If you’re in the UK, you won’t have missed this story from last week – a 5-year-old girl being slapped with a £150 fine by her local Council for selling lemonade ‘without a trading licence’. She was described as distraught in the media, as she and her father, Andre Spicer, were given a filmed lecture by the local Council’s enforcement officials, as the pair sought to capitalise on the thousands of music festival fans walking past their lemonade stand in Tower Hamlets, London.
The Council later apologised for their heavy-handedness and revoked the fine, which was appropriate, given how the enforcement officers had behaved. No child should be reduced to tears by a Council official. However, the father legally needed a street trading licence and, given that Andre Spicer is a Professor of Business Studies at Cass Business School at City University London, surely he should have known better than most of us that this was the case?
Yes, we want to entertain our children in the holidays and, yes, encouraging their entrepreneurial spirit is a wonderful thing to do. But there are good reasons why street trading licences are needed – and they are intended to protect the public. At the barest minimum level, customers have a right to know that the ingredients used in what they are buying are safe, that the kitchen was clean enough, that everything has been properly stored, so it’s safe for you to buy.
Professor Spicer has been everywhere in the media this past week, defending his choices – even blaming his daughter: “Really, it was my daughter’s suggestion.” Fine. But as a parent, we’re legally responsible for our children when they’re five. For good reason.
Is The Law An Ass On This?
You could argue that there couldn’t possibly be any harm in a five year-old girl selling lemonade from a stand outside her house. And I really see the point on that. But where do we draw the line? 8 year-olds? 14 year-olds? Or the 17-year-olds who fit the minimum age required to have a licence?
And the fact is that it wasn’t a 5-year-old girl doing this. I have a 5-year-old and the complexity of this kind of project is something way beyond children of that age. They’re great at ideas, but it was the little girl’s father who took action on the project, who just happens to be a Professor of Business Studies. Surely he’s someone who must reasonably have know that there are rules for this kind of thing?
On a wider scale, those who are trading illegally have a competitive advantage over those who are paying the fees and putting in the effort to comply with the law. Unrepentant, despite knowing he has broken the law, Professor Spicer says, “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”
The government website on this makes it clear that the fine for trading without a licence can be up to £1,000, so Professor Spicer’s attitude seems pretty irresponsible to me.
I’m not trying to be a killjoy on this, but I’m not seeing Professor Spicer either trying to change these laws or offering to pay people’s fines. He’s actively encouraging people to break the law. As a Professor of Business Studies, he’s got huge influence. And that comes with a responsibility.
I have seen so many business friends bust a gut to try to comply with laws like these that seeing someone advocating ignoring the rules makes me want to stop up to protect these tiny business owners.
But it raises the bigger issue for those of us running businesses: are we breaking the law, too?
There’s a difference between a hobby and a business. One is for fun, the other makes money. And if money is changing hands, there are laws we have to comply with, to avoid trading illegally. Those laws are there not just to protect consumers, but also the businesses. And they provide the framework upon which to build a thriving business that we love. Note: these examples are for information only. If you need legal advice, please contact your chosen legal professional!
Here are four legal requirements I have seen small businesses breaking, even in the past week:
1. Not being registered to run a business.
When I started co-running the EU VAT Action Campaign (latest update here), I came across thousands of people who were running businesses, but who weren’t registered. I still come across it, daily. It’s a legal requirement in the UK to either register as some form of company (typically limited company) with Companies House or to register as self-employed, with HMRC, the UK tax authority.
Both of these will require you to produce trading accounts and to complete some form of tax return at the end of each financial year.
2. Your website must include your contact details.
Your business contact details must, legally, be ‘easily found’ by a visiting customer. This means your registered address and some kind of customer services number, not an anonymous ‘contact us’ form or, even worse, as I saw this morning, a link to your Facebook page, instead of contact details. If you’re a limited company then, by law you must include your limited company number, which country of the UK you are registered in, and your registered company address, in an easy-to-find way on your website. Most of us choose to include this in the footer.
It’s really rare to find these details on small business websites, even those running a Limited Company. If you’re stuck on the legal side of your website, Heather Burns has plenty of great information to help you.
3. You must provide invoices or receipts.
These need to include your trading name / Limited Company number (& the rest of the details, above), what was bought, how much was paid, when, by whom, who the seller was and sometimes additional details, too. Relying on PayPal to do this for you is a high-risk strategy.
4. You need a business bank account if you’re a Limited Company.
Yes, they cost a little money, but that is part of running a business. If you’re not planning to make enough money to cover the £5 per month fees, then you shouldn’t be setting up a business.
In the UK, you are invalidating the terms of your personal bank account if you use it for business. For sole traders, it’s best to check the Ts & Cs. The amount it will cost you is easily saved in time when preparing your business’s annual accounts, because you’re not sifting through personal vs business transactions. And many banks offer initial free banking for new customers.
It’s also a really sensible idea to keep your business and personal cash separate, even as a sole trader, otherwise you can really struggle to keep track of which is which and you risk ending up with an end-of-year tax bill, having already spent the dosh.
There’s a huge risk to you of not doing this:
A friend of mine is about to have to sue a contractor he hired, to get his money back, because the contractor didn’t provide the agreed service. The contractor, who owns a Limited Company, took payment to their personal bank account and didn’t mention their Limited Company details on their website – and they didn’t provide an invoice or receipt with those details. As a result, my friend is having to sue the contractor as an ‘individual’, rather than their Limited Company. This means any County Court Judgement will count against the business owner, personally, not their business, and it could make it hard for them to obtain credit (think mobile phone upgrade) or even pass referencing for renting a home or getting a mortgage, for the next six years. It also means that any business insurance they might have will be invalidated for this claim.
All because he didn’t comply with three of these four simple rules.
Why Do We Break The Rules?
Usually it’s because we don’t realise they’re there. But that’s the difference between running an expensive hobby and stepping into you CEO shoes – actually running a business. There are plenty of places where we can check whether our latest brilliant ideas will bring us legal obligations. And we need to do that, before we press ‘go’ on even the most exciting new project.
Running a business brings responsibilities. You can’t just whack up high-ticket coaching programmes to fund your ‘freedom lifestyle’ and hope you’ll get away with not doing the admin to meet your legal obligations. It’s up to us to be proactive, to find out what those rules are and to make sure we’re sticking to them.
And if you’re not an admin / detail person, then you need to hire someone who is.
We need to be grown ups about this.
Having spent the past 15+ years mentoring entrepreneurs, business leaders and passionate world-changers, there’s one common difference between those who make a success of their business and those who will never make it past the ‘freaked out freelancer’ stage:
Successful business people wear a CEO hat and treat their business like a business, not a hobby. They take responsibility for their business decisions and they make sure they are compliant with the rules and regulations required by law.
Time for some fierce truth here:
I sometimes wonder if it’s because we’re scared – we haven’t really committed to running a successful business? That ignoring the law means we’re somehow just ‘playing’ business, like we played ‘shop’ in primary school?
If The Rules Are Wrong, Get Them Changed
Our campaigning on the new Digital VAT rules that came in in 2015 (accidentally leaving millions of micro businesses trading illegally) shows that you CAN change the law: the legislation for a threshold and simplifications is currently progressing through the European Council. We were told by the EU Commission and the UK Government that we achieved something impossible.
Instead of getting people angry and rebelling, we worked incredibly hard to channel the anger and frustration into positive action. That is the reason why the campaign was so successful.
If we did it, so can you. Both the UK Government and the European Commission tell us we have changed the way they work with micro businesses. So changing the law is easier now than it was 2 1/2 years ago.
If you want to rebel, turn that into a positive force for change. Work with your local Council to understand the ‘why’ behind the ‘rules’. Help them to see how small changes could help businesses to grow and survive. Find out if there’s a mid-ground that might allow kids to sell lemonade on street corners. Work with your MP, your MEPs, your regulatory body, your local Chamber of Commerce – or even set up a full-blown campaign.
But encouraging others just to break the rules helps no one, in the long run, and it can damage both the rule-breakers and those working hard to trade within the law.
What’s Your View?
Do you think it’s unfair that people need a street trading licence to sell lemonade to festival-goers in the UK?
Should young children (and, by implication their parents) be exempt from these rules?
How do you feel about a company when you can’t find their contact details on their website?
Have you spotted any other common traps that we should know about? Let’s help make sure we’re all staying on the right side of the law.
Why do you think so many people fall foul of these four simple business rules?
I’d love to hear from you, via the comments.
Author of Dare To Dream Bigger
Mentor To Passionate World-Changers