Business Start-up Agreement

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15 essential questions for a Business Start-up Agreement  

By Neil Butler , Solicitor, Thurles

You and some colleagues have come up with a great idea for a Business Start-up, right?

You’ve spent hours planning and refining it and are almost ready  to launch, yes?

Have you thought about a Business Start-up Agreement?

Consider these questions:-

  1. Is it to be a Company? Understand why a Company might suit – look at my note here for further info
  2. Who gets what percentage of the company or business shares?
  3. Is the share ownership  based on money introduced?
  4. What assets or cash does each Subscriber contribute or invest?
  5. Does the number of shares held by people increase  based on continued participation in the business over a stated period of time?
  6. What are the roles and responsibilities of the each of you and your colleagues as Subscribers?
  7. If one Subscriber leaves or dies, does the Company or the other Subscribers have the right to buy back that person’s shares? At what price?
  8. How much time commitment to the business is expected of each Subscriber?
  9. What roles are filled by whom?
  10. What salaries (if any), are the people entitled to?
  11. How are decisions of the business to be made? (majority vote, unanimous vote, or certain decisions solely in the hands of one person doing the day to day operation?)
  12. Under what circumstances can a Subscriber be removed as an employee of the business? (usually, this would be a Board decision)
  13. How will a sale of the business be decided, should such an opportunity arise?
  14. What happens if one Subscriber is’nt doing what was promised under the Shareholder’s agreement? How is it resolved?
  15. Are there to be Bank Borrowings – what security is to be provided and what personal risk attaches for each Subscriber?


Don’t leave these things on the long finger – ask for our help today and let’s clear your thinking!

 

Successful Business Start-up

10 Tips for Successful Business Start-up

Neil J. Butler, Solicitor, Thurles

business start up

  1. Does everyone involved understand the Agreement?

If you are the only person involved in the Project , then skip this.

BUT if you want a successful business start-up with one or more colleagues, then everyone must agree and accept  the terms of the Project.

Some very important questions need to be asked and answered to arrive at clear Terms.

Have a look here  at my suggestions for those questions.

Those terms should be written into a document – let’s call it a Subscribers Agreement, where the Subscribers are you  and your colleagues who want to go into business together.

In Company Law it is also referred to as a Shareholders Agreement.

Any group of people who are serious about having a Successful Business Start-up, must start with this.

  1. Should we form a Company for our new Business Start-up?

Subscribers often start a business without consulting a Solicitor and, as a result, often incur higher taxes and become subject to significant liabilities that could have been avoided if the business was started as a limited liability company.

The Companies Registration Office in Dublin (the CRO)  oversees the formation and ongoing filing of records by  Irish Companies. The Office of the Director of Corporate Enforcement has a separate role to play –  enforcing compliance with the Companies Acts.

The new Companies Act 2014 is likely to be commenced in June 2015 – it brings very significant changes to the duties, obligations  and liabilities of Company Officers and Promoters/ Subscribers. It is essential  that anyone setting up a Company or indeed currently involved in one, have a clear understanding  of those changes. We at Neil J. Butler & Co. can help you with this, so get in touch !

A Company is formed by filing Statutory documents with the CRO. The costs for forming and operating a Company are often greater than for partnerships and sole traders due to legal, tax, and accounting issues.

However, a Company generally offers significant advantages for Subscribers (and subsequent investors) including, significant liability protection from business creditors, tax savings through deductions and corporate reliefs and depending on the sector, greater ease in raising capital.It can also allow an easier means of handing on the business to the next generation.

Of course Sole Traders and Partnerships can later convert to a Company but costs in doing so can be significant.

For more on Sole Traders, see my Note here.

For more on Partnerships , see my Note here.

There are, however, significant tax implications when an owner might want to draw some wealth out of the Company, if the Company has traded successfully for a time.

In the same way as good ongoing legal advice is essential to any business, so too is quality tax and accounting advice.

  1. T & C’s – beloved of Lawyers but essential for Successful Business Start-up

Whether in retail, manufacturing or Services, every business  that provides something to a customer for payment should have a standard  set of Terms and Conditions , otherwise called a Contract. It si no different  for a business start-up.

“Standard”  may be misleading – it should be the terms that your business works to, for each item of business it transacts. Those terms will not be the same  for another type of business  or even  for the same type of business carried on by a competitor. But they are standard for you.

You can help yourself here– get sample contracts of what other people do in your industry. Use it as a place to start and then consider what specific things you want to cover.

Examples are :-

  • clearly spelled out pricing,
  • when payment is due,
  • what penalties or interest is owed if payment isn’t made.
  • limit or minimize any representations and warranties about the product or service
  • include limitations on your liability if the product or service doesn’t meet expectations.
  • Include a “force majeure” clause relieving you from breach if unforeseen events occur
  • state how disputes will be resolved – arbitration and/or mediation
  • state the  location of the Courts that are to have jurisdiction over any disputes- presumably those in Ireland

Make sure you have an experienced Business Law Solicitor to review and finalise it – it must comply with Irish and European Law.

We at Neil J. Butler & Co. Solicitors can help…..

  1. Answer the hard questions NOW

What happens when one of the Subscribers/ partners wants to exit from the Business Start-up?

What do they get, and under what terms?

What happens if a Subscriber/ partner dies? If their ownership interest goes to a spouse, does the spouse have a say in management decisions?

I know these questions can be awkward but it’s much easier to address these up front than it is when you’re ( hopefully) making lots of money or worse, trying to find a way to survive. Get it on paper in the beginning.

[The essential Questions to be asked are in my Note here]

  1. Sort the Backoffice – organise your records

Business breeds paper and records. It’s expensive to manage  and to store. Decide to keep as much as possible in digital format. Use  Web services like Google Apps.

Every Business Start-up needs to put effort into this aspect – once done it becomes much easier.

Get all the important documents in one place early –

  • Terms and Conditions; premises lease;
  • Tax files and templates  for Reports;
  • Policies for Internet use by employees , email use, use of Company phones; claiming expenses; sick leave ;
  • disciplinary codes and procedures ;
  • employment contracts,
  • Finance and Loan Offer letters,
  • Safety Statements, Risk Assessments etc.

Taking the time to get your paperwork in order now, at the start,  will help your efficiencies as you grow, will make it easier to integrate new staff, make you more attractive to Lenders and possible buyers and will also help defend you from legal attack, should it happen. It is key to having a Successful Business Start-up!

  1. Trademarks Traps

It’d be pretty awful if, after a few years of really hard work, just when your business was doing really well, you get sued by someone who claims you are using a form of their name or product name.

You might be forced to change the name of your key product or even the entire business – and to pay compensation!

Investigate , research , claim your own copyright in a logo/ brand; apply for your own trademark, if applicable. Give your Business Start-up every chance to succeed !

Get Legal Advice early !

   7.  Get a Proper e-mail address

A detail like your new business operating under a free email address from Hotmail, Yahoo, Sky etc. can damage the credibility of that business HUGELY. It is not businesslike!

Interestingly, Google’s Gmail is considered acceptable these days, given the huge investment they have made to encourage business use through it’s Apps for Business; Google Adwords, Communities and Google +.

If you have a website (you do, don’t you?), it’s easy to set up an email address with that domain, and doing so will bring a much needed level of credibility to your business.

Otherwise it is easy and inexpensive to register ownership of your own web name or Domain name.

  1. Use a quality email signature.

List your name, title and contact information in your email signature.

Your company logo, if used properly, can be okay too.

Try a picture of your actual signature, to personalise it.

Don’t be tempted to use HUGE fonts / multiple colours/ silly pics/ emoticons – not professional!

  1. A good website.

Anyone you’re hoping to do business with is going to look for your website, and what they see is a reflection of you and your business.This is especially true when you are promoting a Business Start-up.

With services like WordPress and thousands of quality templates available at low or no cost, there really is no reason why you should not have a good web presence.

   10. Have you thought about Intellectual Property Rights?

There is an expanding area of Law dealing with the protection of original ideas, thoughts creations and expression.

Even as you and your colleagues and friends are chatting about your new idea for a business, you are refining it and developing it. But who owns the idea? Who owns the design of the product  that comes from the idea? Who owns  the brand name you choose; the logo you adopt or design?

How do you get protection  for that idea, that design, that product?

How do you ensure  that your Business Start-up has ownership  and control?

Once you form a business entity, that Company  or Partnership doesn’t own that IP unless you get it into the entity. You get it in by licensing it or by completing an Assignment agreement. Anyone with whom you collaborated,or who contributed to the idea, design etc. needs to get assigned into this entity, to ensure there is no doubt later nor any obstacle to future sales and profits.

Again, expert legal advice will pay for itself in the protection  that can be arranged.

 

Partnerships

Partnerships – the essentials for Business Start-ups

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By Neil Butler, Solicitor , Thurles

A Partnership is where two or more people come together in business , with the common aim of making a profit.

It does not  need to have a document in writing setting out the terms agreed between everyone – the Partnership Act governs things and even implies certain formal Terms , unless they are excluded by a written document signed by the Parties.

Not all of these implied Terms might suit your arrangement and can even cause trouble for the business.

So, it is very important that you and your partners get legal advice at an early stage.

Such advice will likely result in the completion of a formal Partnership Agreement. It will address many issues – very similar in fact  to those for a new Company.

Examples of the questions to be answered are :

  • Who gets what percentage of the company or business shares?
  • Is the share ownership  based on money introduced?
  • What assets or cash does each Subscriber contribute or invest?
  • Does the number of shares held by people increase  based on continued participation in the business over a stated period of time?
  • What are the roles and responsibilities of the each of you and your colleagues as Subscribers?
  • If one Subscriber leaves or dies, does the Company or the other Subscribers have the right to buy back that person’s shares? At what price?


One of the key elements of a Partnership is  that ALL partners are jointly and severally liable for the acts of the others. For example, the business has a bank loan of €10,000 ; each Partner is liable  for the entire 10k and not just a share of it.

The same applies to all Contracts entered into by the Partnership.

So it is very important  that there are clear rules agreed about who in fact can bind the business to expense; to delivery dates; to priority in delivery etc.

Unlike with a Company , liability in a Partnership is unlimited as it is with a Sole Trader.

 

 

Sole Trader – the essentials for Business Start-ups

Sole Trader – the essentials for Business Start-ups

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 by Neil Butler , Solicitor, Thurles

Not every business is suited to operation within a Company.

It might be judged too costly to set up a Company ; you might want to prove the business can survive first; or you might be simply going into business for yourself in a small way with the least complication.

A Sole Trader is just that – somebody trading in business as a sole owner.

It does not mean that you cannot have employees. You can, but the ownership is held only by you personally.

You employ people to do work , pay them a wage but they have no share in the business.

A Sole Trader is personally responsible  for all decisions; for all purchases and sales; for all tax liabilities; for all obligations under the Consumer Codes;

for compliance with the laws  that affect the particular business.

But a Sole Trader is also entitled to all the profits and does not have to ask anyone’s permission when making any decision.

It can be a very fulfilling place to be when things go well but a lonely place if challenges become tough.

Just because operating as a Sole Trader seems simpler does not mean  that you should not ensure you protect yourself as best you can.

Get good legal advice

  • about Employment Law;
  • about Contract Terms in your business;
  • about Franchise or Distribution Agreements ;
  • about the types of insurance you should take out;
  • about the Policies you should have in place in the workplace;
  • about Privacy Law as it affects your business and
  • about methods of financing.

Check out our other Posts on Starting your own Business on www.njbutler.ie

Employment Contract – must it be in writing?

 Employment Contract – must it be in writing?

Generally , an employee is given a written Employment Contract , even if it is no more  than a letter of welcome. Indeed the Terms of Employment (Information) Act 1994 requires an Employer to give a written statement of the Employment terms ( an Employment Contract) within 2 months of the commencement date.

However, an Employment Contract can also be an oral one.  In either case , the Law inserts certain types of clauses into the Contract , even if the Parties never even thought of them. These are called IMPLIED TERMS

Such IMPLIED clauses have been relied on by the Courts to allow them decide a dispute between an Employer and Employee, where  there is no clear agreement between them as to what was in  the Employment Contract.

What kinds of Terms can be implied in the Employment Contract?

  1. Duty of Care – the Employer must take reasonable care for the Employees’s safety which means having a safe place of work ; safe equipment; safe systems of work and competent co-employees.
  2. Duty to maintain trust  and confidence- “the employer’s right to manage has to be balanced with the employee’s right not to be unfairly exploited by the employer” ( House of Lords in Malik v Bank of Credit  and Commerce Intl SA- 1997).
  3. Duty of Good Faith  and Loyalty – an employee should not reveal confidential information obtained during the employment contract unless authorised to do so. This includes trade secrets, client lists, prices, financial information, marketing methods or plans and future development plans.
  4. Mutual Duty of respect – both employer and employee should act in a way  that does not bring either in undeserved disrepute
  5. Duty to provide a Reference – UK Case law suggests  that in certain circumstances, an employee can require an employer to give a reference, usually at the request of a prospective employer. While there is yet no clear Irish decision on the topic, it is likely that the argument would find favour in our system. It is also clear  that an employer owes a duty not to give a reference  that is misleading or inaccurate.
  6. Obligations that are inserted because they are in our Law already – these include
    • minimum Notice periods
    • equality protections
    • the right not to be unfairly dismissed
    • the right to redundancy payments
    • working time rights  including the right to rest breaks, to holidays, maximum weekly hours
    • Protective Leave – maternity  rights, parental leave, Carer’s Leave
    • Jury Leave
    • The right to payment of wages
    • Rights  for fixed-term or part-time workers
    • Health and Safety rights and obligations, inserted  by many Regulations on the subject especially in certain more dangerous occupations
  7. Obligations arising under Codes of Practice – these Codes are not set out in legislation but are what Irish Courts  and Tribunals consider to be best practice within an Employment Contract. One of the most important is the Code of Practice on Grievance and Disciplinary Procedures ( Declaration) Order, 2000. It sets out the principles of fair procedures for employers and employees generally including :
    • that employee grievances are fairly examined and processed
    • that details of any allegations or complaints are put to the employees concerned
    • that such employee is given a chance to respond fully to any allegations/complaints
    • that such employee is given a chance to be represented during the process
    • that the employee has a right to fair and impartial assessment of the issues concerned, taking into account any representations made by the employee, plus any other relevant and appropriate evidence and circumstances

  There are other Codes of Practice dealing with issues such as Bullying in the Workplace, Health  and                Safety matters, Equality problems or issues and suchlike.

8.   Terms implied to the Employment Contract by Custom or Practice – any such term must be so     well known and generally accepted,  that if it is not in the written Contract, it can be taken to be one of the      terms between employer  and  employee. So, not every custom can or should be implied.

    Examples of these are rights to sick pay, the right of an employer to suspend and employee and the right        in  some employments to ex-gratia payments on termination, especially on redundancy.

     For such a term to become part of the Contract, it must reflect a clear, recurring, uninterrupted practice        that has been the norm for a number of years.

9.  Collective Agreements – often, in the manufacturing or other labour-intensive industries, unions               negotiate certain agreements  that both employers  and workers then agree should form part of their               Employment Contract. In the past one of the largest such has been the National Wage Agreements                   negotiated by  Government with certain Sectors.

10. Terms implied by the Constitution – certain rights are implied to the  Employment Contract under          the Constitution such as the  right to earn a living and the right to associate. The most important is  the          right  to Natural Justice which  has been taken to mean the right to fair procedure.

This means  that all aspects of disciplinary proceedings, up to and including dismissal, must be very carefully handled to ensure there is no breach of the employee’s rights here. It is a powerful tool and one       the Courts  and Tribunals are very prepared to use.

It is clear  that the Courts have not been slow to expand  the range  and detail of the rights that are seen to accrue to both sides in the employment relationship and to insert them into the Employment Contract, whether that is a written document or not.

For both Employers  and Employees , it is vital to understand  the issues and obligations in this area- early  and expert legal advice is worth the investment.

CONTACT me today – use our Free Enquiry Form or call on 0504-24173 ; email neil@njbutler.ie

“By Neil Butler”

Succession Plan for your Business

You need a Succession Plan  for Your Business – use our Checklist!

You have put huge effort and money into your Business, right?

You need it to continue to provide support to you and your family, right?

What happens if something unforeseen happens to you ?

Are you ready – is your business ready – if you decide to sell it ; to emigrate; to take up another challenge ?

Early planning  can really help you achieve the best return on your investment in the business. Have a look at the Check-list set out below and , in this New Year, promise yourself to start implementing it.

Any consideration of a Succession Plan for your Business should involve a chat with your Solicitor to review the Business Structure and to plan your personal affairs by making a Will and an Enduring Power of Attorney.

 Checklist for Succession Plan for Your Business

  • Establish a process
  • Start planning early
  • Carry out a comprehensive CSA (current situation analysis)
  • Do you have a plan? – a business plan and a personal plan
  • Know and understand your plan – ensure the objectives are SMART.

Specific – target a specific area for improvement

Measurable- quantify or suggest an indicator of progress

Assignable – specify who will do it

Realistic – state what results can be realistically achieved with available resources

Time-related – specify when the results can be achieved

  • Analyse the roles, management functions and areas of responsibility
  • Give serious contemplation to your exit (planned and unplanned)
  • What would your exit (planned and unplanned) mean to the business’s ability to trade?
  • Think of a transition timeframe for you
  • Your financial security – what would give you peace of mind
  • Is the business profitable? – what measurements do you use?
  • What do you require to live comfortably?
  • Plan for yourself – know your worth, have a Will
  • Contact your Solicitor to review the Business Structure and to plan your personal affairs by making a Will and an Enduring Power of Attorney
  • Encourage inter-generational discussion
  • Involve the family and others in your thinking
  • Take advantage of outside help/advice
  • Set a timeframe to achieve the business objective (this may differ from your personal transition timeframe)
  • Start the grooming process (of the business and family) well in advance
  • Be vigilant, be aware
  • Create a good physical environment, the ordering and maintenance of your physical space sets the scene for an uncluttered and well planned change process

CONTACT me today – use our Free Enquiry Form or call on 0504-24173 ; email neil@njbutler.ie

“By Neil Butler”

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