Smaller businesses tend to find it better to operate as an unincorporated business, such as a sole trader or partnership. However, it is becoming increasingly common to “incorporate” their business, especially as business owners achieve growth or take on increased risk.
Incorporating a business actually involves transferring the individual items making up the business (i.e. the assets) to the chosen corporate vehicle – usually a private limited company or a limited liability partnership (LLP). It is important to obtain appropriate tax and accounting advice when deciding on the correct vehicle to operate the business going forward.
We can help you with the setting up of the new corporate vehicle and the transfer of the business. Depending on your requirements, our services are likely to include:
- Setting up a new limited company or LLP with your chosen ownership structure.
- Preparing an agreement between the owners of the new company (such as a Shareholders’ Agreement or LLP Agreement).
- Preparing the business transfer agreement and verifying that the business is being sold as a going concern to the new company.
- Ensuring that the assets of the business are correctly transferred to the new company, which might include:
- Goodwill and intellectual property – these assets will need to be transferred to the new company.
We will prepare a deed of assignment for you to ensure the new company owns these assets after the transfer. Examples of intellectual property include copyright in written documents, website content and web domain names.
- Business contracts – it is important to establish that you are actually permitted to assign your business contracts to another entity. If that is not the case, then we will take steps to procure that the contracts are “novated” to the new company (which will involve with liaising with the contractual parties, such as suppliers or customers).
- Employees – in any business transfer, the contracts of employment will automatically transfer under Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended) (TUPE). It is essential to make sure the requirements of TUPE are complied with because a failure to do so could lead to a liability to pay compensation to each employee.
- Property – if any properties are to be transferred to the new company, for example a lease, you will need to ensure the necessary steps are followed. It may be necessary to seek the consent of your landlord before transferring a lease. Alternatively, if properties will not transfer then you should consider whether there will be ongoing liabilities.
Our lawyers would be pleased to discuss your requirements with you and provide you with a costs estimate. Please get in touch with us here.