4 Key Elements of Commercial Law Every Business Owner Should Know

4 Key Elements of Commercial Law Every Business Owner Should Know

Introduction: Understanding the key elements of commercial law is crucial for business owners. Commercial law governs the legal aspects of business transactions, contracts, and operations. It provides a framework to protect the rights and interests of businesses while promoting fair and ethical practices. In this blog post, we will explore the essential elements of commercial law that every business owner should be familiar with to ensure legal compliance and mitigate potential risks.

• • 1.) Contract Law: Contracts form the foundation of business relationships, and a solid understanding of contract law is essential for business owners. The key components of a contract is an offer, acceptance and consideration (the parties exchanging something of value). 

• Include Contractual Remedies in an event of a breach

• Business owners may spend a significant amount of time drafting their favorable terms but may leave out contractual remedies. One may be mistaken to think that as long as the terms are favorable to them and are written down on paper, one’s position is protected. If there are no clear and practical remedies and a breach occurs, the only “remedies” at that point may be lengthy email exchanges or litigation in court. Litigation is expensive and time-consuming, so it is definitely something that business owners should try and avoid as much as possible. Therefore, when drafting a contract, it’s essential to refer to remedies in the event of a breach such as monetary damages and termination clauses. This will help prevent you from suffering from the effects of breach of contract and resolve disputes quicker.

• 2.)  Protect your intellectual property: Intellectual property law often protects different aspects of one’s business  such as inventions, trademarks and copyright. Business owners must be aware of the different types of IP protection available and take necessary steps to protect their intellectual property. This includes registering trademarks and applying for patents.

• Being ignorant to this could lead you to being held liable to pay damages for infringing on someone’s IP rights. Infringement can occur in two main circumstances. First, when a business uses the identical trademark as someone else with the same or similar products. Second, which is much more common, is when a business uses a confusingly similar trademark as someone else on the same or similar products.
• Your website,  your logo and your brand are examples of intellectual property that needs safeguarding. A big issue that regularly occurs is when business owners outsource work to copywriters, graphic designers and software engineers for example, they do not ensure that they will own the content once the work has been completed.  
• Therefore, understanding IP law helps prevent you getting in any legal trouble with your competitors and protects you from anybody infringing upon your IP rights.

3.) Unpaid Invoices

If you have an unpaid invoice, there are several steps you can take to pursue payment. Here’s a general outline of actions you can consider:

• Communication: Begin by contacting the debtor directly and politely inquire about the payment status of the invoice. Sometimes, delays may be due to oversight or administrative issues. Clearly state the outstanding amount, the due date, and request immediate payment.
• Written Reminder: If the initial communication doesn’t yield results, send a written reminder. This can be in the form of a letter or an email, reiterating the details of the invoice, the payment terms, and the consequences of non-payment. Set a reasonable deadline for payment.
• Late Payment Interest and Fees: If your contract or terms of service specify late payment interest or fees for overdue invoices, remind the debtor about these additional charges. Referencing these penalties can encourage prompt payment.
• Debt Collection Letter: If the debtor continues to disregard the unpaid invoice, you may choose to send a formal debt collection letter. This letter should outline the outstanding amount, the due date, any applicable interest or fees, and a final deadline for payment. It should also state that legal action may be pursued if payment is not received.
• Small Claims Court: If the debtor fails to respond or still does not pay, you can consider taking legal action by filing a claim in the Small Claims Court. The Small Claims Court deals with claims up to a certain monetary threshold. You will need to complete the necessary paperwork, pay the filing fee, and provide evidence supporting your claim.
• Alternative Dispute Resolution: Before or during the court process, you may explore alternative dispute resolution methods such as mediation or negotiation. These methods can help facilitate a settlement without going to trial and may save time and costs.
• Enforcement: If you obtain a judgment from the court in your favor, and the debtor still does not pay, you may need to take enforcement action. This can involve measures such as instructing bailiffs to seize assets, freezing bank accounts, or seeking a charging order against property.

4.) Taxes 

• Value Added Tax (VAT): VAT is a consumption tax imposed on most goods and services in the UK. Business owners need to determine whether their business needs to be registered for VAT based on their turnover. Understanding VAT rates, obligations, and regulations is crucial for accurate VAT accounting, invoicing, and submitting VAT returns to HM Revenue and Customs (HMRC). Make sure to hire a competent accountant who will consult you in detail regarding this topic.
• Corporation Tax: Limited companies in the UK are subject to corporation tax on their profits. Business owners should be familiar with the rules and rates related to corporation tax, including allowable expenses, reliefs, and deadlines for filing tax returns. It is essential to maintain accurate financial records and ensure compliance with corporation tax requirements.
• Employment Taxes: Business owners with employees have certain tax responsibilities related to payroll and employment taxes. This includes deducting and remitting income tax and National Insurance contributions from employees’ wages. Employers also have obligations to provide accurate payroll records, submit payroll reports to HMRC, and provide employees with relevant tax forms, such as P60 and P11D.
• Capital Gains Tax: Capital gains tax is applicable when a business or individual sells or disposes of certain assets that have increased in value. Business owners should be aware of the rules and rates related to capital gains tax and understand how it applies to their business, such as the sale of business assets or investments.
• Record Keeping and Reporting: Business owners must maintain accurate and up-to-date financial records for tax purposes. This includes recording income, expenses, and any supporting documentation required by HMRC. Understanding the record-keeping requirements and timelines for keeping financial records is essential to meet tax obligations and provide necessary information when filing tax returns.