Many successful businesses have their roots at the kitchen table! Ideas discussed over a coffee while the children are playing can lead many mums and dads to decide to set up a business, either on their own or with family members or friends, which does not have the pressure of committing to particular hours each day, and can easily be run from home.
But what are the main pitfalls they face?
There may be legal constraints on how the property is used. Many houses and flats, both old and new, have covenants that prevent a trade or business being run from them. Whilst in reality probably only the most obvious of businesses are going to draw attention – car repairs in the front garden, or a steady stream of business visitors for example. However, some business owners have unfortunately come unstuck and the cost of dealing with a claim by the person entitled to enforce the covenant can be great.
In some cases, new owners initially may view their new business not as a proper business, but as a ‘baby business’ or ‘something to fill a few hours and make a few pounds’. In looking at their business in this way, many do not create formal terms and conditions for the service or goods on offer and some end up facing claims or liabilities.
The main concern however must be how to make sure that the risk of falling out with the family and friends involved is minimised and if things do not work out, how as amicable as possible exit can be achieved.
With good planning and advice these pitfalls can either be avoided or the impact managed.
A ‘legal health check’ can identify:
- Whether there are restrictions on the title to the property that would prevent the running of a business from there
- What form of agreement may be needed with customers/clients
- What form of agreement maybe needed if the business is being run with running someone else, and crucially the terms of that – what can each person spend without the authority of the other? (Would one be happy if the other spent £2,000 on marketing without talking about it?) What decisions have to be joint? What money does each have to contribute and what money will they receive and when? What happens if one wants to leave? What is the job role of each? This list is not exhaustive
- If the business is with a family member, whether there are other documents and advice required.
Setting off on the right foot in business could be critical to your businesses’ or business relationships survival and to give you peace of mind.
If you are thinking of, or already have set up a business from home and would like to discuss any of the issues above then contact our property team on 0161 475 7676.