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Limited protedion
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Becoming a limited company can help protect your 0-licence — Tim Ridyard of
solicitors Barker Gotelee explains.
One of the best arguments for moving from sole trader or partnership status to incorporation is that a limited company offers better protection for your 0licence. However, before acting it is vital to take financial and taxation advice from a qualified accountant or financial adviser.
A sole trader or partner has sole or joint personal responsibility for the business, including financial liabilities and obligations under its 0-licence.
illegal proceedings are taken against the business the sole trader or partner will be proceeded against as an individual. Sometimes VOSA, the police or other enforcement agencies will prosecute a driver and usually the operator will also be prosecuted.
If the operator is a sole trader or partner in the business he or she will be prosecuted personally as the -user" of the vehicle on the
It is a totally separate legal body with its own identity Its liabilities are limited to company liabilities and do not include the personal liabilities of its directors/ shareholders, although directors often give personal guarantees to underwrite the company's finances.
Checklist 1. Do get tax/accountancy advice to assess what is right or wrong for you from a financial point of view.
2. If you do decide to incorporate you must obtain a separate 0-licence for the limited company You cannot simply use the existing 0-licence because the limited company is a separate legal entity There are probably countess firms currently using HGVs on the road where the drivers are employed by the limited company but the 0-licence is still in the name of a sole tradership or partnership. This is understandable because the business does not 'feel' like a separate legal identity, but legally speaking a limited company has a separate legal personality.
3. Ensure that the drivers are paid through the company if the company holds the 0-licence.
4. Ensure that the finance which underpins financial standing bank and other accounts are in the name of the limited company
road and will be liable to pay fines and costs. Penalty points can be imposed on the sole trader or partner's personal driving licence, even though he or she did not commit the alleged driving offence.
While this only relates to endorsable offences, it follows that the larger the 0licence the greater the potential risk to the licences of operators who are sole traders or partners.
However, with a limited company only the company will be prosecuted. Individual directors or transport managers will not be targeted unless there is evidence of gross negligence on their part. This is because a company has its own distinct legal identity.
Limited company status is obviously preferable in the event of court proceedings but it can also help if there are other problems with the 0-licence.
To maintain an 0-licence an operator must have sound financial standing; must be of good repute; and must demonstrate professional competence. If he or she fails one of these tests the Traffic Commissioner must revoke the licence or refuse any application for a licence.
If the 0-licence is in the name of the company there is some protection for the business, if an individual within the business loses or is likely to lose his or her repute the licence itself does not necessarily have to be revoked — if the executive concerned resigns. But if a sole trader loses repute the licence must be revoked.
Some businesses are split into partnerships and limited companies for tax reasons, with the 0-licence in the name of one or the other, and sometimes both. This is perfectly legal so long as the correct operator — the one named on the licence — is paying the employees.