Letter of Advice on YOUR PROPOSED START UP PICTURE FRAMING BUSINESS

Name

Professor

Course

Date

Letter of Advice

Our Ref:

12 April 2013

John and Fred

New York 9087

BY Email HYPERLINK “mailto:jfpicframe@hotmail.com” jfpicframe@hotmail.com

Dear Client,

YOUR PROPOSED START UP PICTURE FRAMING BUSINESS

First we would like to express our gratitude for giving us an opportunity to advise you on various aspects of your business. The letter consists of the vital procedures and some background information about the business you are about to start. We also included the cost agreement that helps to set our fees and estimated costs.

Introduction: we give advice concerning the legal procedures involved before you start your business. Our team carries out extensive research to ensure that you get the most accurate information. We also assure you that the advice we provide is always credible and your interests are valuable to us. Our company does not dwell much on the finances involved in businesses, so we advise you to seek professional help for commercial or financial viability. The letter does not include profitability and aspects such as competition because we are not aware of the number of picture frame businesses in the area.

Due Diligence: Like any other business venture, the photo frame business requires a thorough evaluation of the financial and commercial aspects. Financial documentations are essential for smooth running of your business. They will help you manage your finances in an appropriate manner. You may also want to find out about the preferred picture sizes to determine the appropriate picture frames that will meet the needs of your clients. The accountant must complete the business plan and we should confirm that you completed the task before you go ahead with the transaction. The business plan may also include the materials you may use for your frames. This aspect requires you to carry out extensive research on marketable picture frames.

We highly recommend the following searches:

The zoning certificate

Outstanding issues under Council notices

Enquire about the landlord to know the solvency status and any unresolved charges or liabilities.

If the landlord is a company, evaluate each of the directors to acquire a solvency status.

Building inspections

Extensive research to ensure that no Authority has interests that could have negative effects on the business

Ownership: there are several business structures, but the main ones are:

Sole trader: this is business by one person. An individual carries out all the transactions in the business alone.

Partnership: a business by various people but not as a company. It involves various people who have common interest in the business and also make contributions to the development of the business.

Trust: holds the property to ensure that everyone benefits from the business. When many individuals run a business, they should trust each other to ensure smooth running of the business.

Company: a legal entity that does not include shareholders. It includes a group of people who may have a common interest but may not make contributions to the run the business.

We also require all the details necessary for the operations in the business. A purchase structure is also vital because it will help you determine the right measures before you enter any lease. Liability issues may also have an immense impact on the structure of the business. You should analyze every aspect of your business to help you give an account of all the activities. After you determine the corporate structure, you should give us relevant details of the business for us to register the entities with the local authorities. The accountant should carry out an appropriate review before they make any approval.

Ownership and related Issues:

Intellectual property Issues: this helps to protect the trade name of the business. It involves the registration of a trademark with the country’s IP. The trademark will give you ownership and private use of the name you register. We request you to advise us in case you want us to proceed with this issue.

Business Name: you should consider whether the business will possess the same name as the company. You should also determine whether you should register a different trade mane. You may contact us in case you have any queries concerning this aspect.

After registration of the business entities you may register a trademark to protect business transactions and also reduce the chances of exploitation of commercial interests. For instance, your trademark may consist of the name of the business or an image that suggests the activities involved in your business.

Town Planning (Zoning): The zoning of the land for carrying out the proposed business should be effective. You should consider council zoning because the council makes most of the approvals regarding the business. The council must approve all the building work on the land.

The Building Department of the council is also vital because they will advise you in case you wish to make changes on the use of the business or building work. They will help you evaluate the constraints and opportunities offered by various authorities. This may help you make appropriate decisions regarding the significance of the business on the property. You will need a written permission from the owner of the property to review the council’s files. You should also find out about proposed future developments that would affect the business in future.

You should visit the council offices to review the files related to the development work of the property. We do not have immense experience on such matters, so you should seek professional advice.

Rates: the buyer and the seller apportion the council and water rates at the date of completion.

State of Premises

State of Repair: Appropriate professionals should inspect the business premise and relevant inventories before you sign the Lease.

Building Reports and Pest assessments: Pests may destroy the pictures frames and other documents stored in your premise. This may cause immense loss and mistrust especially by clients. Pest control may also be a menace, so you should investigate the premise before you start the business.

Development Application/ Approval: Development Applications and Certificate of Compliance are the documents that will help you in this research. They will help you determine the legality of buildings around your premise to be sure about the status of the land you want to use for the business.

Finance: Finance is a crucial aspect in any business. You informed us that the bank will fund this venture. This requires you to know various terms and conditions and the processes involved to acquire funds from the bank. You should know the loan

You should have extensive information on the terms of loan facility agreements or other financial accommodations offered by any financial institution. You should also know the security required by the institution in case you need to extend your funds. You should also know the legal effect of providing guarantors in case of any default.

Insurance: we do not have essential information to provide financial and insurance advice. You should seek advice and also insure your business for full replacement of equipment and stock. Lenders would also want you to name them in the policy as individuals with interest in the business, so you should also insure the contents under a policy. Worker compensation cover and public liability insurance also require an appropriate level.

Stamp Duty: a stamp duty is necessary in case you borrow money to finance the business. Your financial institution may give you the relevant details in this issue.

Lease: if the current tenant has a lease, then they should assign it to you. Below are the key provisions related to leases that may be useful to you.

Item Lease Provision Comment

1 Term: Five year term with an choice of additional five years.

Options: 2 Lessor:

Lessee: ensure that the lease has correct entity 3 Premises: provision of correct description of the premises

Folio Identifier: 4 Rent: rent should appear in the overall expenses

Rent review: 5 Costs: outgoings payable by tenant are part of the landlord’s legal costs for negotiation, planning and completion of the lease.

Lessee’s proportion: you should check to know how much you are accountable for. 6 Promotion Levy: not always necessary 7 Assignment: you should know your rights to determine the appropriate consent and circumstances that withholding of the consent. 8 Permitted Use: you should specify this detail because th breach of lease may have effects. 9 Business hours: the council regulates the business hours, so you should enquire about this information at the council offices. 10 Redecoration date: some leases may not require this. 11 Maintenance: you may have to contribute to the maintenance costs 12 Insurances: a tenant should possess insurances such as:

Public risk

Building Insurance

Plate Glass

Worker’s compensation

Public Liability Insurance: may vary between $15- $25 million dollars 13 Default (Essential Terms): these are provisions that give the landlord authority to terminate the lease in case you breach the agreement. They include,

Lack of proper insurances

Lack of property maintenance and repair

Inappropriate use of the premises

Obligations to make necessary payments

Failure to submit Rent and outgoings 14 Guarantees: These ensure that the tenant meets the requirements of the Lease. The guarantee should be an individual who promises to face the consequences in case the other party defaults. This is a secondary obligation

Bank Guarantee: equivalent to three months Rent

You should have an idea of all the costs you should pay in relation to the Lease. These may include Rent, insurances, bank guarantee and outgoings. This will help you determine the necessary ones and the inappropriate ones.

We are also aware that you will be present during the negotiation of the Lease.

You should read the Lease carefully to ask any other relevant questions. We may also request the Landlord’s solicitor to make amendments if you have special requests.

General Taxation Implication: We do not have the essential details to offer taxation and financial advice. We cannot provide details concerning taxation implications and penalties of this business transaction. Your accountant should carefully examine the taxation preparation of the proposed purchase. They should also provide written advice concerning this information.

If you have any queries and would like further explanation, you may contact the us any time.

Yours Faithfully,

Xxxxxxxxxxxxxxxx

Xxxxxxxxxx

Part B

Question 1

Corporate governance is the set of systems, processes and principles that govern a company. They act as guidelines for controlling and directing the procedures in the company as it strives to achieve its goals and objectives. They also ensure that stakeholders benefit from the processes of the company. The stake holders include the board of directors, customers, shareholders, employees, management and the society. Corporate governance may include aspects such as transparency with regard to all transactions involved in the company, accountability towards stakeholders and enhancement of fairness in all the transactions.

Corporate governance is significant because it enhances foreign investment. Many foreign investors analyze the procedures involved in running a company to determine whether they can rely on the company. Corporate governance is a way of selling the company to the investors. It also enhances the relationship between the shareholders and the management. It also attracts customers because they want to associate themselves with companies that value their needs. Corporate governance also motivates employees to perform their duties efficiently. The society also benefits from appropriate corporate governance through community development projects. Corporate governance also improves the relationships of companies and the the authorities, for example the local government.

Question 2

An executive director is an employee of a company who is also part of the board of directors. They have a specified role in the company, so they take part in the daily procedures that take place in the company. They may act as the finance managers of the company. A nonexecutive director is a member of the board who actively takes part in decision making of the company, but they are not employees. They may take part in suggesting disciplinary actions against significant members of the company’s management. A non-executive director only takes part in the board proceedings of the company. An executive director may also enter into contracts that benefit the company. He also has extensive knowledge on every scope of the company, but a nonexecutive director has vague knowledge on the field of the company. A nonexecutive director provides external information to the board members of the company. He also takes part in ensuring that the company meets the interests of its stakeholders.

Question 3

The concept of fiduciary refers to a legal relationship based ion trust. A company may entrust its development funds to another company because of their ethical relationship of trust. A fiduciary is an individual or a party that acts on behalf of another in relevant circumstances. A fiduciary duty is the top most standard of care. Each party must place the interest of the other party before theirs.

Fiduciary is relevant in the context of management of companies because it enhances development. The managers should build a trust relationship with the employees to acquire information that may improve the company. The employees will also be free to air their views because they know that the managers will strive to make decisions that have positive effects on the employees. Fiduciary also helps a company to compete effectively in the market. The employees will not disclose any private information about the company, so the managers will share all the relevant information with their employees. Employees get motivated when they realize that the management respects their decisions.