Franchising

August 6th, 2011

The advantages of owning your own business are obvious but so too are the risks.

A franchisee is taking less of a risk than starting his or her own business because they are operating under an established and proven business model and supplying or producing a tested brand name.

Franchising is essentially the permission given by one person, the franchisor, to another person, the franchisee, to use the franchisor’s name, trade marks and business system in return for an initial payment and further regular payments.

Each business outlet is owned and managed by the franchisee. However, the franchisor retains control over the way in which products and services are marketed and sold, and controls the quality and standards of the business.

Advantages

1  it is your own business
2  someone else has already had the bright idea and tested it too
3  there will often be a familiar brand name which should have existing customer loyalty
4  there may be a national advertising campaign
5  some franchisors offer training in selling and other business skills
6  some franchisors may be able to help secure funding for your investment as well as discounted bulk buy supplies.

Disadvantages

1  it is not always easy to evaluate the quality of a franchise especially if it is relatively new
2  extensive enquiries may be required to ensure a franchise is strong
3  part of your annual profits will have to be paid to the franchisor by way of fee
4  the rights of the franchisor, for example to inspect your premises and records and dictate certain methods of operation, may seem restrictive
5  should the franchisor fail to maintain the brand name or meet other commitments there may be very little you can do about it.

The Costs

The franchisor receives an initial fee from the franchisee together with on-going management service fees. These will be based on a percentage of annual turnover or mark-ups on supplies and can vary enormously from business to business. In return, the franchisor has an obligation to support the franchise network with training, product development, advertising, promotional activities and a specialist range of management services.

Raising money to finance the purchase of a franchise is just like raising money to start any business. All of the major banks have specialist franchise departments. You may need to watch out for hidden costs of financing. These could arise if the franchisor obtains a commission on introducing you to a business providing finance or a leasing company for example. Of course these only represent true costs if you could have obtained the finance cheaper elsewhere.

Choosing a Franchise

There are many factors you may need to take into account when choosing a franchise. Consider the following:

1  your own strengths and weaknesses – make sure they are compatible with the franchise
2  thoroughly investigate the business you are planning to buy
3  research the local competition and make sure there is room for your business
4  give legal contracts careful consideration
5  last but not least, talk to us about the financial projections for the business – cash flow, working capital needs and profit projections will form the core of your business plan.

The Contract

The contract will form the basis of all franchise agreements. It should ensure that you run your business along the lines set out by the franchisor. The following areas should be covered:

1  the name and nature of the business
2  the geographical territory where the franchisee can use the name
3  how long the franchise will run
4  the fees (both initial and on-going) that will be charged
5  what happens if the franchisee wants to sell or either the franchisee or franchisor want to end the agreement
6  the terms of the relationship, specifically that the franchisor will provide training, advertising etc and that the franchisee will abide by the rules laid down by the franchisor.

Posted in Business Planning, Business start up, Business Types, finance, Franchise Specific, franchising, Legal, Miscellaneous, owning a company, Starting in Business, types of business | | Comments: Comments Off

Training and Course Fees

July 28th, 2011

Work related training:

If an employer pays for staff training, or reimburses an employee training costs, any benefit to the employee is not subject to tax.

An employee is generally unable to claim training costs as deduction for their own tax if the employer does not reimburse his costs.

Recent case law indicates that training costs will be deductible in the employee’s hands if training is part and parcel of the employee’s job specification.

The term “work-related” is defined very widely; it can include anything from a first aid course to a motivational team building activity course.

Other (non work related) training costs:

Training not related to the employees’ duties are taxable as benefits in kind for higher paid employees or taxable as earnings if employer reimburses employee (all employees).

Posted in Benefits, Benefits in kind, business expenses, Business start up, Business Tax, company, Corporation Tax, Employment, expenses, Guidance notes, PAYE, Personal Tax, tax, Xebox | | Comments: Comments Off

Companies House deadlines and late filing penalties

July 28th, 2011

All limited companies and limited liability partnerships (LLPs) must file copies of their financial accounts at Companies House. Every company and LLP has an accounting reference date, which determines the date that its financial year ends. This is also the date that determines when accounts are due for delivery to Companies House.

All limited companies and LLPs must also provide copies of their audited accounts to Companies House, within a specified period of time – the filing deadline – following the end of its financial year, also known as the accounting reference date.

This requirement to file annual accounts applies to all companies and LLPs, including small companies such as flat management companies.

This guide explains how a late filing penalty is imposed on a business if its accounts are not filed in time, how you can avoid these penalties, what happens when a penalty has been imposed and how to appeal.

Late filing penalties explained

All limited companies – public and private – and limited liability partnerships (LLPs) must file their annual accounts and reports on time. If they fail to do so, they face an automatic fine. The time allowed for filing depends on whether the accounts are the first or subsequent ones and whether it is a private limited or public limited company.

Filing first accounts

For private companies and LLPs, if the first accounts cover more than 12 months, they must be delivered to Companies House within 21 months of the date of incorporation, or three months from the end of the accounting reference period, whichever comes later. If the accounts are for 12 months or less, they must be delivered within nine months of the end of the accounting reference period.

For public limited companies, if the first accounts cover more than 12 months, they must be delivered to Companies House within 18 months of the date of incorporation.

Subsequent accounts

In subsequent years, private companies and LLPs have nine months from the end of the accounting reference period to file the accounts, and public limited companies have six months. If the accounting reference period is changed, the filing time may be reduced.

Late filing penalties

The amount of penalty charged depends on when the accounts are filed.

The penalties are doubled for late filing in two successive financial years beginning on or after 6 April 2008 (for companies) or 1 October 2008 (for LLPs).

Fines on directors and designated members of LLPs

Failure to file accounts is a criminal offence which can result in directors, companies or designated members of LLPs being fined personally. The Registrar may also strike the company or LLP off the public record. If a late filing penalty is not paid, it can result in enforcement proceedings.

How to avoid a late filing penalty

It’s important to allow enough time for your accounts to reach Companies House within the period allowed. If the filing deadline expires on a Sunday or bank holiday, you need to take this into account. To help you file on time:

• make a diary note of the filing deadline to remind you in good time
• read the filing reminders Companies House send to your registered office
• tell your accountants and remind them as appropriate to prepare and deliver your accounts on time

First-class post does not guarantee next-day delivery, so it is worth thinking about using guaranteed delivery methods such as couriers. The most secure and cost-efficient way of filing company documents is to use the Companies House WebFiling service.
If there is a special reason why your accounts may be filed late, you can apply to extend the period allowed, but an extension will only be granted if the reasons are exceptional.

What happens when a penalty has been imposed?

If you deliver accounts for a company or limited liability partnership (LLP) late, Companies House automatically issue a penalty notice to the registered office address. This gives details of the penalty, including the last date for filing, the date of filing of the accounts and the amount of the penalty. It also includes information about how to pay the penalty.

If you don’t pay the penalty, Companies House will ask debt collectors to take action. If you still fail to pay, they will take action in the County Court or Sheriff Court, where you will be given the chance to file a defence. You may want to avoid legal action, because Companies House will seek to recover their legal costs if the court finds against you.

Restoring a company or LLP to the register

If you restore a company or LLP to the register after it has been struck off and dissolved it will not have to pay penalties for the period it was dissolved. However, you will still need to pay any penalties:

• outstanding on accounts from before it was dissolved
• for accounts delivered on restoration if they were overdue at the date the business was dissolved

Late filing penalty appeals

You can always appeal against a penalty, but it will only be successful if you can show that the circumstances are exceptional, because the Registrar has very limited discretion on collecting a penalty. An example of exceptional circumstances could be a fire destroying the financial records of the company or limited liability partnership (LLP) a few days before the filing deadline.

The following situations are outside the Registrar’s discretion and cannot be considered for an appeal:

• your company is dormant
• you cannot afford to pay
• your accountant was ill
• you relied on your accountant
• these are your first accounts
• you are not familiar with the filing requirements
• your company or its directors have financial difficulties (including bankruptcy)
• your accounts were delayed or lost in the post
• the directors live or were travelling overseas
• another director is responsible for preparing the accounts

If you still want to appeal, you must do so in writing to the address shown on the front page of the penalty notice. You will normally get a reply within ten working days, and any recovery action will be suspended while the appeal is considered.

If your appeal is rejected, you can write to the senior appeals manager in the Late Filing Penalties Department at the appropriate Companies House office (shown on the penalty notice). If the senior appeals manager upholds the penalty, you can ask for the Independent Adjudicators to review your case, but you should not contact them until you have heard from the senior appeals manager

Paying by instalments

If you have difficulty in paying the penalty in a lump sum, you can usually pay in four monthly instalments – in exceptional circumstances you can pay in up to ten instalments, depending on the amount you have to pay. You must ask in writing to pay in instalments, explaining the reasons why you can’t pay the penalty outright.

Posted in Business start up, companies, companies house, company, compliance, Guidance notes, late filing fees, Legal, Limited Companies, Limited Liability Partnership, LLP, non compliance, penalties, Xebox | | Comments: Comments Off