solicitor can advise circumstances where incorporation may be considered.

What is Companies House?

This is a cover-all phrase used to describe various offices through the UK where the Register of Companies has a presence.

For a partnership to exist does there need to be a written Partnership Agreement?

No, a partnership can exist "at will" and without any formal Partnership Agreement being in place.  It is, however, almost always better that a partnership should have even a basic Partnership Agreement in place. 

What is a trading name?

A trading name is a name distinct from that of an individual, partnership or other entity carrying out the trading activity. 

I want to change the name of my business.  How do I do this?

For a sole trader it is very straightforward provided nobody else is already using the name.  For partnerships and limited companies it is more complicated and if a limited company wants to change its registered name there are particular formalities involved. 

I want to relocate my business.  Is there anybody I will need to tell?

You should always advise HM Revenue & Customs, your bank and any significant suppliers and contractors.  

I want a set of standard business terms for my business.  How do I prepare these?

Some trade organisations provide standard business terms and conditions.  Other businesses prefer to have their own “bespoke” terms and conditions.  A Solicitor can advise on what may be best for a particular business.

I am wanting to take on a new employee.  Do I have to offer them a Contract of Employment?

All employees have the right to a written statement of their terms and conditions of employment and which is broadly equivalent to a Contract of Employment. It is generally better both for an employee and employer to have the certainty of something set out in writing. 

Where can I check what the current minimum wage is?

The rate fixed by the National Minimum Wage Act 1998 is generally reviewed annually.  Information is available on the HM Revenue & Customs website www.hmrc.gov.uk.

Is there any restriction on the number of hours an employee can work?

In the UK generally there is a restriction under legislation to a working week of 48 hours.  It is possible in some circumstances for an employer and employee to “contract out” of this restriction.  Legal advice should be taken on the paperwork necessary to make such an arrangement watertight. 

I may need to make an employee redundant.  How can I calculate their redundancy entitlement?

Redundancy entitlement varies according to an employee’s age and their continuous service at the time of redundancy.  The rules are fairly complex and legal advice can be valuable in helping to ensure payments are made accurately.

What maternity rights are employees entitled to?

There has been a considerable increase in the range of maternity and parental support rights available to parents in recent years.  There is now scope for parents in some circumstances to exchange entitlement.  This is a highly complex area and where employers in particular may wish to seek legal advice when difficulties arise.

Is there a compulsory age for retirement?

The UK’s rules for providing for a compulsory retirement age of 65 have now been abolished.  Retirement is now a matter for negotiation and agreement as between employer and employee. 

I have been told that a company owing me money has gone into liquidation.  What does this mean?  Will I be able to get my money back?

Liquidation is a process which takes place when a company has become insolvent (unable to pay its debts) and cannot trade its way out of difficulty.  The prospect of recovering money due in a liquidation situation varies from case to case.  Sometimes a creditor will receive back a dividend of so many pence in the pound for what they were due and in other cases, unfortunately, creditors will receive nothing.

Trading in a partnership how can I protect my personal assets from business losses? 

The most effective means is to use limited liability partnership structure.  In most cases, however, individual partners bear unlimited liability for their business debts.

I am a sole trader and want to plan for my retirement.  What is the best way to plan for succession to my business?

Must will depend on the nature of the business and whether there is some succession structure already in place.  Generally the longer one prepares for succession the more likely a successful outcome can be received.

I want to work from home.  Will I need to get planning consent?

This may not be necessary for a fairly low level of trading.  If, however, a significant level of trade will take place then a change of use consent may be required.  Certain types of trading activity are absolutely prohibited from residential property.

What is corporation tax?

This is the tax levied by HM Revenue & Customs on company profits.

How are sole traders and partnerships taxed?

Sole traders are taxed according to their personal tax code and on all business profits as and when arising.  Partnerships are not taxed separately and generally the partners in a business are liable for UK income tax on any share of profits attributed to them.

When must a business register for VAT?

A business may require to register for VAT if it generates sales of in excess of £83,000 over a twelve month period.  The threshold is reviewed by HMRC from time to time.  Businesses trading under this threshold can apply for voluntary registration. 

I want to sell alcohol.  Do I need to obtain a licence?

In terms of the Licensing (Scotland) Act 2005 virtually all activities involving the sale (or indeed supply) of alcohol now require to be licensed and with only very limited exceptions. 

I have been told that I need a street trading permit from my local council.  What does this mean?

A range of activities such as food vans, mobile shops and farmers markets may require to obtain a Street Traders’ Licence.  Different local authorities have different requirements in this area and it is always worth checking with the relevant local Council before undertaking any activity.  There are significant penalties for trading without a permit.

Rob Learmonth
Rob Learmonth
David Fairnie
David Fairnie
Catherine Smith
Catherine Smith