There are a couple of basic types of these companies but they all originate from the differences between freehold and leasehold. It is fairly common in the UK for one legal entity to own the ground that a building stands on and then to charge an annual ground rent to the people who own the building. Where flats are concerned it is common for individuals to own the flats within a building while a third party owns and manages the building itself (either on a freehold or leasehold basis). In some cases the people who own and live in the flats within a building may decide that they would prefer to be responsible for the management of the building rather than relying on a third party. There are three basic types of company structure that can help them to do this the first is a “Flat Management Company”.

Flat Management Companies

In reality a “Flat Management Company” is normally a Private Company Limited by Shares. How it works is that the owners of the flats within a building will form a company to buy the freehold (or lease) of the entire building. Each flat owner will have shares in the company to represent their share of the freehold. It will normally be written into the articles of association that if an individual sells their flat they have to sell their shares in the company which owns the freehold along with it. This allows the people who live in the flats within a building to own and manage their own freehold (or leasehold) and any issues which arise from it.

Right to Manage Companies

The second type of these arrangements is a Right to Manage Company. In many blocks of flats the landlord will impose a management fee on an annual basis. This is to cover the general upkeep of the buildings structure and public areas. The Right to Manage introduced in The Commonhold and Leasehold Reform Act 2002 gives the owners of the flats within a building the right to take over the management of the building for themselves. The flat owners would therefore become responsible for repairs and maintenance of the building. Where applicable they may also become responsible for any common heating, lighting or water infrastructure and bills. In order for the flat owners to gain the Right to Manage they have to set up a Private Company Limited by Guarantee using the RTM model articles. They then need to follow a set procedure of making a claim on the landlord.

Commonhold Associations

The third type of company structure is a Commonhold Association. These were introduced in 2002 as part of The Commonhold and Leasehold Reform Act. The Commonhold Association offers an alternative ownership model for new blocks of flats. Under a Commonhold Association the owners of individual flats own the freehold to their flat. They are also automatically made a member of the Commonhold Association which owns the building, the land it stands on and any common areas. It would then be up to the Commonhold Association to manage the building and its common areas. This is similar to a Flat Management Company and a Right to Manage Company but is designed mainly for new flats rather than for people buying the freehold of existing blocks.

The Leasehold Advisory Service offers extensive advice on the different procedures involved in purchasing lease and freeholds. Fundamentally all of these ownership types are standard Private Companies Limited by Shares or Private Limited Companies by Guarantee with specialist articles of association. Once a consensus has been established within a block of flats that some kind of joint ownership is desirable the next step is normally to form the company structure which will buy the freehold or lease. Our legal team can advise you on how to carry out one of these specialist company formations.

Whereas employees are liable to income tax, company owners can pay themselves dividends from their company which are liable to a much lower tax rate. Paying yourself through the dividends of a company also means that individuals can avoid paying National Insurance contributions. If you are running a legitimate company then this is not an issue. However HMRC have been concerned that many people who, like the 2000 civil servants, could be seen as employees were being paid as contractors through companies purely to avoid paying the full amount of tax.

As a result of the widespread abuse of company structures HMRC launched what became known as the IR35 forum with small business owners, tax experts and HMRC collaborating on new rules. The IR35 initiative was launched in 1999 and finally came up with a new points based “Business Entity Test” last week. This test looks at various business activities and assigns points as to the risk that a “company” is really just being used as a tax dodge for an employee. If a company is found to be in the “high risk” category then they could come under full investigation and potentially be lumped with quite a large tax bill.

Despite the collaborative consultation process the new test has been heavily criticised by some members of the IR35 forum who feel that HRMCs criteria are much too strict. Critics of the test say that manly legitimate UK companies would find themselves in the “high risk” category of the IR35 test and would be liable for investigation from HMRC. The new test looks at the following factors:

• Does a company rent or own premises other than an individual’s home?
• Does the company advertise?
• Does the company have a business plan?
• Does the company invoice for its work before getting paid?
• Does the company sometimes not get paid?
• Have the company’s contracts changed in the last year?
• Does the company employ more than one person?
• Could the company send an alternative person to do its normal job?

If the answer to most of these questions is no then a company could find itself at “high risk”. In other words it is likely that HMRC would not see them as a real company but as an employee using the pretence of a company to dodge tax.

As the new IR35 Business Entity Test has only been in existence for a week it is hard to know how HMRC will try to enforce it. However if you are a company whose contracts are largely with one other company, or if you are thinking of forming a company in such a situation it is worth thinking about what kind of points score you would accumulate.

As with most aspects of Company Law in the UK the 2006 Companies Act changed the rules on Company Directors. One of its stipulations is that at least one of the company directors must be a real or ‘natural’ person. This is because of a trend towards companies being founded by other companies, which in turn would be founded by other companies making it virtually impossible to track the people behind them.

As well as one of them being a ‘natural’ person company directors must be over the age of 16. However for practical reasons it is often best not to have directors under the age of 18 as this is the legal majority in the UK and having someone under this age signing contracts on behalf of the company could cause problems.

As long as you are a real person and over the age of 16 the assumption is that anyone (including non-British Citizens) can be a company director in the UK. However there are two major exceptions to this.

The first, and probably best known, is that you cannot be a company director if you are an ‘undischarged bankrupt’. (In other words if bankruptcy proceedings are ongoing against you). It is possible to apply for an exemption from the courts to allow undischarged bankrupts to be a company director but this is fairly rare.

The second reason why you cannot be a company director is if you have been disqualified from being a company director by the courts (again exemptions are possible but rare). People can be disqualified from being a company director for a variety of reasons including fraud, failure to keep proper records and persistently breaching company laws. Disqualifications normally last from 2 to 15 years.

As with the bankruptcy clause, disqualification from being a company director requires specific court action to have been taken against you. So assuming that you are over the age of 16 and no court proceedings have been made against you then you can be a company director in the UK. No other qualifications are required.

Many people ask us about setting up charitable, social interest and non profit companies but none of these things really exists. Instead they are names used for standard company formations which have been adapted for charitable or non profit purposes. One of the main features of UK company law is that an individual company’s Articles of Association determine what it can do and how it can run. If a company is being set up for a specific charitable purpose this can be written into the company’s Articles of Association. Although any type of company structure could be adapted into a charitable, or non profit, organisation most people opt for one of the following two options:

Private Company Limited by Guarantee – This is what most people mean when they talk about Charity Companies but they are also a popular option for community groups and organisations such as sports clubs. The main feature of these types of companies is that their structure is very similar to a normal limited company making them easy to understand and do business with. There are few restrictions on the type of business these companies can undertake making them a very flexible option. The “limited by guarantee” bit is that if the company comes to an end through bankruptcy it is only liable for debts to the amount guaranteed by the members who founded it. As this guarantee amount can be set on foundation it reduces the amount of risk involved. The Charity Commission offer model articles of association for setting up charity companies.

Community Interest Companies – The Community Interest Company (CIC) is not really a type of company. Rather it is a way of adapting standard company structures for community purposes. They must have a set “Community Purpose” and must pass a “Community Interest Test”. In addition they have to report every year on how they are meeting their community obligations. The defining feature of a CIC is the asset lock. This is a way of permanently securing the company’s assets for community use. So, for instance, if the CIC owned a piece of land or a building this asset would be dedicated for community use. The structure of the CIC would place restrictions on selling this asset and any money raised if it was sold would have to go back into the community.

The Charity Commision, Social Enterprise UK and CIC Regulator all offer a wealth of advice and guidance for anyone wanting to set up charitable companies or other non-profit organisations. Alternatively you can get in touch with our legal team who talk you through some of the different options.

If you are really struggling to come up with a company name idea there are now a range of online company name generators to have a play around with.

Company Name Generator – Verdict 2/10

This site has a couple of options. On the home page you can simply hit the generate button and it will give you a random name most of which are pretty meaningless. Clicking on the “Advanced” button gets some more options where you can choose from lists of prefixes and suffixes to make up two word company names. Most of the names it suggests are pretty meaningless but it could give you some idea.

Biz Name Wiz – Verdict 3/10

Biz Name Wiz looks quite promising to start with. It allows you to put in a range of words related to your business then generates a name. I tried putting in “tours, essex, countryside, cycle” for my new imaginary company doing cycle tours of the Essex countryside. The top 2 suggestions I got back were “toursessexcountrysidecycle” and “countrysidecycleessextours”. Neither of which are very inspiring or clever.

Wordlab – Verdict 4/10

A bit like Company Name Generator wordlab generates random names at the push of a button. However unlike Company Name Generator some of these names actually have meaning. Wordlab has a variety of categories of names to choose from making it more likely you will find something useable.

Name Station – Verdict 6/10

Name station requires a login and doesn’t have the easiest navigation in the world but after a bit of digging around there are some decent tools. It is mainly focussed on domain names but has tools which allow you to see related words and alliterations. Where Name Station does particularly well is that it has some human intervention. You can (for a price) conduct public contests to name your business and see some of the unused names from previous businesses that are relevant to your keywords.

Overall Verdict

Most of these tools are based around domain names rather than traditional business names. A lot of the name generators that I haven’t mentioned essentially work in the same way as the ones above, either generating completely random names or simply joining your keywords together. The better ones, like Name Station, do this as well but then offer another level of choices on top. Ultimately none of these names generators are likely to give you the perfect company name but they could well give you some ideas to start with.

In recent year a new option has begun to emerge through crowdfunding. Crowdfunding is like a Dragon’s Den pitch that is open to the public. People with a business idea can put a pitch up on a crowdfunding website describing what their new venture is, how much money they want and what the investors will get in return. Users of the website can then choose to give as much or as little money as they like. If target set by the new company is reached they get their funding. If the target is not reached then the investors get their money back. Unlike Dragon’s Den through, the investor does not normally get a share of the company. This is largely because of investment regulations which place limitations on how businesses can buy and sell their shares. Instead they might get priority access to the new company’s services or limited editions of their products.

Crowdfunding has proved to be popular with Kickstarter, who helped to pioneer the model, having raised $200 million since they launched in April 2009. This total was achieved through 1.8 million people funding 20,000 projects as diverse as an urban farm, an online magazine and numerous films and works of art. One of the most high profile success stories for Kickstarter has been a company called Pebble who went on Kickstarter looking for £100,000 to produce their new high tech watch. They hit their funding goal within 2 hours and ended up raising $7 million.

At the moment many of the crowdfunding platforms are American but Kickstarter and Indiegogo allow projects and investors from around the world to participate. Meanwhile there are a range of UK based crowdfunding platforms in the works with seedrs and crowdfunder being leading examples.

The potential of crowdfunding for business start-ups has been recognised by President Obama who recently signed the Jobs Act. This will allow American start-ups to sell up $1 million of shares through crowdfunding. Some people have raised concerns that this will leave business start-ups and investors open to fraud. As with any business or investment opportunity people will need to be aware of the risks and invest carefully. Crowdfunding may not yet be a mainstream way of raising money for new businesses but if you have an interesting or quirky product it can be an excellent way to get prototypes and other proofs of concept under way.

Not everyone who sells stuff online needs to worry though. To be liable to pay tax on your online earnings you need to be classed by HMRC as ‘trading’. What this boils down to is whether you are actively seeking to make a profit online. HMRC are not interested in you if you are selling a few personal possessions every once in a while. They are interested in people who are buying products in order to sell them on for a profit, or in people who are offering services for a profit. For those who aren’t sure if they can be classed as ‘trading’ HMRC have created this helpful video:

The current HMRC e-marketplaces campaign is intended as a bit of an amnesty. You can declare any earnings from the last six years and get yourself paid up to date. HMRC point out that if you make a full voluntary disclosure they will not normally prosecute you. The threat being that if you do not declare your online earnings by 14^th June HMRC will start to prosecute people, and they can look into your tax affairs for the past 20 years.

If you think you might need to make a disclosure HMRC recommend that you get your business records in order and look for some independent professional advice to help put your case. Why not get in touch with our Legal and Accountancy Services team and get the ball rolling?

There are many things to consider when setting up a website, including choosing domain names and web hosting, but first you need to decide what type of website you want.

Many small businesses get by with simple 5 or 10 page static websites, or 1 page holding sites. The key word here is static. In practical terms what this means is that you pay a web design company to build you a website which has a limited number of pages. You will give them some content (pictures and text) to upload and once you have agreed on a design they will put it all online for you. Normally this is done for a one off fee. For some businesses startups this can be a good option. The problem with static websites is that if you introduce some new products or services into your business, or need to change prices, or want to promote an offer or news story you cannot easily update your site. Typically you will need to go back to your web designers and pay them to change it for you. This could not only prove to be quite expensive if you are making regular changes, but also introduces delays as you will have to wait for the web designers to be available and then double check their work.

Because of the inflexible nature of static websites we are increasingly encouraging our customers to go for CMS websites. We still handle all of the technical aspects of designing and building the website, hosting it and putting it online but we then give customers control of the website content through the CMS.

 CMS stands for Content Management System, in plain English what this means is that we give the customer the ability to add new pages and change the content (pictures and words) on the website themselves. Customers can do this through logging into a simple web page. The level of technical ability needed is the same required in writing an email or creating a Microsoft Word document.

Because customers can use the Content Management System (CMS) to edit their company website themselves it allows them to respond quickly to the needs of their business. So if you decide to offer a new service you can update your company website yourself and have it live on the internet in a couple of minutes. Similarly if you sell out of a key product on a Saturday afternoon you can update the website yourself to let you customers know that your new stock will be arriving on Monday morning.

Updating your website regularly will make it more appealling to customers (and search engines) and stop you from running into problems with out of date information.

If you want to get a good look at how CMS systems work then you can book a demonstration online and have one of our team talk you through it.

There are arguments as to whether the economic crisis has derailed the environmental movement but dramatic moves were made while the matter was still high on the agenda, so start up companies should understand what their legal and ethical responsibilities are.

In this article we will run through some of the green issues that are important to consider when establishing your company.

It Pays to Go Green!

The government in the UK have many commitments to try and reduce the amount of carbon produced in the country by 2020, and if you can prove your green credentials then they may well reward you for it in the form of tax breaks and loans.

The government has produced a website to help businesses find out if their green credentials make them eligible for assistance, so if you are currently flying the environmental flag but not getting your reward, visit the Business Link website .

Not Green? No Contract

If you are one of the lucky few companies that can still bid for public sector contracts, make sure your environmental policies are in check. As part of the same government commitments, many contracts now depend on companies being able to demonstrate that they go about their business in a way that is considerate to the environment.

This will cover everything from insulation and heating to disposal of waste so if you are bidding for government contracts, you may not get past the first stage if your environmental policies are not in check.

Punch “environmental policies contracts” into Google for some good examples of environmental policies from other businesses.

Make The Environment A Part of Your Brand

It can take a lot of effort for a business to establish and maintain a greener way of operating and the importance that many companies place in environmental issues now makes it very appealing to be seen to be green.

Using environmental themes as a part of your brand could well make you very appealing to those companies and individuals who are concerned about ethical matters, so using these themes as a part of your brand image could help to snag you some extra business.

This has even been used successfully in the world of politics as in 2006 the Conservative Party re-branded to reflect its new commitment to the environment.

You can promote your environmentally friendly image by using items such as eco-friendly business gifts but when doing this, just be sure that the company you are buying from are using items that are sourced with environmental concerns in mind.

As brand disasters go, handing out corporate gifts that represent your green aware brand but that cannot be recycled or do not bio-degrade would be up there with the best.

Despite the ongoing economic difficulties, it is still increasingly important for businesses to operate in a way that is sympathetic to the environment. Sometimes it may even benefit your company, so before rolling your eyes at the thought of putting your environmental policy together, investigate how operating in green way could improve your company as well as the planet.

This article is a guest post by Alan Grainger who writes articles for The Promotional Gifts Company. They cover issues surrounding the promotional gifts industry including marketing, advertising and PR.

Guest Blog Disclaimer

Even though it can be frustrating to see businesses not understanding the importance of business interruption insurance it can be even more frustrating to see a well prepared business that had all the business interruption in place still flounder (or even go under) because the insurance company payout was so tight that the business just cannot afford to carry on.

Fire and flood could potentially ruin your business premises and stock, you are going to have staff that are temporarily out of work, you will have contractors to sort – and then on top of that is the insurance claim. It can be emotionally draining and when you find out that the insurance will expect you to deal with your end of the claim yourself – whilst they have a specialist loss adjuster in place to pick the case apart and ‘adjust’ the payout you will receive, it is like a disaster all over again.

You are not going to have the specialist knowledge to take on the big boys, so you should hunt down the services of a firm of loss assessors. Essentially a loss assessor does a similar job to the loss adjuster that has been employed by the insurance company. There is, however, one small difference – the loss assessor works for you. As they work for you they will only have the interests of your business in mind, leaving the playing field completely levelled out.

The key points to remember are:

• That the loss assessor represents your business and no one else, they will be working towards getting you the best possible settlement following a disaster like fir or flood.
• Loss assessors have areas of expertise and the appropriate one will be assigned to your case – this helps ensure maximum payouts.
• They deal with all the paperwork for you; they liaise with insurance company for you. Essentially the loss assessor will take all of the responsibility of the claim away from you and leave you to deal with the more personal aspects of the disaster.

Leaving business interruption claims solely in the hands of the insurance company is never a good idea – you owe it to your business to make the most of a bad situation. You will have spent years of blood, sweat and tears building up the company to get it where is and to see it close through no fault of your own can be equally devastating.

Wayne Barker writes for Harris Balcombe – the UK’s most prestigious claims recovery and claims management company. With a pedigree stretching back over 100 years you can be sure that their loss assessors will help your business be one of the ones that survives following a major disaster. Harris Balcombe specialise in business interruption and fire insurance claims.

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