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Professional Issues – Lect.3

Professional Issues – Lect.3. 1. Running your own business 2. Contractual issues in Employment and Self Employment. Running your own Business. The Alternatives: Sole Trader Cooperative Partnership Limited Company. Sole Trader (1). Characteristics

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Professional Issues – Lect.3

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  1. Professional Issues – Lect.3 1. Running your own business 2. Contractual issues in Employment and Self Employment CT218 Professional Issues

  2. Running your own Business The Alternatives: • Sole Trader • Cooperative • Partnership • Limited Company Professional Issues / Lecture

  3. Sole Trader (1) • Characteristics • Individual operating his/her own business • No legal formalities • Tax status • Register with Inland Revenue • May have to register with Customs & Excise for VAT Professional Issues / Lecture

  4. Sole Trader (2) • Advantages • Easy to start • Little or no formalities • Flexible / simple • Disadvantages • May lack credibility • Unlimited liability (insurance) Professional Issues / Lecture

  5. Co-operative • Support and “companionship” • “All in it together” • No hierarchy • Complementary skills • Limited interdependency Professional Issues / Lecture

  6. Partnership (1) “The relationship which subsists between persons carrying on a business in common with a view to profit” [the Partnership Act 1890] • Required structure for some professions: e.g. Solicitors, General Practitioners • Can have partnership without formal agreement Professional Issues / Lecture

  7. Partnership (2) • Advantages • High personal commitment • Stability • Disadvantages • Unlimited liability for the debts of the partnership • High level of Interdependency • More difficult to move into and out of Partnership Professional Issues / Lecture

  8. Company (1) Characteristics: • The Company has an independent existence as a legal person (entity) It can participate in any legal process in its own right (e.g. Buy and sell, sue and be sued) • Regulated by the Companies Act (1985 + 1989) Professional Issues / Lecture

  9. Company (2) Two types: • Public Company (PLC or plc) • May offer their shares to the public • Minimum capital required • Formal (heavy) structure • Private Company (Ltd) 2 types: • Limited by guarantee • Limited by shares Professional Issues / Lecture

  10. Private Company Limited by Guarantee Characteristics • Each member undertakes to pay a fixed sum towards the company’s debts in the event of the company being wound up • Members have no other liability for the debts of the company • Used by professional bodies and charities • Not used by commercial organisations Professional Issues / Lecture

  11. Private company Limited by shares (1) Characteristics • Ownership of the company is divided into shares • Minimum capital • Shareholders are people or organisations who own a number of shares in the company • Shares can be traded (within limits) Professional Issues / Lecture

  12. Private company Limited by shares (2) Advantages • Liability of each shareholder (Member) is limited to the shares he/she owns • If the company is wound up, all its debts must be met (if possible) out of the assets of the company • Anything left over is distributed amongst the shareholders • Cannot lose more that the value of the shares they own Professional Issues / Lecture

  13. Private company Limited by shares (3) Disadvantages • Structure is quite formal But the Companies Act [1989] provides for a lighter structure for SMEs Small company • Turnover up to £2m • Up to 50 employees • Balance sheet total up to £975,000 Professional Issues / Lecture

  14. Private company Limited by shares (4) Memorandum and Articles of Association regulate: • The authorised share capital • The number and nominal value of shares • Who are the initial shareholders • How many shares each holds • How many shares are issued • Whether the shares are fully or partly paid • Voting rights • Etc. Professional Issues / Lecture

  15. Memorandum of Association Controls external relations of the company • Name of the company • Country of registration (E&W / W / Scotland) • Objects of the company (type of business) • Liability • Authorised share capital • Declaration of association “We, … are desirous of being formed into a company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the company set out opposite our respective names” Professional Issues / Lecture

  16. Articles of Association Internal Rules of the Company(Table A) • Rules to apply to allotment of new shares • Rules governing the transfer of shares • Meetings of members (General Meetings) • Annual General Meeting (AGM) - required • Extraordinary General Meetings – optional • Appointment / removal of Directors • Powers of Directors • Dividends and reserves Professional Issues / Lecture

  17. Company Directors • Elected by the shareholders to run the company on their behalf • Have considerable powers • Have obligations: • Act in good faith and in the interest of the company • Exercise skill and care (= negligence) • Duty to disclose conflicts of interest • Special obligations if company is insolvent Professional Issues / Lecture

  18. Company Secretary • Company Secretary • May be a Director • Often an outside professional advisor (e.g. Solicitor, Accountant) • Statutory duty to keep the records of the company • Provide annual return and Accounts to Companies House Professional Issues / Lecture

  19. Organisational Structure Professional Issues / Lecture

  20. Employee Share Ownership • Employee Share Ownership • Used to give employees a stake in the company • The company can provide financial assistance to employees to acquire shares in the company • Sometimes done by issuing new share capital • Common in HiTech companies • Employee Share Options • Gives employee the right to acquire shares in the company at an agreed price (which may be lower than actual value of shares) • Tax incentives Professional Issues / Lecture

  21. Virtual Organisation Portal to promote your work and to interact with other professionals • Become more visible on the www • Online support (discussion group) • More resources • Opportunities for joint tenders, etc. • Networking opportunities without travel • Part of a “one stop shop” Professional Issues / Lecture

  22. Professional Organisations / Informal Groups • Membership may increase credibility (Code of Conduct / qualifications for membership) • Provide training and guidance • Provide support • Common resources • Opportunity to meet others in similar circumstances • Opportunities to network Professional Issues / Lecture

  23. CT218 Contractual Issues in Employment and Self-Employment CT218 Professional Issues

  24. General Contractual Issues • Pre-Contractual obligations • Confidentiality agreements (see example) • Invitation to Tender • Offer and Acceptance • Consideration • Unfair Contracts Terms • European legislation • Law applicable • Forum Professional Issues / Lecture

  25. Contractual Issues - Employment • Enquire about opportunities: • to learn from others • to learn new skills (training) • to work on a variety of projects • Conditions of work • Privacy • Technical support • Hours of work/travel/Overseas secondment • Career prospects and rewards (e.g. shares / share options) Professional Issues / Lecture

  26. Contractual Issues – Employment (2) • Who owns the software you develop (IPR) • What rewards will you get if you develop a product which is a market winner? • Your reward for introducing clients • What happens if the company is taken over? • Benefits (bonus / health plan / pension) • What happens when you leave the company • Restrictions to who you can work for • Restrictions as to what you can do • Restrictions as to the use of your software Professional Issues / Lecture

  27. Contractual Issues – Employment (3) • Unethical or illegal behaviour by Employer or Fellow Employees • Software Piracy • IPR violations • Infringement of legal obligations (e.g DPA) • Invasion of Privacy (legal or illegal snooping) Professional Issues / Lecture

  28. Contractual Issues – Self Employment (1) • Working for an Agency • Work specification (realistic deadlines) • Terms and conditions of payment • Your liability • Professional Insurance • Agency’s Membership of professional body • Your Membership of professional body • The Agency’s reputation with Contractors Professional Issues / Lecture

  29. Contractual Issues – Self Employment (2) • Working for Direct Clients • Terms and conditions (whose?) • Who owns the IPR • Detailed specifications / milestones • Scheduled payment linked to milestones • Compensation for late delivery • Availability of resources from the Client • Procedure to resolve conflicts (arbitration) Will be dealt with in greater depth in Lecture on “Software Contracts” Professional Issues / Lecture

  30. Contractual Issues – Self Employment (3) • What happens if the client does not want the product any more? • Realistic expectations of benefit of the product for the company • Realistic expectations of market prospects • Other issues: • Staff training (on use of software) • Data population • Additional / changed requirements • Change of hardware / platform • Data Protection Act Professional Issues / Lecture

  31. CT218 Next Lecture Software Contracts CT218 Professional Issues

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