unit 36 p4 m3 RESUB

UNIT 36 P4 M3

Describe the legal and financial aspects that will affect the start-up of the business
Assess the implications of the legal and financial aspects that will affect the start-up of the business

In this assignment I will be describing the legal and financial aspects that will affect the start up of my make-up business. I will also be assessing and evaluating the implications and benefits of the legal and financial aspects that will affect the start-up of my business.

There are multiple laws that would affect the start up and running of my business therefore, I will make sure I am aware of all the appropriate laws and regulations to avoid facing the consequences if I do not abide by them. There are loads of benefits in running my business as a sole trader, along with many disadvantages as well. Like I mentioned previously, there are multiple options for pricing, such as premium pricing, skim pricing, competition-based pricing, penetration pricing etc. In order to manage all my documents I will recreating three documents; profit and loss statement, cash flow forecast and a balance sheet.

As I will be running my business as a sole trader there are many advantages, as well as disadvantages. Being a sole trader means I am the only owner and will run the business alone. The reason for this is because it allows for the distinctive concept of the brand to be kept however, all responsibilities are in my hands and all the profits made by the business will be kept by me individually due to the fact that their are no other shareholders within my business. This also means I have unlimited liability because I will be the only owner. I will not have a partnership with anyone, because I want to run my business solo because I feel I have enough knowledge and experience which enables me to run this business alone. I don't need the capital right now because I have the equity I need. The main cost that my business will face will be the running of the business cost and the start up cost. Running costs are things that the business will have to maintain and keep paying such as rent, stock, electricity. Start up cost is a cost that the business will pay once, when they first set up the business. My products that I will be selling need to be priced correctly so that I make profit as well as repeat customers.

There are various different pricing methods I could use in order to improve my pricing such as, skim pricing, competition-based pricing, value pricing, cost-based pricing, premium pricing, penetration pricing and many more. I will choose one of these methods to use within my business to use as a marketing strategy. The method I have decided to use for my business is competition-based pricing because I think this is the most appropriate pricing method to use for my specific business because I want to work on being better than all my competitors. The problem with using competition-based pricing is that I will have to find alternative unique ways in order to rise above the competitors and stand out from all the other competitors within the make-up industry. Although, competition-based pricing would be extremely useful because it avoids price competition that can damage the company therefore there is no risk that the business will go bankrupt and have to shut down because of this.

I have a clear trading terms and conditions which is clearly set out explaining all the terms and conditions for my business including all the legal aspects e.g. pricing, payments, terms, credit facilities, delivery options etc. It is in a written copy because my customers must be made aware of it legally and they have to agree with it. Trading standards protect customers from businesses traders who disobey the law, I am fully aware of my legal obligations about trading and I will not be selling any counterfeit goods or anything that disobeys the Trading standards regulations. The Trading standards are a group of people who work for the local council to protect customer from misconduct and they deal with complaints from customers about counterfeit goods. The TSI, which stands for the Trading Standards Institute, safeguards customers by offering them advice and guidance on their rights as a consumer, legalisation relating to food and safety issues. I will produce three different accounting documents which are; cash flow forecast, profit and loss statement and a balance sheet. I may think about hiring an accountant to construct and manage those documents for me if I am having problems handling them, however this can be costly to employ a new staff so I will have to think about it logically. It is essential that these documents are well prepared and all the staff are aware of this, which will be done by holding regular meetings with all the staff to make sure they are fully aware of the procedures that have to be taken to ensure documents are well manage and constructed appropriately.

As I am selling make-up, I am not required to obtain a license, I have done plenty of research about whether or not I need a licence and I have discovered that I do not need one as I am not selling pets, food, alcohol etc. There are some places that require make-up artist licences including Louisiana. Therefore I do not need to get into contact with the government or national services. I must keep a record of all the financial transactions that happen because this is required by law. The benefits of doing so are that, it will save me time and money because the records will be more accurate and it ensures my bills are paid only once, and there is no mistakes. It also enables my business to be able to keep up to date on what I owe and what I am owed. Legally, I must keep documents for at least 6 years after the transaction therefore I need to keep my documents safe and secure. The type of documents that should be kept, include; cash book/spread sales and purchase ledger, wages and petty cash books, accident records. However, licences are needed for equipment like computers, tills, software's etc. I will be using computers, tills and software's in my store therefore I will need to get a license on those pieces of equipment. My employees will also require licences to check they have business innovation skills and to check they do not have any criminal records to ensure they are safe to work in a work environment.

Most problems that occur within the business can be avoided through correct communication and procedures which can be put in place in order for problems to be avoided. Three examples of procedures that can be used to avoid problems are; staff association and trade unions. I will have good relationships with my employees because this will allow communication to get across better. Also, another procedure that could be put in place to resolve any problems is ensuring there is clear and effective disciplinary procedures to clarify acceptable behaviour and not acceptable behaviour within my business. Along with this I need to provide contracts for all my employees legally which have to be written 2 months after employment. Things included in a contract are; pension arrangements, sick pay arrangement, job title and description, name of employer/employee, notice periods, date employment ends etc.

There are national and local laws that I must comply with which include, paying employees, hours of work, rest breaks, working weeks, holidays, discrimination, VAT as well as various other laws such as the Trade Description Act, The Data Protection Act 1998, Sunday Trading Act, Supply Of Goods & Services Act and Weights and Measures Act. I must ensure I pay staff the right amount of money, according to the national minimum wage, on a wage slip as this is considered legal. If this isn't the case, and I do not pay the employees the correct legal amount of money they are supposed to be paid then this could result in my business getting shut down. Also, employees are entitled to have 5-6 weeks of holiday off of work a year, which means I have to carefully plan out the routine for my employees to ensure I have at least two members of staff working in the store at one time. If I do not follow this law, it could result in my business getting shut down as well.

I have spoken to the local council to see what laws my make-up business specifically has to abide by. This is extremely important and most business owners do not know that you have to find these laws out yourself because some are specific to your business. I have to put my companies registration number on display within any emails I write and send and within every bit of paperwork I fill out because this is compulsory. Common laws that apply to my business are the Data Protection Act 1998, Smoking (this means indoor smoking is banned), The Consumer Protection, E-commerce Regulations 2002, The Privacy and Electronic Communications Regulations 2003. All my employees will have to have written contracts of employment after 2 months which includes; name of employer, job title and description, date, place and address of employment, amount of pay and how often employer is being paid, hours of work, holiday entitlement, sick pay arrangements, pension arrangement, notice periods, date employment ends (for temporary staff only), grievance and appeal procedures, disciplinary rules. I will need to get insurance for various things such as; employers liability insurance, owners liability, motor insurance, building insurance, contents insurance, product liability insurance, public liability insurance.

The Data Protection Act 1998 is a law which I have to consider when starting up my business, because it gives me the protection of all my documents and data within the business. It protects information from customers and employees being able to access it. I will ensure all the documents and secure infuriation that I don't want anyone seeing will be locked away securely in my office where everything will be put into easily accessible folders or drawers. Also, the legislation focuses on having all the correct, up to date and relevant information, as well as only collecting information that is needed for a specific purpose. Legally I must keep all documents from 6 years after the transaction is made which means I have to ensure I have enough storage space to keep all the documents in an organised and systematic order.

I have to take full responsibility for all the employees and customers that are in my business, this includes their health and safety. I need to ensure risk assessments are carried out frequently to ensure their all up to date and the appropriate policies are put into place and are carried out correctly. Their are laws that have to be followed to do with fire and they are implemented to prevent fires within the store and to prevent accidents happening to people. In my store there will be a minimum of 3 fire exits which are easily accessible. Along with this, there will be 3 fire extinguishers across the store in case of an incident. Training for incidents like fires will happen frequently to ensure all employees are aware of the procedures that have to take place in case of a fire and how to prevent it spreading. If I wanted to extend my business in the future if its becoming more successful than planned, I will need permission from the local authority to extend or build a new building which is something that is very expensive and can take a long time.The government set up groups to monitor standards in different industries which include, The Gambling Commission, The Office of Communication. However, if I am in need of advice I have plenty of places to go, including, Department for Business Innovation and Skills (BIS), Local Enterprise Agencies, Shell Live Wire, Banks etc.

Sex Discrimination Act 1975 is an act which makes it illegal to judge someone on their gender, which impacts me as a recruiter, because this means I cannot discriminate anyone from the job just because of their gender. As a recruiter, I am obliged to treat men, women or transgender all the same and allow them to have equal opportunities. Another law which is important to know when starting up my business is the Race Relation Act 1970 which ensures nobody is discriminated because of their race, every race is considered and have the same opportunities, just like the Sex Discrimination Act 1975. The Disability Discrimination Acts 1955& 2005 focuses on ending discrimination towards whose who have a disability. This means I have to give people with disabilities the same opportunity as people who don't have a disability, because people with disabilities may be perfectly able and qualified for a certain job however, recruiters choose to not employ them just because they have a disability. This is now deemed illegal and I cannot decline someone just because of a disability. The European Working Time Directive is an act which allows employees to have a minimum amount of time off work for holidays, rest breaks and the right to not work for longer than 48 hours if they do not want to. This means that any employees I take on will be aware of their rights and so will I be in order to give them the appropriate rights they deserve. I will need to think about how many staff I can employ depending on the factors the European Working Time Directive act focuses on. The national minimum wage is the minimum amount of money that I have to pay my employees based on their age. The Data Protection Act 1998 was set up to protect data from employees or customers, this is important for my business because it means I will be able to keep my information secure and will have a right to not let customers or employees have access to any important documents unless necessary.

There are various financial aspects also. I will need a personal survival budget so that I have enough money to live whilst I am running my business alongside that. My person budgets will be compared to the cash flow forecasts to see if my business will be successful or not. I have to choose the right location in order for my store to be, this is crucial for the businesses success. I have decided that I will rent the premises of the store I will locate my business in because this is a cheaper option and means I can set a certain period of time I want to be located there. If I want to carry on the rent time after its ended, I can rent it for longer. The insurance and rates for the premises will be expensive. The cost of the equipment and supplies that I will need are very expensive because they are make-up products which need to come from a highly successful factory. Before I put this information into a cash flow forecast, I need to decide on the different types of equipment I will need and how much it will cost a capital breakdown will be needed. One major cost will come from employing my staff, the law requires me to think about the national minimum wage and make national insurance contributions for each employee that I will employ. There are multiple pricing policies that I could use when pricing my products. These include; value pricing, cost-plus pricing, penetration pricing, premium pricing, price skimming, promotional pricing, economy pricing and psychological pricing.  Cash flow forecasting is something that I will be producing regularly so help me predict the future of the business. They will be based on market research and other information that is accurate which I have collected. After they have been constructed, profit and loss accounts and balance sheets can both be produced which both can show projected levels of profit. Additionally, there are numerous sources of finance you can get that do not require creditors, which comprise of, owners personal savings, grants from the government, The Prince Trust, EU convergence region funding. However, sources of finance from creditors involve, bank loans, trade credit, leasing, mortgages, sponsorship, borrowing from friends and family, credit cards and overdrafts. Some of these sources of finance have various advantages and disadvantages, some as loans being very good for me because it allows me to get help for the start-up for my business. On the other hand, mortgages may be a disadvantage for me because it may be hard to pay back off if I don't start earning a lot of money. I will make sure that I keep all documents recorded for financial purposes. Although, I could hire an accountant to help me with my record keeping and who specialises in HM Revenue and Customs to ensure that all my financial records are acceptable and accurate to make my business successful.

The National Minimum Wage system is something I have to abide by, because it will determine how many employees I can afford to have. The national minimum wage is the minimum amount of money per hour an employee is entitled to receive by law, no matter how small the business is. I am required to pay my employees a set amount of money depending on their age. If I employee anyone who is under 18 then I will be required to pay them £4.00 however, if they are 18 to 20 they will receive £5.55, if they are 21 to 24 then they will receive £6.95 and lastly if they are 25 and over then have to get £7.20. However, in April 2017 the National minimum wages are charging very slightly although this will have to be considered depending on when my business opens. By having set prices I have to charge my employees, this will help me to enable my budget for the business is smooth and controlled. I will be aware of the amount of money I will be using to pay for the employees per hour which I can put into a cash flow forecast and work out to predict how well my business is performing.

A problem that this legalisation has on my business is that because employees know exactly how much money they should be getting. This could mean that they will not perform exceedingly because they know they are obliged to getting a certain amount of money of the business. This may make employees not perform their job properly or be enthusiastic about it because they have to get paid, which is a problem for my business, especially because it needs to have a positive and enthusiastic vibe which means I need staff that are going to be engaged into the business. They will need to know exactly what their talking about and staff that will go the extra mile to make sure my business is successful, positive and allows me to make the most profit I possibly can.

I will have to abide by the Health and Safety law, because this is extremely essential when setting up a make-up business. There are many advantages to following this law, which include less injuries and accidents occurring because there are laws put in place to prevent them from happening. There is less risk of any legal threats if there is a decrease in incidents which is a positive thing for the business.If there are less incidents then the business will keep up a good reputation and people won't have any negative things to say about the Health and Safety in the business. Although, keeping up the law is costly, because it requires frequent training courses for the staff to ensure they are aware of the constant changes in the law and how to carry them out. Also, health and safety equipment are expensive e.g. fire extinguishers but they are essential because the Health and Safety law really impacts my business.