Starting up a business for yourself means you join with over 4 million businesses that operate within the UK. Owning a business is a great adventure but one that requires a huge amount of thought and planning beforehand. Here are some key elements to get you on the right path.
CREATING A SOLID BUSINESS PLAN
First off, any business that is going to succeed should start out with a well-constructed business plan. A business plan is an essential roadmap, making sure you have a clear idea of how your goals can be achieved. Many business owners will also use their business plan to attract investors and show them the benefits of investing in the new venture.
Make sure your business plan contains the following:
- A clear legal structure. Make it clear what your business structure is. We’ll touch more on this in a moment, but this could be a sole trader, partnership or limited company etc.
- Income and expenditure. Defining all the costs and revenues the business will incur and generate will be a key part of your plan and demonstrate what you need as capital to fund it: insufficient cash flow can hold back growth and development.
- A funding source. How will your business manage to fund itself in the early stages? The sourcing of your capital or debt financing (equity, loan, direct investment by you or from a bank) will be unique to your own position, so keep that in mind as you build-up your business plan.
- Registration for taxes. From deciding if you need to register for a PAYE scheme to if you need to register for VAT, your business plan should make a clear reference to this. These factors are very important to investors in particular, giving evidence that you have complied with local business rules and laws.
- Business aims. Any good business plan will also touch on the long-term aims of your business. From long-term profitability to short-term funding issues, your business plan should show any potential investors what the future of your business will be.
- Market analysis. It’s vital you demonstrate you understand the industry and market you will trade in and how you can establish yourself as a player there.
PLANNING THE STRUCTURE OF YOUR NEW BUSINESS
You need to take a closer look at the legal structure of your new business. Many business owners make a mistake with this and can opt for the wrong kind of business structure. The most common choices are; sole trader, partnership, limited company or limited liability partnerships. Make sure you are aware of what this can mean to your business as it will influence a lot of the responsibilities you undertake and how your business is taxed.
Do you intend to work alone, with only freelance help brought in as needed? Then you likely do not need to put in place anything too complex and can operate as a sole trader. Are you going into business with someone else? Then you might wish to choose a partnership agreement.
Private Limited Companies do not have to meet stock exchange requirements and do not have to share ownership in the business with outside shareholders. This means you can run the business entirely in the way you choose. Share ownership matters for many reasons but the most relevant are to do with capital provision, control of assets and distribution of profits.
Do you wish to retain any assets personally? Or should they become part of the business? Take this into account as you consider the business platform best suited to you. Speak to a business advisor if needed, as making the wrong choice on business incorporation could become costly over time.
PICKING THE CORRECT YEAR END FOR YOUR BUSINESS
Next, you need to decide the year end that suits you with regards to your business. Sometimes, you might find it easier to change from the tax year dates of April-April and choose an accounting year calendar. Some people would prefer to handle their year end at a different time of year, perhaps due to issues including seasonal trading, stock-taking or even just better suitability to the industry that you operate within.
A year end that takes place early in the tax year could mean your profits aren’t quite so quick to show up when they increase. It could give you time to help make sure you can use the delay between bringing in profits and paying tax, using this to help your business. However, a decrease in profits will also mean a lower tax bill, so consider the timing carefully.
MAKING SURE YOU REGISTER WITH HMRC
You should also look to inform HM Revenue and Customs about your decision to invest in this business opportunity. When you start to employ staff, you have to sign up for a PAYE scheme. If you are sole trader, you do not need to do this. Make sure you take into account other factors like pension auto-enrolment schemes, and any charges and duties regarding how – or who – you will be employing, or not employing. Also consider whether your annual turnover will exceed £85,000 meaning you will have to register for VAT and charge VAT on any sales.
This should make the challenging decisions you need to make a bit easier to fathom as a new business owner.
GETTING HELP WITH RUNNING YOUR OWN BUSINESS
Of course, if you find setting up a new business a little more difficult than it first appears to be, you should look to bring in help. Our team at Devonshire Green, for example, can help you to make intelligent business choices and advise you on the way in which your business operates moving forward.
We can help you to work out the best financial year for your business, the most appropriate ownership model and on how to prepare a business plan. We can also guide you on registering the business accordingly with HMRC. For support in turning that business idea you have into a reality contact us today.
We’ll help to make the complexities around business set up, structure and ownership a little easier to understand and work this to your advantage long-term.