I’m a big fan of incorporation!

I chose not to set up my own law firm until it was possible to do so as a limited company and I actively encourage my clients and contacts to incorporate their businesses at the earliest opportunity.  Not only do I think it looks more professional to be dealing with a limited company than a one man band, but the protection it can offer you if things go wrong can be huge.  It also means that if you want to take on business partners/investors, or if you want to sell at some stage in the future, it is far more clear cut as to what is yours personally, and what belongs to the business.

For those people who have been running their own company for many years, it often comes as a surprise to them when I talk about the company being a separate legal entity.  It is it’s own person, with it’s own rules and responsibilities.  This can have some restrictions.  For example, you cannot treat company assets and money as your own.  If the company were to be put into liquidation at some stage in the future, any money you have taken out of the company must be accounted for, and if you cannot account for it, you may have to pay it back.  You can’t just take laptops and phones that the company has paid for, and, perhaps most importantly these days, the intellectual property like logos, names and websites are not yours either unless you can show that you personally have paid for them.

Many of you, particularly, the professionals amongst you, will be reading this and nodding sagely, being familiar with the conversations we have with clients, trying to persuade them that simply because they put the money in and set the company up, and just because they are a shareholder, doesn’t mean they can do what they like.  The most common example I give is that simply because you own shares in Marks and Spencer doesn’t give you the right to walk out with a jumper without paying for it.  I also talk about the similarities between the relationship you have with your company and the relationship you have with your children.  Yes, when they are little they depend on you for everything and you get to make all the important decisions, but they both reach a stage where you have to let them go and you have to respect their right to be their own person.

However, I learned recently that there are some things that a company cannot do, because although it has it’s own corporate identity, and we talk about it having a separate legal identity from it’s owners, it doesn’t have a mind of it’s own.  Therefore it cannot commit some crimes.  For example, it cannot commit murder (although it can commit corporate manslaughter) and it cannot break the speed limit.  This means that if a company has a fleet of vehicles and one of them is caught by a road camera, the company cannot get points on it’s licence, because it doesn’t have a licence!

If you were thinking that this gives you a perfect excuse to put your car in the name of the company, break loads of land speed records and get away with it, think again.

Firstly, there are no longer any tax advantages to having a company car, so it’s going to cost you a lot of money.

Secondly, you have an obligation to keep records of who was driving the vehicle at any time.  You might occasionally be able to say “I don’t know” but there is a limit, and if you get caught doing it deliberately, the consequences will be far worse than if you’d owned up to being the driver in the first place.

Finally, although a court cannot impose points on your licence, they can impose any level of fine they like up to the statutory maximum, and if they are unhappy with your failure or inability to be able to identify the driver, you can be certain they will exercise their discretion to set it at max!  I can tell you this from many years of experience of helping clients whose paperwork can leave much to be desired!

If your company does own any vehicles that can be driven by more than one person, I would strongly recommend that you have a system for working out who was driving it and when.  Even if the system fails occasionally, the fact that you were trying to do the right thing might protect you from a heavy fine.

Kleyman & Co Solicitors.  The full service law firm.  Speeding to your rescue.