SGS 1-8
BUSINESS LAW
AND PRACTICE
1
, SGS 1-8
SETTING UP IN BUSINESS
FIRST STEPS Must cover the following matters with new clients:
SETTING UP
A BUSINESS 1. Identity check
2. Conflict of interest check
3. Money Laundering check, report this to the MLR officer if something is
suspicious.
4. Send out Client Care letter – including fees, complaints procedure,
matter’s supervisor, scope of the work
5. Open a matter
CHOICE OF When the client is choosing business media, consider the below: (1) Sole Trader
BUSINESS (2) Partnership (3) Limited Liability Partnership (4) Company Limited by
MEDIA shares.
SOLE TRADER
• Number of persons needed for set up: 1 person, cannot form
sole trader business for less/more than 1.
• Control and management: Sole trader have complete control
over the running of the business. This gives sole traders
flexibility but high pressure if working without support.
• Liability: Not limited – unlimited personal liability.
• Expenses when setting up: No formalities so no setting up
costs.
• On-going expenses after the business is set up: None
necessary, although usually accountants will be involved in
keeping accounts.
• Methods of financing: No quick options. Sole trader can
borrow from a bank but cannot create floating charges (BUT
should have an appropriate asset(s) to create a security for
bank loan), cannot raise finance by share issue.
• Profits: All profits go to the owner.
• Tax: Owner pays tax on business profits as an individual
(income tax + capital gains tax)
• Regulation: None
• Publicity: Fewer requirements, easy to maintain privacy
• May trade immediately? Yes
2
,SGS 1-8
PARTNERSHIP
s.1(1) Partnership Act 1890 – ‘Partnership is a person’s carrying
business with a view of profit’. A partnership may be formed
irrespective of contrary intention.
No separate legal identity – a partnership is unable to own property
or enter into contracts. Instead, it is the individual partners who
will sue, own property jointly and enter contracts jointly. If
partnership goes insolvent, creditors can enforce debt against the
partners personally.
• Number of persons needed for set up: Min 2 persons
• Expenses when setting up: None, although it is beneficial to
have a Partnership Agreement drawn up by the lawyers (this
may be expensive)
• On-going expenses after the business is set up: None
necessary, although must pay for accountants.
• Management structure of the business: In accordance with
the Partnership Agreement, however if no agreement, the
default provisions in the PA 1980 step in.
• Method of financing: Partners can borrow but cannot create
a floating charge. In addition, they also cannot raise finance
by issuing shares.
• Liability: Unlimited /joint and several– Partners have
unlimited personal liability.
• Legislation: PA 1890
• Publicity: Fewer requirements than for other options, easier
to maintain privacy. No disclosure required.
• May trade immediately? Yes
3
, SGS 1-8
LIMITED LIABILITY PARTNERSHIP (LLP)
An LLP is a hybrid as it has flexibility of a partnership with the added
advantage of limited liability for its members – Common for Law
firms.
An LLP has a separate legal entity from its members. But for tax
purposes, it is treated as partnership and the members will be
taxed as partners, each being liable to pay tax on his share of the
income of the LLP.
• Number of persons needed for set up: 2 persons min
• Expenses when setting up: Low costs, but must pay legal fees
for Partnership Agreement.
Requirements:
o Registration fee + incorporation document
o Legal fees for setting up Partnership Agreement
o Printing of LLP stationery
• On-going expenses after the business is set up:
o 2008 Regs Accounts must be prepared by accountants
annually. LLPs that do not qualify as ‘small’ must file
audited accounts.
o SBEEA 2015 file a confirmation statement min once a
year, higher costs due to regulation and disclosure rules.
• Management structure of the business: Apart from a few
default provisions, the LLPA and regulations leave matters of
governance to a partnership agreement (if one exists). There is
therefore nothing about the calling of (or procedures at)
meetings. Pros of an LLP (along with limited liability) of the
few formalities for management procedure.
• Method of financing: LLP can borrow and create floating
charges, if it is underwritten by a member’s personal
guarantee, limited liability is removed. Cannot raise finance by
issuing shares.
• Liability: Different types of partners – general partners
(unlimited liability) + limited partners.
• Legislation:
1. LLPs Act 2000
2. LLPs Regulation 2001 – Default provisions on capital
and profit share between members.
4
BUSINESS LAW
AND PRACTICE
1
, SGS 1-8
SETTING UP IN BUSINESS
FIRST STEPS Must cover the following matters with new clients:
SETTING UP
A BUSINESS 1. Identity check
2. Conflict of interest check
3. Money Laundering check, report this to the MLR officer if something is
suspicious.
4. Send out Client Care letter – including fees, complaints procedure,
matter’s supervisor, scope of the work
5. Open a matter
CHOICE OF When the client is choosing business media, consider the below: (1) Sole Trader
BUSINESS (2) Partnership (3) Limited Liability Partnership (4) Company Limited by
MEDIA shares.
SOLE TRADER
• Number of persons needed for set up: 1 person, cannot form
sole trader business for less/more than 1.
• Control and management: Sole trader have complete control
over the running of the business. This gives sole traders
flexibility but high pressure if working without support.
• Liability: Not limited – unlimited personal liability.
• Expenses when setting up: No formalities so no setting up
costs.
• On-going expenses after the business is set up: None
necessary, although usually accountants will be involved in
keeping accounts.
• Methods of financing: No quick options. Sole trader can
borrow from a bank but cannot create floating charges (BUT
should have an appropriate asset(s) to create a security for
bank loan), cannot raise finance by share issue.
• Profits: All profits go to the owner.
• Tax: Owner pays tax on business profits as an individual
(income tax + capital gains tax)
• Regulation: None
• Publicity: Fewer requirements, easy to maintain privacy
• May trade immediately? Yes
2
,SGS 1-8
PARTNERSHIP
s.1(1) Partnership Act 1890 – ‘Partnership is a person’s carrying
business with a view of profit’. A partnership may be formed
irrespective of contrary intention.
No separate legal identity – a partnership is unable to own property
or enter into contracts. Instead, it is the individual partners who
will sue, own property jointly and enter contracts jointly. If
partnership goes insolvent, creditors can enforce debt against the
partners personally.
• Number of persons needed for set up: Min 2 persons
• Expenses when setting up: None, although it is beneficial to
have a Partnership Agreement drawn up by the lawyers (this
may be expensive)
• On-going expenses after the business is set up: None
necessary, although must pay for accountants.
• Management structure of the business: In accordance with
the Partnership Agreement, however if no agreement, the
default provisions in the PA 1980 step in.
• Method of financing: Partners can borrow but cannot create
a floating charge. In addition, they also cannot raise finance
by issuing shares.
• Liability: Unlimited /joint and several– Partners have
unlimited personal liability.
• Legislation: PA 1890
• Publicity: Fewer requirements than for other options, easier
to maintain privacy. No disclosure required.
• May trade immediately? Yes
3
, SGS 1-8
LIMITED LIABILITY PARTNERSHIP (LLP)
An LLP is a hybrid as it has flexibility of a partnership with the added
advantage of limited liability for its members – Common for Law
firms.
An LLP has a separate legal entity from its members. But for tax
purposes, it is treated as partnership and the members will be
taxed as partners, each being liable to pay tax on his share of the
income of the LLP.
• Number of persons needed for set up: 2 persons min
• Expenses when setting up: Low costs, but must pay legal fees
for Partnership Agreement.
Requirements:
o Registration fee + incorporation document
o Legal fees for setting up Partnership Agreement
o Printing of LLP stationery
• On-going expenses after the business is set up:
o 2008 Regs Accounts must be prepared by accountants
annually. LLPs that do not qualify as ‘small’ must file
audited accounts.
o SBEEA 2015 file a confirmation statement min once a
year, higher costs due to regulation and disclosure rules.
• Management structure of the business: Apart from a few
default provisions, the LLPA and regulations leave matters of
governance to a partnership agreement (if one exists). There is
therefore nothing about the calling of (or procedures at)
meetings. Pros of an LLP (along with limited liability) of the
few formalities for management procedure.
• Method of financing: LLP can borrow and create floating
charges, if it is underwritten by a member’s personal
guarantee, limited liability is removed. Cannot raise finance by
issuing shares.
• Liability: Different types of partners – general partners
(unlimited liability) + limited partners.
• Legislation:
1. LLPs Act 2000
2. LLPs Regulation 2001 – Default provisions on capital
and profit share between members.
4
