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Business and Company Law Property Law Start Your Own Business

Why Reviewing a Commercial Lease Alone is Of Limited Value

I am often asked by budding entrepreneurs to review the lease of a commercial premises which is part of a small business they are considering purchasing.

The entrepreneur, understandably, is trying to avoid as much avoidable expenditure as possible and wants the lease reviewed for a competitive fee.

I can do that, of course, without any difficulty but I have to explain that reviewing the lease alone is of extremely limited value.

Because most commercial leases emanate from a standard template or precedent lease which is widely used and accepted by solicitors in Ireland. Therefore any difficulties in the proposed acquisition of the business and taking on of the lease are unlikely to be contained within the terms, covenants, and conditions of the lease which are similar across commercial leases.

What are the dangers?

Potential problems are more likely to appear in relation to other issues outside the lease, issues like

  • Title-is there good legal title to the lease? Was the granting of the lease in the first instance in order?
  • Planning-are there any planning issues arising from the use of the premises? And any development carried out over the years, development that would have required planning permission?
  • Is the premises being used for a use permitted by the lease?
  • Rates/charges-are there any issues in respect of rates or other charges that may attach to the premises and is there any arrears for which the new occupant may become liable?
  • Is there a management company? Are there outstanding charges?
  • What condition is the premises in?
  • Are there any issues likely to arise from a fire safety perspective?
  • If the business is involved in food preparation and sales are the necessary plumbing, electrical, food preparation, refrigeration issues compliant with building regulations and any applicable food regulations?

If you are considering taking on a business in which there is a leased premises you are taking an avoidable, critical risk by not having all aspects of the lease assignment investigated.

This involves pre-lease enquiries about title, planning, rates, and so forth being properly investigated. None of these issues will be dealt with by a review of the lease alone.

Yes, it will cost you more money.

Yes, there may be no further issues.

But checking the lease on its own is of extremely limited value and if your finances cannot stretch to having the transaction carried out property, with the necessary checks and pre-lease enquiries carried out, you should seriously consider your investment.

Because you cannot afford it. You are too early and it is premature.

You might be as well going to a casino and putting all your money on red, or black.

Because the likelihood is that any problems that arise from your purchase of the business will not necessarily be contained in your lease, they will probably lie elsewhere, outside the 4 walls of the lease itself.

 

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Business and Company Law Start Your Own Business

A Licence to Use Photographs

licence to use photographs
Licence to use photographs

Are you a photographer? Do you need a licence to use your photographs?

I can supply you with a licence agreement to use your photographs.

The licence contains the following sections:

  1. Background
  2. Parties
  3. Definitions
  4. Duration of the licence agreement
  5. The grant of the licence-for example, is it exclusive, non-exclusive, transferable, use etc.
  6. The licensee’s obligations
  7. The licensor’s obligations
  8. The moral rights
  9. Fees
  10. Royalties
  11. Limits on liability
  12. Warranties of licensor
  13. Indemnity of licensor
  14. Equitable relief
  15. Entire agreement clause
  16. Force majeure
  17. Termination
  18. General
  19. Dispute resolution
  20. Governing law and jurisdiction
  21. A schedule of the photographic works

Use the contact form to make an enquiry.

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Debt Problems | Bankruptcy Start Your Own Business

3 Vital Questions to Ask When Trying to Collect Debts

debt-collection-mistakes

Are you owed money by a debtor?

And you’re not quite sure whether to just forget about it and write it off, or pursue it?

Before making your decision there are 3 critically important factors to consider.

  1. Who owes you the money?

This might seem like a blindingly obvious fact that you don’t need to be concerned about. Well, it’s not obvious at all.

Let me explain. While Mick or John or Susan may have ordered your goods or services they may have been acting on behalf of, and with the authority of another legal entity such as a partnership or limited company.

I won’t go into the legal concepts of implied or ostensible authority, and explicit authority, but keep at the forefront of your mind that you need to pursue the correct legal entity.

Because if Mick was acting on behalf of “Slim Shady Builders Limited” then there is no point in suing or pursuing Mick. The correct target is Slim Shady Builders Limited which may be on the verge of liquidation or dissolution.

  1. Are they a “mark”?

What I mean here is are they worth pursuing? If you are successful in obtaining a judgment against your debtor is there a possibility that you will get paid? Or a snowball’s chance in hell?

Remember: obtaining a judgment that is unenforceable is a complete waste of your time and money. Yes, you may have the legal costs of obtaining that judgment awarded against your debtor and in your favour but the bad news may well be that they still can’t pay.

  1. Will it be cost effective to sue?

If the amount of money owed is small it may not be worth your while pursuing it through the Courts. Your legal costs will still have to be paid and the scale costs which you may be awarded in the District Court will almost certainly fall short of your actual legal costs.

Guess who will be picking up the financial slack? You.

Conclusion

The best way to approach bad debts is probably try to avoid them in the first place by being more selective about who you do business with and your terms and conditions of engagement.

There is a saying in retailing that “volume is vanity”. What this means is that it does not make sense to pursue turnover at the cost of setting aside your good judgment and weighting up the prospects of getting paid for your goods or services.

Let’s face it: if you want to dominate any market just undercut everyone on price. But this isn’t a sensible strategy, I’m sure you’ll agree.

So, to avoid and reduce your bad debts sometimes you just have to walk away and refuse to supply unless you are paid in advance or load the dice in your favour to ensure a return for your business.

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Start Your Own Business

Starting Your Own Business in Ireland-Are You Overlooking These 4 Critical Areas?

starting a business in ireland

Deciding to start your own business is easy.

However, ensuring that your start up does not become an insignificant statistic in the “graveyard of broken dreams” along with the 85% of startups that fail within 3 years is more problematic.

Despite the massive changes in technology in the last few years the fundamentals of starting and running a successful business haven’t changed much.

Let’s take a look at 4 critical areas to increase the probability of success for your business.

1. Legal structure of your business

The legal structure that you choose for your new business will have far reaching consequences and you should be crystal clear as to what structure is best for you and why.

There are three common ways to structure your business:

a) Sole trader

b) Partnership

c) Limited company.

Sole trader

As a sole trader you will be solely responsible for the debts of your business. Clearly this is something that requires serious consideration on your behalf as failure could leave you saddled with the debts of the business, even after you cease trading.

Partnership

Setting up your new business with a partner and forming a partnership to conduct your business means that each of you will be liable for the debts of the partnership.

It is important to understand that this does not mean the debts are shared or split between you-each of the partners will be jointly and severally liable for all debts of the business.

Learn more about partnership law.

Limited Liability Company

A limited liability company has a separate legal identity from it’s promoters, shareholders or directors and the company’s liability, if things go wrong, will be limited to it’s paid up share capital.

While this may seem to offer significant protection to you from exposure to creditors and/or banks if things go wrong, in practice the protection is illusory to a great extent as many suppliers and all banks will look for personal guarantees or bonds from you to cover the debts of the company.

Read more about setting up a limited company and company law, shareholders agreements and many other topics of business law in Ireland.

2. Professional advisors

Having professional advisors that you can rely on and whose judgement you respect can provide a great sounding board for many of the significant decisions you will need to make on your own.

So get yourself a good accountant and solicitor to whom you can turn and who will ensure that all of your legal requirements   are met-things like registration for vat and as an employer, business name registration or company set up are necessary details that will need to be executed properly and which will allow you to spend more time on the overall development of your business.

3. Cash flow budgeting

A prime reason for the failure of startups is a shortage of cash. Cash is king, especially in the early days and you need to be clear about the difference between profitability and cash flow and the ability of new businesses to suck considerably more cash than anticipated in the early days.

Business Financing-9 Options For Your Small Business

Without the sufficient finances you cannot run your business properly no matter how well planned it is. In other words, business financing plays a huge role in the survival of your business.

Many owners and would-be entrepreneurs face difficulties as to where they can find a source to finance their business. Here is a list of ways that you might want to consider:

3.1 Partnership

Establish a partnership with company or investors who are willing to put their money in your business. There a two types of partners, the industrial partner and the capital partner. Industrial partners are those who invest their time, skill and effort in the business in exchange for a portion of the income while capital partners invest through contributing cash or property such as machinery to the partnership.

In establishing a partnership, your partner may impose a degree of control over your business besides having a portion of your income so make sure to choose a capital partner who has less demands and conditions and who you are comfortable working with.

3.2 Investors

Entice investors into your business. Approach possible investors and present a well formed plan that will convince them to invest. This is somewhat similar to partners. The only difference is that investors can only demand minimum control over the business compared to partners although that will depend on the level of investment.

3.3 Suppliers

Approach suppliers and make propositions. Convince them to give you supplies in a form of loan payable periodically. That way you will have your raw materials without releasing cash before you gain income.

3.4 Loans

Avail of loans. Inquire from banks and financial institutions for possible business loans. However, not all banks support newly opened businesses. They are more inclined to extend loans to businesses that are already operating. For starting businesses you might want to choose other ways of business financing.

3.5 Credit Cards

Get cash advances from credit cards. This is normally used for a quick fix of your troubles but this is not advisable for a long term solution because interest rates on credit cards, can be very punitive. Try to get the introductory rates for lower interests.

3.6 Lease equipment

Lease your equipment. Rather than spending your money to buy new and expensive equipment you might think of leasing them. Leasing generally reduces the amount of money you have to raise. Within the lease period make sure to save enough income to buy your own because leasing is more costly in the long run.

3.7 Government Help/State Assistance

Avail of government programs. Check with the IDA, FAS and the Department of Enterprise, local county enterprise boards etc. to see what is available.

3.8 Savings

Utilize your savings. It is time to use your long time savings for greater purpose. You might be a little hesitant but do not worry because if your business will succeed it will come back to you with twice its value.

3.9 Mortgage

Mortgage your property. Mortgage must be the last resort that you should consider because of the risk it can bring. If you fail to pay you might lose more than what you bargained for.
You can combine any of these nine choices to come up with a best business financing suitable for you and your business.

4. Human Resources

A vital part of the success or failure of your new business will be your people.

Choosing the right staff is one thing; managing them is another.

There are a number of key areas you need to be careful about as an employer. I have learned these things the hard way.

But the potential for costly employment related claims is fairly extensive.

Here are some of the most important problem areas.

In conclusion, starting a new business can be an exhilarating white knuckle ride-taking care of these three fundamentals will ensure that it will be an enjoyable and profitable journey too.

About the author

Terry Gorry has extensive experience in starting, running and selling small businesses in Ireland since 1986 in a number of diverse industries.

Categories
Business and Company Law Business For Sale Start Your Own Business

7 Steps to a Good Small Business Plan

The longest journey begins with a single step.

A good small business plan is critical to the success of any enterprise.

Whether it is a formal document or written on the back of a cigarette packet it is an essential first step on the road to building your small business.

Even though we in Ireland are in the midst of the worst economic situation that has ever prevailed many people are still intent on setting up their own small business.

And the first critical step in that process is to start with a small business plan.

This can take many forms but most people are agreed that there are a few critical areas which must be addressed .

1. Overall tone of your small business plan

You need to be clear and concise with your plan with clear objectives/goals and a clear strategy. It should be factual, not aspirational, and easy on the eye with plenty of white space.

2. Summary

The summary should be able to convey in a few sentences your strategy and goals and highlights the positive parts of your plan. You need to think of the elevator pitch ie can you describe your plan succinctly to a stranger if you met him/her in a lift and were travelling from the 5th floor to the 1st.

3. Description of the business

This part of your small business plan should set out clearly the industry, type of business, any company history, the legal structure to be employed, any trading history and your vision for the future.
You will need to describe the USP(unique selling proposition of your business) and how you will grow your product/service with realistic achievable goals.

4. Marketing and Sales

You will need to set out how you will market your business and obtain sales, your target market and how you will handle competition if and when the squeeze is put on your business. You will need to show some solid market research in this section and demonstrate that you know the industry that you will be competing in.

5. Your People

This part of your small business plan will deal with your people, your key personnel and will include your professional advisors such as solicitor and accountant. You will also outline any recruitment plans you have and set out your salary structure which will show also that you are planning for growth.

6. Your operations

This section will essentially set out how you operate your business and include the location of your business, any production facilities if appropriate and information technology systems which should be robust enough to accommodate your future growth plans.

7. The Financials

This section will include your realistic achievable forecasts, both of cash flow and profitability. It will also be critical to outline any capital requirements you will have into the future and demonstrate that you have actually planned for the growth that you forecast elsewhere in your small business plan.

These are the essential parts of a decent small business plan and can obviously be adapted easily depending on your particular circumstances and individual requirements. A good small business plan should be an asset to you when you walk into any meeting with a financier/investor/bank and should reflect your professionalism and overall business approach.

Make sure that it reflects well on you and your company or fledgling enterprise.

Learn more about small business in Ireland here.