As 2019 draws to a close, we are not just seeing out the year, but also seeing out the decade.
Looking back to where the economy was 10 years ago, we were in the midst of the recession. Fast forward 10 years and we still seem to face a period of political and economic uncertainty. Whatever your thoughts are on Brexit and the Election, I think most business owners would agree that the uncertainty around these factors is in itself damaging to the economy but also makes planning for 2020 extremely difficult.
As with any election period, whether there is a change of government or not, there can be a series of legal, financial and political changes which can be both positive and negative for business.
For all of the uncertainty there are however always positives and always opportunity so rather than focus on that uncertainty, we are looking at what we know will happen and what steps business owners can be taking now to ensure that 2020 is the best year it can be, regardless of what is going on in the wider political and economic landscape.
Some of this advice may be obvious and some of it may not be but if you are a business owner make sure you consider it all.
Follow the Scout’s Example
As any current or former Scout’s will tell you, their motto is ‘Be Prepared’. The same, of course, is true in business. Whatever happens in 2020, there are steps that all business owners should take.
It is said that there are only two certainties in life, death and taxes. With this in mind however, have you considered what would happen to your business if you died tomorrow? It isn’t a pleasant thought, I accept but there are very real, very significant consequences of failing to prepare for this eventuality in terms of business continuity and, of course, taxes.
As a starting point, any limited company in which there are multiple shareholders ought to have a cross option agreement. Not only is this tax efficient but also provides security to both the surviving shareholders and the estate of the deceased.
Another aspect of preparation which is often overlooked is properly documenting the relationship between business owners whether this is in the form of a shareholders agreement or a partnership agreement.
I would perhaps add one more certainty in life other than death and taxes which is ‘change’. Everything changes, people change and people’s desires and interests change. Time and again, we see it where business owners go into business with the best intentions but over time the owners change and with these changes it brings the potential for conflict.
Business success isn’t just about preparing for growth or preparing for marketing or expansion, it is also about preparing for risk and disaster.
As a guide, all businesses need to have in place:
- Appropriate contracts and terms of business;
- Contracts between owners;
- Disaster plans for ill health and death, including appropriate contractual provisions;
- Employment Contracts and Procedures
- Data Protection compliance
Whatever happened to GDPR?
In 2018, the General Data Protection Regulations and the Data Protection Act 2018 were probably the biggest legal change facing many businesses.
Many however question whether it has really made a difference. It still surprises me how many businesses I see who either don’t have a Privacy Notice or have contracts which refer to the Data Protection Act 1998 or are otherwise not compliant.
Of course, we are only now seeing the first decisions of the Information Commissioners Office (‘ICO’) in respect of post GDPR breaches and the fines imposed are astronomical (tens of millions of pounds). Undoubtedly this is to create an example as a mechanism of forcing compliance.
There has also been group litigation brought against WM Morrisons Supermarket PLC for data breaches on behalf of circa 100,000 employees and this is a matter currently before the Supreme Court but at first instance Morrisons were held to be liable.
I anticipate that businesses will face increased scrutiny over their data protection practices in the coming years with the increased risk of litigation. With this mind, businesses need to ensure that they are compliant and continue to be compliant. GDPR provides an obligation on business owners to review their practices to ensure continued compliance.
IR35 – Ignore this at your peril?
April 2020 heralds a change in taxation around self-employed contractors. The changes mean that certain businesses may be directly liable for certain tax liabilities of self-employed contractors where it is deemed that the contractor ought to have been an employee.
We have already seen many larger corporations make the sweeping decision to force all contractors to become employees.
Whether you are yourself a self-employed contractor or if your business engages self-employed contractors it is imperative that you ensure that you have the correct contractual provisions in place to protect all parties. This could impact a number of industries but will be particularly relevant for the likes of marketing consultants, business advisors and sportsman to name but a few.
Whilst, initially it is larger businesses who will be affected, I suspect that this will be filtered down in the SME market sooner rather than later and the time to prepare is now.
Smart Contracts and Blockchain?
What is Smart Contracts and Blockchain? Well that isn’t necessarily an easy question to answer but it broadly relates to the increasing use of technology in contractual relations between parties.
The Supreme Court recently ruled as to the enforceability of Smart Contracts and found that they are enforceable. This area of law is still evolving but what I can say with certainty is that the way businesses contract and do business will change as technology develops.
Whilst there are enormous benefits to the use of technology in business, it is important that you understand the legal implications behind this.
Tech Gurus describe Blockchain as revolutionary but as with any technology, it will need to be understood by businesses and consumers to enable its use to grow. In the short term most businesses will be unaffected by these changes but be mindful that technology is changing at an ever increasing rate and it is important that you remain legally compliant for the protection of your business.
Had Enough? Want to sell or retire?
Whatever your reason, perhaps you have decided that now is the time to sell or retire. As a business owner, you are entirely responsible for your own exit plan. If you have spent your life building your business, it is likely to be your biggest asset. How are you going to best utilise that asset to fund your next step in life?
Don’t leave the sale or your retirement until the last minute as this could create the impression of a distress sale to potential buyers and diminish the sale price of your business. The key to a successful exit is to consider the strategy that best fits your personal aims and to plan in advance. You will need to consider getting your company accounts in order, settling any disputes with customers or suppliers that could create liabilities, and preparing your employees for the change.
By thinking of your exit as a process rather than an event, you can maximise the value of your business and your returns. For many businesses, it can take months if not years to plan for an exit but one thing is for certain, the time that you spend on preparing a business for your departure, the more you are likely to obtain out of any sale.
Preparing for a sale will often involve ensuring that you have adequately documented contracts, policies and procedures as well as a clear forecast, budget and business plan. Another point to identify is who the potential buyer could be, will it be a management buy-out, a competitor or private equity as each type of buyer will have their own considerations.
If it is a family run business, are you intending to pass the business down a generation and how will this work both legally and practically.
Whatever your plans are for 2020, Ison Harrison Solicitors are here to help. We often a full range of commercial and private client services ideally tailored to advising businesses on the wide ranging issues facing them.