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Hi, I'm Tim Bishop from Bonallack and Bishop and I'd like to have a few words with you
about the five essential documents you need for your business.
"Protecting your business -- Five essential documents"
It always amazes me how few business actually get the most basic documents in place, and
what are they? Well, I think there's five of them. Firstly, it's a will, a personal
will, secondly, a lasting power of attorney, thirdly, it's an up-to date simple terms and
conditions, and fourthly and fifthly, depending on the state of your business, its either
a shareholders agreement if you're a company or if you're a partnership, it's a written
partnership agreement. "Do I really need a will?"
Absolutely, failing to make an up to date will can create a serious risk to your family
and your business partners. For example, you'll need to ensure that your business can run
after you die. That your business interests are inherited, with or without the family
as you would wish. That your will maximises potentially significant tax savings. That
a properly drafted will prevents potentially highly divisive and expensive claims on your
estate which can even involve claims against your share of the business. And lastly, that
there is adequate succession planning for directors.
"I've got an old will - wont that do?" It's really not good enough to have your will
drafted just once and for all, there's a huge difference perhaps between being a 25 year
old, setting up your first business when you're single, to when you're 55, perhaps you're
a managing director of a successful company of say 55 employees in a number of locations
with children on a second marriage, step children and grandchildren. You wouldn't expect to
leave your health without being checked at that age, and you certainly wouldn't want
to leave your financial situation without being checked, why should you leave your will
unchecked? "How often should I consider reviewing my
will? You really need to look at your will regularly
to see if it adequately covers your circumstances and we recommend that every business owner
should do so every five years. "How will my business operate if I become
incapacitated?" Well if you become incapacitated, unless you
take adequate steps and you get a lasting power of attorney in place your business could
be in real trouble. No one could really deal with those day to day issues that need running
and if you're not careful by the time you actually apply to the court of protection
to get those things sorted, your business could be in serious financial trouble. The
answer is simple, it's a lasting power of attorney, it's a simple document that you
only need to complete once, every business owner really needs one.
"How important are terms and conditions?" Of all the documents every business needs
I think simple clear terms and conditions are the absolute essential ones. If you haven't
got that right you could be in all sorts of trouble. It can make a significant difference
to your cash flow. It's a simpler step that any business should take, it's simply a no
brainer. Make sure you've got good terms and conditions, they're simple they're clear,
and they're updated regularly. "Does my company really need a shareholders
agreement?" Your company doesn't legally need a shareholders
agreement but unless you've got one you could be in a really difficult situation. You really
don't want somebody else deciding how you run your company, it can become particularly
important for example if you have a business bust up or a shareholder dispute, in which
case having your own properly drafted shareholder's agreement can make a world of difference.
Again, a shareholder's agreement is a simple, relatively cheap document, and can save enormous
cost in the long run. "I'm in business with someone else and we
haven't formed a company -- what do I need?" Every business, if you're not a company, is
in a partnership, if you're working with someone else and therefore you do have a partnership
agreement even though you may not realise it, its governed by the partnership act. But
the problem is, that means someone else is deciding how you run your business so any
sensible partnership, make sure they have their own written partnership agreement that
covers their own circumstances and reflect their own wishes, again it's a simple and
relatively inexpensive document and every partnership really should have one. They are
particularly important in case of any partnership dispute when having that partnership agreement
can make all the difference between a difficult and uncomfortable and expensive battle and
a relatively simple exit. "In summary"
My advice to any business is to have a good look at your business and make sure you've
got these four or five simple documents in place. The will, the lasting power of attorney,
the simple terms and conditions and depending on your circumstances, either a shareholders
agreement or a written partnership agreement. "Final advice?"
So to sum up, I would take my grandma's advice, don't put off tomorrow what you can do today,
she was absolutely right.