Assignment 1, Starting a small business

Ali Al-Abdali Blue 1B -1C

Legal liabilities

I am going to operate as a sole trader, this will have a negative effect as I am going to be fully liable for any debts as this type of business entity has unlimited liabilities.

Therefore if my business experiences bankruptcy then I will be fully responsible to pay all the debts owned by my sole trader business and if after all isn’t sufficient to cover the costs, my personal assets will be considered to pay back to the creditors.

This foreshadows the level of risk of running a sole trader, so therefore I will need to be very good and considerate at managing the business finance and make good forecasts to keep the business up and running.

As the owner of Arcadian Shisha Lounge (ASL) I would have to keep records of loans and capital taken to start-up the business. However I will have to keep records of the income and expenditure of ASL as they will help me work out the profit and enable me forecast for future plans. However these statistics are used for taxation by the HM revenue by submitting an annual self assessment form. However if the earnings of ASL is seen to be low and insufficient to pay the taxes then the taxes will only apply from the following April of starting the business.

However if my forecast is to make a turnover of £68,000 or more then I have to register ASL for Value Added Tax (VAT). However VAT has decreased to 15% from the previous 17.5%.

However there are legal issues that will influence my sole trader business “Arcadian Shisha Lounge (ASL)” one of which is the trading terms and conditions.

Trading standards -

“Trading standards exists to promote and protect the success of a modern vibrant economy, and to safeguard the health, safety and wellbeing of citizens by enhancing the professionalism of members in support of empowering consumers, encouraging honest business and targeting rogue traders”

This needs to be closely considered by ASL as they will need to identify their responsibilities and operate abiding laws.

Licences

Licensing is another factor Arcadian Shisha Lounge should look up as of the smoking ban that took place in July 2007 affected the licensing of public place smoking. For ASL to operate I will consider having a license, as operating with no license will make the run of my business illegal. Contacting the Solihull council will allow me to gain a license for my business. The license ASL require are:

Hygiene license

Business license

Smoking license (A2 license)

Health and safety license

Insurance

Arcadian Shisha Lounge need to consider having insurance on several aspects as it will keep them insured from any aspect that could influence their business activity and avoid any claims and court hearings

Employer’s liability insurance – this will protect ASL’s employees and enables them to claim against injuries while at work and will not affect ASL business operation.

Building insurance – This protects the premises from any damages and fire as the insurance will be fully liable in amending these issues. ...

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Hygiene license

Business license

Smoking license (A2 license)

Health and safety license

Insurance

Employer’s liability insurance – this will protect ASL’s employees and enables them to claim against injuries while at work and will not affect ASL business operation.

Building insurance – This protects the premises from any damages and fire as the insurance will be fully liable in amending these issues.

Owner’s liability insurance – This protects ASL from any court hearings and claims, as a customer may fall or trip within ASL premises and decide to claim and/or sue which can be costly if ASL don’t consider having this insurance.

Below is an insurance quote from .

Source:

Employer - Legal liabilities

If ASL decides to employ staff then there are many requirements which are regulatory when looking to employ new staff. ASL must strive to create a safe and friendly working atmosphere, and regardless of race, age, gender and creed everyone should always be treated fairly and everyone is to be judged on the quality of work.

It is illegal for any employer to discriminate against:

Disability
Race
Gender
Age, and
Equal pay

Equal Pay Act (1963))

The Equal Pay Act is to protect people who are been paid less than others who are doing the exact same job, but are different in gender or class (e.g. relatives). This act is to neutralise the payment for both men and women. During the interview there should be no discrimination against genders, therefore if one of each gender is employed they shall both receive same wage (if doing same job).

Race Relation Act 1992

This act is to protect people from being discriminated due to their colour creed or nationality, so therefore regardless of their colour “black, white, brown, red, etc...) they should all get same treatment and all should have the same chance of getting the job (depending on experience and other evidence).

Disability Discrimination Act 1995

This act identifies that no one is to be judge on their ability or disability therefore everyone should also be treated fairly regardless of their status. The consequences of these factors could prove to be costly if ASL discriminates in any way.

Age Discrimination Act 1975

This act protects people who are in legal working age from discrimination about their age, therefore regardless of the interview’s age make sure that they are treated like everyone else and judged based on qualifications, experience and other skills to see if they are suitable for the job.

National Minimum Wage Act 1998

A person who qualifies for the national minimum wage shall be remunerated by his employer in respect of his work in any pay reference period at a rate which is not less than the national minimum wage.

National Minimum Wage rates (October 2009)

ASL need to make sure that if they employ staff, they pay them at least the minimum wage and don’t breach this law to avoid punishment. These are the current minimum wage rates (October 2009):

£5.80 an hour for workers aged 22 and over
4.83 an hour for workers aged 18 to 21
£3.57 an hour for workers aged 16 to 17

(Source: )

ASL failing to pay their employees at least the minimum wage then I as the owner of ASL will be held liable for the consequences. Failure to pay at least the minimum wage will lead to repaying back the wage and paying a financial penalty. Since 6 April 2009 the penalty has been set at 50 per cent of the total underpayment and a penalty from a minimum of £100 to £5,000.

It is crucially important that ASL make clear the goods and services they are providing to their customers. For example the type of Shisha flavours they are selling and the percentage of tobacco on each one of them. This will prevent any confusion and disagreements between the business and its customers. Arcadian Shisha Lounge need to make sure that the product and service they are providing are fit for purpose and are of stated quality.

There are several laws that ASL need to consider as they will be fully liable for all the damages caused if they are not followed:

Sales of Goods Act 1979

Satisfactory Quality

Fit for purpose

• Wherever goods are bought they must "conform to contract". This means they must be as described, fit for purpose and of satisfactory quality (i.e. not inherently faulty at the time of sale).

• Goods are of satisfactory quality if they reach the standard that a reasonable person would regard as satisfactory, taking into account the price and any description.

This will require that Arcadian Shisha Lounge need to make sure the products that they are providing their consumers are fit for purpose, for example, if ASL state to the customer that they are selling them double apple Shisha flavour and when they smoke it, they realise that it is not double apple, but rather watermelon, then ASL would be liable for the problem as they stated it was double apple.

Moreover if Arcadian Shisha Lounge sell the same Shisha flavour but claiming different qualities as they sell them at different prices, the high price meaning the one with better quality and it ends up as both being the same quality flavours then they are breaching the “Satisfactory Quality” of this law and the consequences of that could lead to a court hearing and could prove costly to ASL.

Trade Description Act 1968

To prohibit false or misleading indications as to the price and description of goods

This law protects consumers from being mislead about a product description. ASL must take this act into consideration as they will face punishment if they breach this law. Arcadian Shisha Lounge must make sure all their product description are accurate, for example, 500grams Shisha flavour contains 5% tobacco, then ASL must make sure the information is accurate and correct or else they face the consequences of breaching this act. ASL must make sure they get the labelling right and their advertisements are accurate according to the description to avoid breach of law.

Health and Safety Act

An Act to make further provision for securing the health, safety and welfare of persons at work, for protecting others against risks to health or safety in connection with the activities of persons at work, for controlling the keeping and use and preventing the unlawful acquisition, possession and use of dangerous substances, and for controlling certain emissions into the atmosphere.

ASL must consider these issues as it is seen as a vital aspect of the business. As I am the owner of ASL I am fully liable for the employees safety within the work place, so therefore may contact and invite the Health and Safety Executive (HSE) to perform a health and safety inspection on ASL premises and insure all aspect of the health and safety procedures are covered.

However, I can insure the health and safety of both the employees and customers by providing facilities such as:

Toilets – for staff and employees to use in their needs
Cautions – cautions and signs to create awareness, i.e. wet floor signs, mind the step posters, etc...
Fire Exits signs – to ensure the staff and consumers are aware of the exits if anything happens
Assembly point signs – to create awareness amongst customers and employees within the building to identify the nearest assembly point if anything goes wrong.
Fire extinguishers – to insure the safety of staff and customers within the building if a fire is experienced

Failing to operate according to the health and safety act will see ASL pay a penalty or attend a court hearing. “The Health and Safety Offences Act 2008 came into force on Friday, 16 January 2009. This new Act will increase penalties and provide courts with greater sentencing powers for those that break health and safety law, and are being welcomed by the Chair of the Health and Safety Executive”

Affects of the smoking ban on Arcadian Shisha Lounge (ASL)

The smoking ban was introduced in July 2007 to ban smoking in public places, this has an influence in ASL business startup and operation as it requires more issues to consider such as licensing.

There are several factors that the introduction of the smoking ban influenced, including:

Shisha bars must have at least 50% air circulation - this means that ASL should consider rebuilding the premises to suit the requirements of 50% air circulation. However the 50% circulation does not mean 50% roof and 50% non roof, but the 50% air circulation can include a big opened door to participate in the 50% open air circulation.

Licensing – due to the smoking ban, the licensing changed in pubs and public cafes. The license that is going to allow ASL to operate legally is A2 licensing as it will allow public smoking within the lounge, but only according to the regulations i.e. 50% air circulations.

Age Restriction – As of 1st October 2007 the law for selling tobacco changed.
It became illegal for you to sell tobacco products to anyone under the age of 18 in England and Wales. This restricts ASL from serving customers under the age of 18.