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Helping start-ups

According to research undertaken by the Centre For Entrepreneurs (CFE), business formation reached a record high in 2016 with more than 650,000 new businesses having been started in the UK compared to 608,000 in 2015.

Furthermore, the UK’s small and medium-sized business community is expected to increase its total economic contribution to over £200bn by 2020.

So it is clear that fast-paced, innovative and tech-savvy companies will be at the heart of our future economic growth, but to be successful it is vital that the country’s entrepreneurs are allowed to do what they are good at – come up with new and exciting ideas and deliver them to their target markets rather than be distracted by the operational and administrative demands that will inevitably demand their attention.

A range of matters need to be considered from the outset including:

  • Choosing an appropriate legal structure - the most common choice is to form a limited company so as to safeguard personal assets, attract available tax reliefs and protect intellectual property.  Other structures may be more appropriate depending on specific circumstances so legal and financial advice should be sought.
  • Considering fund-raising strategies and proposed sources of finance – there is an increasingly wide variety of methods available with which to fund a new venture, including the founders themselves, friends and family, angel investors, banks, corporate investors and crowd funding.  Being well networked with the investment community will give entrepreneurs a head-start in getting their venture off the ground.
  • Ensuring that available tax reliefs are available to potential investors – tax incentives such as EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) are in place to encourage investment in start-up businesses and provide significant savings on successful exits.  However, the rules are complex and tax planning advice should be sought from the very start.
  • Ensuring appropriate financial resource to support the business – advances in technology mean that new start-ups now regularly operate with a ‘virtual’ finance team.  A part-time Finance Director with experience of helping start-ups is a valuable way of getting the required advice without having to offer permanent contracts.  Many growing businesses also now use a cloud accounting solution such as Quickbooks or Xero to provide real time financial information in order to make timely commercial decisions whilst ensuring that routine compliance matters such as filing annual accounts and tax returns can be dealt with quickly and efficiently.
  • Remuneration and reward – in the early stages of a start-up, a lot of blood, sweat and tears will be expended for little or no immediate financial reward.  It is therefore important to make sure that key management and  employees are suitably incentivised to hit growth targets.  Often share options are issued to those key individuals which vest when specific milestones are reached, e.g. a company sale or stockmarket floatation.  Most commonly these options are offered under an Enterprise Management Incentive (EMI) scheme and offer significant tax savings if eligible.

At Mercer & Hole we have the experience and expertise in providing advice on all of the above and pride ourselves on matching the energy and enthusiasm of the management team.

To discuss your situation, please contact Ross Lane or your usual partner.



Date: 20th July, 2017
Author: Ross Lane


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