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UK SMALL BUSINESSES LACK LEGAL FOUNDATIONS
The owners and partners in the majority of small and medium sized businesses in the UK have no legal protection against a partnership bust-up, according to figures released today by O2 and the Law Society.
Research among O2’s small business customers and Law Society members found that goodwill at the start of the relationship is often considered enough. Over two thirds (68%) of those questioned have a business venture based on trust and a handshake, rather than a written contract. Small businesses whose partners are family members were revealed as the least likely to have signed a legally binding partnership agreement.
In response to the research findings, the network has worked with the Law Society to create the template for a small business pre-nup or the ‘SME-nup’. Available at http://www.o2blueroom.co.uk/SmeNup and free to download, the SME-nup is a checklist of the basic requirements needed to form a business partnership agreement, the legal foundation for a business.
Feedback from solicitors revealed that the absence of the correct legal protection can cost businesses thousands of pounds in the event of a dispute, while preparing the adequate paperwork can cost as little as £100.
Andrew Holroyd, President of the Law Society, comments: “People don’t go into business together expecting to fall out so it’s all too easy for them to fail to take the correct legal precautions or seek sound advice before launch. Such a large number of small businesses operating without any kind of protection is alarming and some kind of partnership agreement is crucial.”
Whilst legal documentation is bespoke to each small business, the SME-nup covers the common areas of contention including the agreeing of business financing, identifying the contribution of assets between partners, the rights of sleeping partners and profit distribution.
Businesses downloading the checklist will also be entitled to a free half hour consultation arranged through the Law Society with a local business solicitor, who will provide legal guidance and formulate the SME-nup into a legally binding partnership agreement.
Simon Devonshire, head of small business marketing, O2, comments: “Given the current economic climate, it’s critical that small business have a solid legal foundation. Through working with the Law Society we can help add value to both our own customers and small businesses in general.”
Firgas Esack of Raw Material, a Music Management and Publicity company, comments: “We spotted an opportunity within the industry and practically started our business overnight so we didn’t spare a thought as to properly agreeing on how the partnership would work. Whilst we do get along we do row quite a lot – mainly over creative differences – but sometimes over what we think is better for the business. Being able to put the correct legal protocol in place will be a big peace of mind.”
In addition to partnerships, the site will also contain guides providing business and legal advice on other key areas including employing staff, developing contracts and raising money.
To access the O2 SME-nup and free legal advice pack go to:
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For further information or to request interview with O2, the
Law Society or a case study please contact: Nathank@talkpr.com / 0207 543 4670 / 07766977318