I have some friends who run dance classes in a studio which is rented. They are concerned about what may happen in the event they are sued for something. They are considering setting up the business as a Ltd company which is one way to protect their personal assets but given the nature of the business is this the equivalent of using a sledge hammer to crack a nut. Obviously with being a Ltd there are more onerous reporting requirements, perhaps the need to on board an accountant, increased costs, more stringent HMRC requirements etc etc.. What other options may be available to them.
Limited liability does not protect the owners from personal liability for injury of people attending their classes or where directors have acted in a manner, even inadvertantly, that caused the business to be sued.
Basically the veil for the smallest companies is a very thin one that directors are ill advised to attempt to hide behind.
What they need is good comprehensive insurance that will properly cover them. I believe the Hiscox tends to be very comprehensive but they are certainly not the cheapest out there. The cost of good insurance is likely to be more than the costs associated with incorporation but should not be judged on that basis as even if an entity incorporates it must still insure itself properly.
Back to the liabilities on incorporation idea. The directors are responsible for taking out that adequate insurance. If there is insufficient insurance then the directors are liable as they did not fulfill their fiduciary duties properly.
The idea of incorporation to seperate the business is not a bad one and does offer some very limited protection, however, it needs to be looked at from the perspective of their business as a whole rather than simply the protection from litigation angle to determine the best business model for them.
HTH
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The veil can only be lifted by a court but if someone is being sued its going to be going to court anyway unless settled outside as insurance companies prefer to do (which is partly why the premiums are so high).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I would suggest that to make sure all staff are adequately trained, first aid etc. Keep everything well maintained, scrap any equipment which is questionable. Keep insurance up to date. Never use untrained staff to supervise a class. People will try to take a supermarket down if they fall over, and a member of staff has forgotten a wet floor sign.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Ive had a few sprained wotsits from dance lessons in the past, but it would never cross my mind to sue, but sadly this is how much society has changed to follow the Americans in the claim culture!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Had two spammy calls recently from oiks representing the even dodgier of those types of companies. In both cases, they told me they were calling about the accident I reported - and in both cases I said it must have been a very serious accident then, because it's left me with amnesia and therefore unable to remember the accident.
In both cases they hung up at that point.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
