SME start-up guide
Starting your own small or medium business can be one of the most exciting times of your life. The chances are that you’re setting up your business in an area in which you have lots of experience and expertise. However, it can also be the source of apprehension because some of the finance, legal and tax-related factors can be daunting for many people. Even people who have come from a tax, finance or legal background can sometimes have concerns about these issues when it comes to running their own company. But don’t let this put you off because over a thousand new businesses are set up in the UK every day. This handy guide will steer you through some of the major issues you’re facing and direct you towards some useful support.
Give some thought to the status of your company because you will need to decide whether you want to operate as a sole trader or as a limited company. There are pros and cons with each option, mainly concerning tax, national insurance and liability for any losses. Operating as a limited company means that you are not risking your personal assets such as home and savings in the event of your business failing. A sole trader would risk having to use their personal assets to offset any losses. Find out more at www.businesslink.gov.uk.
You may already have decided on a name for your company. If you’re planning to be a limited company, then you need to register your name with Companies House. First of all, you need to make sure that the name has not already been taken. You can do this very easily online at www.companieshouse.gov.uk and you can also register your company online for less than £20.
Unless you have another source of income, you may need a business loan to kick-start your company and to ease cash flow while you’re getting off the ground. Many high street banks provide specialist services for businesses but it is worth checking out the commercial specialists as they have a wider range of options on offer. A business loan is essential to underpin initial purchases but you may want to consider cash flow easing solutions like invoice discounting and factoring. These can help keep money flowing into the business and also reduce the time and stress involved in chasing bad debts. For more information, try www.abnamrocommercialfinance.co.uk, a commercial finance specialist who will be able to advise on a package of financial assistance for your business.
The best way to avoid sleepless nights about tax is to get on top of it from the start. If you have opted to operate as a sole trader, you need to register with HMRC as soon as possible. Depending on your likely business turnover, you may also need to register for VAT. Currently, businesses that have a turnover of £77k or more need to register for VAT. If you get near to that threshold and think you might go over it in the next month, then you need to register too. Anyone going down the limited company route needs to register with HMRC for Corporation Tax and also for PAYE purposes. Even if you aren’t planning to employ anyone, you may need to pay yourself a wage. Many of HMRC’s services are available online at http://www.hmrc.gov.uk/businesses/ and you can register and send in returns via their website.
At the most basic level, you need to be aware of your responsibilities as both a business and an employer in terms of health and safety and employment law. Depending on the nature of your business you may need to cover other areas such as copyright, intellectual property, consumer law and data protection. You may wish to retain a company lawyer to take care of this for you, but if you are a small company, it may be more practical to take advantage of online companies which provide a good value pick and mix approach to supplying legal advice and documents. Consider subscribing to a package such as “My Business Works” which will take care of your legal hassles for a surprisingly small fee.
An article written on behalf of ABN AMRO