Unit 10 Starting a Small Business P 4

Unit 10 Starting a Small Business P 4 and M 3 Legal and Financial Aspects

Booklet • As you work through these slides you are going to fill in sections of the booklet. • You may also need to print things out and insert them into your booklet at the end. • Your teacher will tell you what sections to finish in at each point.

Business Ownership Sole Trader Owned by one person Partnership Owned by between 2 -20 partners

Business Ownership Sole Trader Profit goes to: The one owner (me) Partnership The partners – it is shared between … Decisions made by: The owner – I do not have The partners share the to discuss decisions with decision making – decisions Anyone have to be agreed Start-up capital comes from: The owner – I will use my The partners both put in own savings and get a some of their savings and bank loan arrange a bank loan Responsibility for running the business: The owner – I have full responsibility for the success or failure of the business The partners share all the responsibilities. They share in the success and share any debts

Unlimited Liability If the business fails, the owners must use their own personal possessions to pay the debts. I am responsible for all the debts of the business and can be taken to court and made to pay back any business debts. A BIG disadvantage!!!

Fred has just been made redundant. He has £ 10, 000 of savings and decides to set up his own business. He calculates this is not enough to start-up his own firm. He sets up as a sole trader and borrows £ 5, 000 from his bank. He sets up “Removals R Us” and prospers for the first 5 years. Each year Fred keeps all the profit he makes.

Then the housing market slumps and the firm starts to make a loss. Fred owes money to his suppliers the suppliers want paying! He has to close his business and sell all his business assets in order to pay the debts.

But, there still isn’t enough money to pay all the debts. Mr Grumpy supplier is still wanting his money and there isn’t any! So what happens? Mr Grumpy supplier can then get paid! Fred’s family possessions HAVE to be used to pay off the debts. But poor old Fred is back to square one.

Booklet - Page 1& 2 • Now that you understand the difference between a sole trader and a partnership. Think about your business and complete the questionnaire/ survey to identify what type of ownership would be good for you. • Fill in questions below to explain your plans for your business

Business Ownership Complete the HM Revenue & Customs form (CWF 1) to register your business. To do this you will need to Google CWFI and print out the document. Fill out in pen or on screen You will then need to insert this in your booklet

Business Ownership Go to: Business Advice Complete the questionnaire – make sure you read through all the information it will help you later. Screenshot the questions and the result. Put this in a new word document and print ready to put into your booklet.

Legal Aspects of Setting up a Business Set up and register as self-employed In order to legally set yourself up as a self-employed sole trader there are several things you must do. Make sure that you: • register as self-employed with HM Revenue & Customs (HMRC) • obtain any permits and planning permission that you may need from your local authority • contact your local authority to find out whether you need to pay business rates • contact HMRC to register for VAT if you expect to have turnover of more than £ 64, 000 a year • set up a financial record-keeping system • put your name on all your business stationery, including letters, invoices, receipts and cheques

Booklet Page 3 • Now that you have looked at the answers from your business advice questionnaire, you have a good understand of what you need to think about. • Using this information and the information on the sides complete the next page.

Planning Permission The Application Process (approximately 6 -8 weeks) • • Submit application form and plans to Calderdale Planning application is advertised locally Calderdale receive letters from local residents Planning Committee meet and make decision: Application approved with conditions Application refused • Applicant can appeal against the decision

The Impact of Planning Permission • Fee has to be paid (based on size of application) – costs? • Have to wait to hear decision – start date? • May have to change plans to meet conditions – costs and time? • May have to appeal – costs and time?

Booklet Page 4 • Using the two slide above complete the next page.

Other Legal Constraints Health and Safety at Work Act Employers must make every effort to keep the workplace safe and healthy. Employees have a duty to report any potential dangers. Equal Pay Act Ensures that all workers are paid the same wage as another worker doing the same or similar job. Minimum Wage Act Employers must pay at least the minimum wage – depending on age. The Sale of Goods Act Goods must be: • As described • Fit for the purpose • Of merchantable (suitable) quality

Minimum Wage – Research Task Minimum wage for a 19 yr old? Why is it important for the business to keep records? What are the enforcements and penalties for not paying the minimum wage? Use the following website: http: //www. hmrc. gov. uk/paye/payroll/day-to-day/nmw. htm#2

The Law and You 5 13 16 18 7 14 17 12 15 17

The Law and You can go into a pub but you cannot buy or drink alcohol there. A boy can be convicted of rape, assault with the intent to commit rape and unlawful sex with a girl if she is under 16. 14 You can open and draw money from a National Savings Bank Account. 7 You are an adult in the eyes of the law. You can vote in elections. You can serve on a jury. You can buy alcohol in a bar. You can change your name 18 If you are a boy, you can be sent to prison to await trial. You can open a Girobank account. 15 You become of “compulsory school age”. You can see a U film at a cinema unaccompanied. You have to pay a child’s fare on trains and buses. You can drink alcohol in private, eg at home. 5

The Law and You Criminal charges against you will be dealt with in the adult courts. You can hold a driving license. 17 You can get a part-time job, but there are restrictions. Eg you cannot work for more than two hours on a school day or a Sunday. 13 You can be convicted of a criminal offence if it is proved you knew what you were doing was wrong. If you are guilty of homicide you could be detained “at Her Majesty’s pleasure” for a specific period – including a life sentence. 12 You can leave school. You can marry with parental consent. You can join the Army with parental consent. You can buy cigarettes and tobacco. You can have beer, cider or wine with a meal in a restaurant. You can enter or live in a brothel. Girls can have an abortion without your parents consent. 16 You can emigrate. You can pilot a plane. 17

Consumer Law The Supply of Goods & Services Act 1982: This law states that any supplier of a good or service (in particular suppliers of services such as home improvements) must provide work which is satisfactory, at a reasonable price and within a reasonable amount of time. Action: Complain and demand either that the work is rectified and/or that you receive compensation. Court action if necessary to prove your case.

Consumer Law The Trades Descriptions Act 1968: This law makes it illegal to describe a product incorrectly. For example, strawberry jam must have strawberry jam in it, not raspberry. Action: you have selling Complain to shop. Demand money back. You may accept a replacement if wish, or a credit note but you don’t to. The retailer is responsible for the illegal product.

Consumer Law Consumer Protection Act 1987: This law makes manufacturers responsible for damage or injury caused by defective products; the Government has the power to: a) prevent the sale of goods which are considered potentially dangerous b) set standards in the production of products. Action: Complain to shop. Contact Trading Standards Officer at your local authority - they will investigate the complaint and may prosecute the retailer for selling the defective/dangerous goods. The retailer must compensate the customer (eg a refund). However, the manufacturer will be responsible for any damage or injury caused to you.

Booklet Page 5 • Using the slide above complete the next page. • You can also additional information to your booklet that is not specified.