Updated 02 August 2019
Introduction from WFL
Independents setting up on their own need to be aware of the laws that do and can impact on the way they set up and carry out their businesses.
They need to be able to recognise the risks that can be avoided or reduced and the opportunities that can be managed by good knowledge and by putting in place well thought out legal agreements to regulate their business relationships and dealings.
Our approach is to deal with “Headings” and to signpost visitors to those websites where the answers might best be found. Our expectation is that anyone embarking on an independent working lifestyle – an Entrepreneur by default rather than by intention – would consider the legal implications in all aspects of their endeavours.
- Knowing when you need advice;
- Knowing where to get it from; taking action ahead of the actual need;
- Never being taken by surprise;
- Avoiding risks you don’t have to take and ending up with liabilities that you should never have to cope with;
- Being proactive rather than reactive.
The law can affect you and your business in many ways. Be prepared. Act wisely – and in timescales of your choosing rather than anyone else’s.
Andrew James of OnHand Counsel Ltd offers this signposting service and sets out in this section Headings for the different areas of the law which may come into play in your work. In some cases, he will be able to advise personally as a lawyer and by agreement. He has also created a number of useful guides on areas which are likely to be of particular relevance to independents. As the large majority of independents start by setting up on a consultancy basis, Andrew has initially provided a number of guides focussing on this important area and focussing on the legal aspects. If you think a topic could usefully be added to this section please email [email protected]
In designing this Technical Topic Section of Working Free on Law Matters, we have puzzled over how best to design its composition and in a way that would best suit the needs of visitors. As Working Free is seen by many as the first of its type on the market, we have no statistical information to work with. We don’t fully know how to prioritise the displaying of our material – what to focus on – and what depth of information might be of most use. The types of things senior executives leaving the corporate employee world might get up to vary considerably.
The types of activities senior executives leaving the corporate employee world might get up to vary considerably.
They include consultancy – and in all its various forms;
- interim assignments;
- project management;
- charities and trusts;
- setting up new (non-consultancy business) in various industry sectors;
- going into business with others;
- investing in new businesses (and getting investment in their new businesses)
- business angels;
We decided that the best approach is to list all those areas where legal advice might become necessary – including those falling into those categories listed above. We segregate all these areas where Working Free can help directly from those where we would seek to redirect enquirers to other lawyers. Sometimes these will be law firms we know who have specific expertise in the areas of advice being sought and sometimes we will fall back on offering signposting advice.
Our primary aim is to point out all those areas where legal advice can be sought. What we would ask is that if there are any areas that are relevant to your current needs are not mentioned here, please do email us, using the interactive mechanism on this website. Being online and interactive also means that we are constantly updating both its content and its functionality.
Information contained in this section is necessarily generic and in a readable format which may not contain all details on the subject matter. In all Law Matters the devil is in the detail and you should ensure you take individual advice specific to your circumstances before acting.
Choosing your Lawyer
Many businesses don’t choose a lawyer until they have to. They may ask current contacts for recommendations. They may trawl through the internet. They may have met someone socially. They may just take pot-luck.
Even where current relationships exist, many businesses tend to ask their lawyers to provide a reactive service, when they could be getting better value out of them by talking to them earlier and using them as a regular sounding-board for their aspirations, objectives, strategies and plans. Using a good experienced lawyer as a business friend, as a trusted counsel in whom you can confidentially confide any problems, needs, opportunities or concerns is a smart thing to do.
Having to pay for this might frighten many – particularly those who will have read press comments about the average annual earnings of most of the Equity Partners in the Magic Circle law firms now pitched at around £1.7m.
Read here what Andrew has to say about choosing a lawyer: www.onhandcounsel.co.uk/benefits/value-for-money/
…and here is what the Law Society says: www.lawsociety.org.uk/for-the-public/using-a-solicitor/
But talking about it can/should virtually always result in a mutually agreeable arrangement. It will be easy for many to assess what a value for money deal looks like.
An experienced business lawyer can help you in many ways, such as:
- Advising and helping to set up the different types of business models you can use to run your business. They will generally do this working together with your accountants and tax advisers (see the separate Accounting and Tax Technical Topic which also covers this area).
- Advising and helping you to put in place appropriate paperwork to regulate your relationships with any business partners.
- Advising and helping you to put in place appropriate paperwork to regulate your business dealings with clients, customers, suppliers and other business relationships.
Importantly, please be aware that you can also use a good experienced lawyer, as a business friend, as a trusted counsel in whom you can confidentially confide any problems, needs, opportunities or concerns. Many businesses tend to ask their lawyers to provide a reactive service, when they could be getting better value out of them by talking to them earlier and using them as a regular sounding-board for their aspirations, objectives, strategies and plans.
OnHand Counsel can help in all sorts of areas where corporate or commercial legal advice and paperwork is needed, and can help to point you in the direction of other specialist business lawyers where required. These may include fellow members of the Network of Independent Business Lawyers which was founded by Andrew James, who are predominantly one-person bands who specialise in different areas of business law, ranging from general areas such as property, employment, intellectual property and commercial litigation to more niche areas such as construction, planning law, data protection, tax law, financial markets, life sciences, the travel and leisure industry, biotech, competition law, pensions and wine!
Here are some of the areas you might want legal help with at various stages in your business journey following your move into being an independent. Please note that Marked in bold are links to related Guides prepared by Andrew James of OnHandCounsel Ltd, This material is available for free.
- Articles of Association
- Business plans
- Business structures
- Companies limited by guarantee
- Consultancy contracts (see ‘A brief introduction to consultancy’ and linked articles, below)
- Contractor contracts
- Directors’ duties
- Employment contracts
- Executive and non-executive director contracts
- Financing and security
- Friends and family investments
- LLP agreements
- Option arrangements
- Partnership agreements
- Share schemes and incentives
- Shareholder issues
- Shareholders agreements (see ‘Joint venture companies and shareholders agreements’ www.onhandcounsel.co.uk/business-structuring/business-models-part-3-joint-venture-companies-and-shareholders-agreements/
- Society and club constitutions
- Varied corporate advice
- Confidentiality agreements/NDAs (see www.onhandcounsel.co.uk/doingbusiness/confidentiality-agreements-ten-top-faqs/
- General contract issues
- Identification, protection and exploitation of technology/brands/products/ ideas/IPR.
- Industry specific commercial agreements
- Introduction/referral agreements
- Joint ventures (see ‘Business models for joint ventures’ www.onhandcounsel.co.uk/doingbusiness/business-models-part-two-joint-ventures/
- Routes to market, eg
- Franchise (see ‘Business models – franchises www.onhandcounsel.co.uk/doingbusiness/resources/
- Supply of goods and services
- Use of 3rd party rights
- Varied commercial advice
- Company procedures, eg share buybacks
- Corporate and other joint ventures
- Corporate finance
- Corporate restructuring and reorganisation
- Debt rescheduling
- Directors’ duties
- Legal audits and due diligence
- Management Buy Outs
- Mergers and acquisitions
- New ventures/diversification
- Raising debt and equity finance
- Shareholder and director conflicts
- Subscription agreements and investor Articles of Association
- Venture capital; private equity
- Exit planning
- Grooming for exit
- Insolvency/corporate recovery
- legal healthchecks
- preparing and formalising contracts
- putting business and legal issues in order
- Share and business sales
- Succession planning
We have produced a number of Guides covering issues relating to the world of consultancy. The other Guides are as follows:
- What provisions can you expect to see in a consultancy agreement www.onhandcounsel.co.uk/guide-and-tips-favourites/what-provisions-can-you-expect-to-see-in-a-consultancy-agreement/
- Legal status of consultants – legislation to be aware of www.onhandcounsel.co.uk/uncategorized/legal-status-of-consultants-legislation-to-be-aware-of/
- How to work out whether a consultant is self-employed or an employee www.onhandcounsel.co.uk/uncategorized/how-do-you-work-out-whether-a-consultant-is-self-employed-or-an-employee/
- Consultancy and data protection www.onhandcounsel.co.uk/uncategorized/consultancy-and-data-protection/
What is a consultant?
There is no special legal definition. The term can be applied to any person who provides their personal services to someone else, whether for a short term project or on a long-term ongoing basis. Usually the term is used when a client needs to engage someone with skills, knowledge or experience to provide services which are not available in its existing workforce. There may or may not be much actual ‘consulting‘ involved.
What are the main pros and cons of being an independent consultant as opposed to an employee (or worker)?
Pros for the consultant:
- The feeling of autonomy and independence (escaping from the corporate employee rat race)
- Ability to work for multiple clients, and to develop one’s own business relationships and personal business ‘goodwill’
- Flexibility and work-life balance
- More favourable tax treatment than for employees (eg business expenses; National Insurance contributions) – if you avoid IR35 etc
Cons for the consultant:
- Lack of job security and employment law protection
- Scary world of running your own small business
- Less certainty over earnings
- Potential business liabilities (requiring insurance; and/or operating through a limited company to limit personal liability)
Pros for the client:
- Flexibility – the client can engage the consultant on an as needed basis , and the consultancy agreement can be put on a more commercial contractual footing
- With a genuinely self-employed consultant or with a consultancy company the client doesn’t have to worry about all the statutory employment law obligations and liabilities
- The client shouldn’t have to worry about payroll accounting and employee tax and NI – IF the client can sleep at night comfortable that it has got around all the legislation designed to try to help the Revenue treat consultants as employees or workers!
Cons for the client:
- The client has less control over the consultant as the consultant does not owe all the ‘master-servant’ duties owed to an employer by an employee. The client can try to put various controls and obligations in the consultancy agreement but this then increases the risk that the consultant will be said to be an employee.
- Employees owe their employers implied duties of good faith, trust and confidentiality. A consultant doesn’t generally have such implied duties as regards their client.
- Intellectual property (IP) created by an employee is automatically treated as owned by the employer, whereas an independent contractor owns any IP he creates.
Self-employed, employee or ‘worker’ – why does it matter?
There are complex rules which determine how a consultant should be treated for tax and employment law purposes.
These rules depend on whether the consultant is to be treated as self-employed, an employee or a ‘worker’.
Why are the main pros and cons of providing consultancy services through a company?
Pros for the consultant:
- A company has limited liability
- Opportunities for more tax-efficiency using a company (for example, paying dividends). But the opportunities are drying out a bit…
Cons for the client:
- No direct contractual link with the consultant. A client may therefore want a separate side letter agreement with the individual consultant to cover issues such as intellectual property and confidentiality.
What provisions can you expect to see in a consultancy agreement?
An employment contract is known as a ‘contract of service’. A consultancy contract or any other services contract is known as a ‘contract for services’. It is a commercial agreement, and each party is free to try to impose whatever commercial terms they want. However, usually a balancing exercise is needed to include provisions which are strong enough to look after the client’s interests but not strong enough to result in the consultant being treated as an employee or worker.
Please see this article for a breakdown of the most usual provisions [take from the OHC website www.onhandcounsel.co.uk/guide-and-tips-favourites/what-provisions-can-you-expect-to-see-in-a-consultancy-agreement/