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All at sea – incorporation the easy way

As Michael Hawthorne’s business grew, forming a company became a top priority. He has offered a boat-building, storage, repair and maintenance service for more than 20 years, but work on the building side, particularly on yacht interiors, was increasing.

He regularly makes and maintains boats for language schools whose students are learning to sail. He has also begun to offer other services, such as providing embroidered clothing for sailing groups.

‘Building and selling boats has involved serious outlays for equipment, and I needed to form a company to structure the costs,’ says Michael, who runs his business from Bawdsey Quay on the Suffolk coast. ‘It reached the point where the business needed to be a serious set-up, and to be recognised as a company.’

After meetings with his business adviser and directors of the language schools with which he is in partnership, Michael looked on the Internet for help in forming his company quickly and efficiently. He focused on Duport.

Insight # 1: ‘I liked Duport’s portfolio and was impressed with the documentation, which was very professional. They offered a wealth of information without any need for me to commit myself to anything, and there was no hard sell – nothing.’

‘The information told me I could easily set up a company and website in half an hour. There were many useful recommendations and advice on matters such as tax and VAT. And there was no need for any direct contact.

‘I carried out initial investigations via email and then spoke to Derrick Phillips at Duport, who asked what he could do for me.

Insight # 2: ‘He took me through the nitty-gritty of company formation and setting up a website, dealing with emails and so on. He also sent me a booklet that outlined very clearly how to set up a company and spelt out the dos and don’ts. I found that exceptionally useful.’

Duport set up Bawdsey Boat Company Ltd for Michael, registering directors and a secretary, and offered him a company website. ‘A lot of leads come from my website. It advertises the many services I offer and it gives my business visibility,’ Michael says.

Insight # 3: ‘Duport let me decide on the design for my homepage, and I liaised with their designer who was helpful in telling me what was possible and what wasn’t.’

‘For all Duport’s services I paid less than £200. I didn’t pay extra for a site with many pages, but I may well ask for that later on. ‘

Insight # 4: ‘I know that I can go back to Duport and ask for more, which is a good feeling. It’s not as if the job is done and communication comes to an end!’

Michael now sees a bright future for his business. He has been impressed that Duport could handle everything ‘in one hit’, making life easy for him. ‘I liked the site and the company’s documentation. They have been helpful and the fees are very good value,’ he says.

Contact details: Bawdsey Boat Company Ltd, Tel: 01394 412103. http://www.bawdseyboatcompany.co.uk;
email enquiries@bawdseyboatcompany.co.uk

If you would like information on setting up a company or a website for your business, click here or contact Derrick Phillips on 0117 330 8910.

The responsibilities of company directors

Along with the impressive-sounding title of ‘company director’ go some hefty responsibilities. You must carry these out by law, so it’s vital to know what you should and should not do, otherwise you risk prosecution, even imprisonment.
The basics
You do not have to be called a director to be covered by the legal rules on directorship. Often in a small company there may be no formal agreement as to your title, but if you attend and vote at a board meeting, even if it is on a director’s behalf, the law regards you as a director of the company. It helps to avoid misunderstandings if people have formally agreed titles.

As company director you are expected to do your reasonable best for that company.

You also owe your company ‘fiduciary’ duties, so you must always act honestly and with the best interests of the company at heart.

If you have a specific professional qualification, you are expected to have higher standards when you are employed in that area than someone who is not qualified. For example, if you qualified as an accountant you would be expected to have a better understanding of the company’s finances than a personnel director.

You can hold directorships of more than one company.
Key responsibilities
It is the directors’ responsibility to prepare the company accounts. You might delegate this to a firm of accountants or bring in a part-time accountant to do the job. Copies of the accounts must be submitted to the Registrar of Companies.

You must not borrow from the company in excess of strict statutory limits. Directors can, and often do, lend money to their companies - this is quite legal.

You must keep up to date with the law as it affects your own business. This includes current Health & Safety at Work legislation.

As an officer of the company, you are deemed to have authority to act on the company’s behalf.
Tread carefully
Directors have to be especially careful not to take advantage of their knowledge and position of trust.

• You must have shareholders’ permission before you or anyone connected with you can acquire a substantial company asset.

• If you profit from your position as director - even if the company doesn’t suffer at all, and even if the board has previously rejected the course of action you then take on your own account - a court can order you to pass on any profits you make to the company.

• Although you can and should be insured against liability for debts or ‘wrongful trading’, you can still be found personally negligent when things go wrong. Check the exceptions to your insurance policy. Generally, however, if a court is satisfied that a director has acted honestly and reasonably, it will lift any personal liabilities.
Insider’s tips
If you act prematurely in advance of becoming a director of a company, you may be personally liable for any deals you enter into.

The directors often guarantee a company’s overdraft. If you have to wind up your company, be careful to pay off the creditors before or at least in parallel with any bank loads or overdraft facilities so that you aren’t seen to favour your own interests. Take independent advice before signing any such guarantee.

Prosecution can result if you even suspect that your company is in financial difficulties and you go on trading. This is known as ‘wrongful trading’. If, on the other hand, you do all you can to minimise the company’s losses, the likelihood is that the courts will clear you of liability.

The correct course of action should be to alert the other directors and try to bring about a recovery, if necessary by calling in outside help. Only resign your position as a last resort when you have tried all these reasonable means to avoid liquidation.
Second chance
You are not automatically barred from being a director of another company because one you used to work for went into liquidation. If, however, you set up another business under the same or a very similar name, you run the risk that you can be held personally liable for its debts, even you are a limited company. You may be barred from being a director or controlling a company if you are prosecuted and struck off.

Get your firm ready for venture finance

Firms seeking venture finance now have the chance to learn about the process through a special workshop.

R4Finance provides small business with the knowledge and expertise to prepare themselves for the business of raising private equity finance.

Upon completion of the course, companies will have the opportunity to have their proposition and plans reviewed in depth by a number of the leading Business Angel groups in the country.

The R4Finance programme provides a distance-learning module, two-day residential workshop (including an opportunity to present to an investment panel), a mentoring package providing three days’ expert advice across a wide spectrum of management disciplines, and a final stage where the business plans are reviewed by all the investment partners.

The programme is being launched in June and is managed by VisionMatch Ltd, a Surrey-based independent business advisory company.

For more information and applications for the course on the R4Finance programme contact Richard D’Silva at VisionMatch on 01428 643022, or email rdsilva@visionmatch.fsnet.co.uk

Credit scam warning

Traders are being warned of a new scam being targeted at firms offering credit facilities.

The Office of Fair Trading says that businesses are being contacted by people purporting to be from the OFT, producing a book listing trustworthy credit providers. Traders are asked for a £199 fee to be included in the book.

However, the OFT does not approve or recommend individual companies or produce lists of ‘trustworthy’ traders.

Under the OFT’s new Consumer Codes Approval Scheme, only industry bodies and trade associations can gain OFT approval for their codes of practice, enabling them to carry the OFT ‘Approved code’ logo.

Penny Boys, OFT Executive Director, said: ‘The OFT does not endorse individual businesses, and traders should beware of unsolicited callers claiming to be producing approved lists.

‘Traders that want to show that they have higher standards than the law requires should join a trade body that is submitting a code for OFT approval.’

Firms miss out on tax savings

Business owners are missing out on tax savings because they are unaware of complex Treasury rules.

That is the claim of accountancy software company IRIS, which says the government should do more to highlight cost-saving measures.

These include:
• Cash incentives for submitting PAYE details to the Inland Revenue electronically in advance of the legal compliance date;

• Legislation that allows firms owed money to claim up to £100 in debt recovery costs for each overdue bill, on top of claiming interest on the amount owed;

• Priority treatment of personal tax submissions submitted electronically.

‘Unless small businesses spend hours every day surfing the Web, it’s unlikely they will be aware of how to actually take advantage of these regulations,’ said a spokesman.

Minimum wage set to rocket

Government plans to raise the National Minimum Wage by almost 16% to £4.85 in October next year will spell danger for Britain’s struggling small business sector.

That’s the stark warning from Bibby Financial Services, the UK’s leading independent business finance providers.

From October this year, the minimum wage for workers aged 22 or over will rise from £4.20 an hour to £4.50.

Workers aged between 18 and 21 will see their pay packet rise from £3.60 an hour to £3.80.

But the government plans to further increase the minimum wage in October 2004 to £4.85 for workers aged 22 or over and to £4.10 for employees aged between 18 and 21.

A recent survey by Bibby Financial Services found that according to 60% of small business owners and managers, compliance with minimum wage regulations to date has already cost them up to £10,000 each.