So you’ve decided to start a small business and you’re ready to go, but how can you get started in your new business?
Here are some things to consider to get your new business idea off the ground.
Sole Trader or Limited Company?
The first thing to consider is whether you are going to trade as a sole trader or as a limited partnership. The type of small business you start will largely determine the option you choose.
A sole proprietor is a business that is owned by one person (without staff) who is solely responsible for the debts of the business and the performance of contracts. This type of business tends to be favored by traditional skilled tradesmen like gardeners, plumbers, decorators, plasterers, etc.
The advantages of being a sole trader are:
Have full control over the business.
It is easy to set up as there are fewer regulations to comply with. You just have to make sure you contact the Public Treasury to inform them that you are self-employed within 3 months after starting the business.
You won’t have many forms to fill out unlike limited partnerships, but you will still need to have accounts prepared for your annual self-assessment tax return to report annual earnings and tax liabilities.
Since there are no staff, you yourself will keep all the profits, which can remain private, since you will not have to declare them to the company house.
You won’t have to register the business and therefore can be known as anything, which is why so many sole proprietors refer to themselves as “traders like …”
You can create a more personal report with the client.
It will be cheaper for you as the accountants will charge you less as they will only need to fill out a profit and loss account for you.
The main disadvantages of this type of company are:
You will be solely responsible for any failure or liability, such as the failure of your business or damage to property.
It can be more difficult to compete with larger companies that have more staff and therefore can complete work faster.
If you get sick, you will have no income. Although you can purchase critical illness insurance, some will not pay for until after 1 month.
If your business fails, you could be forced to sell your personal assets, such as your home, to meet your obligations.
However, as your business becomes more successful, you can minimize risks by forming a corporation or limited liability company.
Limited liability company
Unlike being a sole proprietor, when you form a private limited partnership, you are registered in such a way that it is guaranteed that you have limited liability, and that your business and personal finances are kept separate. A limited partnership is owned by shareholders and is run by directors. When registering your business as a limited partnership, you should consider the following:
It will be subject to corporation tax.
If you plan to deliver more than £ 77,000 or more per year, you must register for VAT.
As a director, you will have more legal, financial and administrative responsibilities.
You will have less control over the overall operation of your business as you will be accountable to shareholders.
You will need to register with Companies House and submit an annual statement to them along with the annual accounts each year.
Note: The difference between a limited liability company and a limited liability company is that in a limited liability company all the shares of the company are in private hands, while in a limited liability company the shares are owned by the public.
The main advantage of registering a company as a limited partnership is that the directors and shareholders only have “limited liability” and therefore their personal assets cannot be touched, unlike being a sole proprietor.
When you start a small business, you are becoming a self-employed worker and therefore you will need to inform the Treasury that your income may change. Even if you keep an existing job, you must report to the Public Treasury.
The same applies if you are hiring staff. You have the obligation to collect and pay your PAYE contributions to the Public Treasury. Inland Revenue will provide your new business with a PAYE number and an account office reference number.
You can do it yourself or you can appoint an accountant for all of this for you and pay wages and salaries on your behalf, which is what I do with one of my largest businesses.
Choosing a small business name
Creating a good name for your company is important. When choosing a name for a business, it is important to ensure that the name is not already in use, otherwise you could be sued.
You can check with Companies House if the name you have chosen is available or if you are considering an online business or have a website for your business, you can go online using sites like Go daddy to check if the domain name you want is available .
Personally, I used to think that when naming a business you should make sure that the name reflects what your business is about, but many people argue that the name should be something that is easy to remember or is unusual and leaves a lasting impression such as “confusion. .com “or” funkypigeon.com “. After all, who would have imagined that these types of names would become multi-million dollar companies?
If you plan to start a limited partnership, you will need to register a business name with Companies House. They, in turn, will give you a company registration number that will be unique to your new company.
Companies House will retain your new business details, including address and account details, for third parties to view.
Small business insurance
No matter what small business you start, you will need to purchase small business insurance to protect your business and your customers. There are many specialized insurance brokers who can put together a package to suit your business requirements.
Make sure you have your insurance coverage in place before you start your small business to ensure your equipment and facilities are insured while you establish your business.
Once you have implemented the above points, you are ready to start operating your new business.