If you decide you want to start a new business, it’s usually because you have a skill, product or service that you are passionate about. You want to offer this to other people and more importantly, use this passion to earn a living.
If your business is successful, then you are very likely to earn a lot more than you would be able to if you were in employment. However, if you don’t build the foundations of your business carefully, you could find that it doesn’t live up to your vision for the future.
On a positive note, the number of small businesses in the UK has grown considerably over the past few years. Statistics gathered by the Federation of Small Business showed that small businesses accounted for 99.3% of all private sector businesses at the start of 2016 and 99.9% were small or medium-sized (SMEs).
This is good news and should hopefully give you some encouragement to get started. We wanted to help you on this journey by giving you a few tips on what you need to think about in the early days, so you set your business up properly from a financial point of view.
Before you start any of these find a good accountant!
Not someone that just submits your annual tax return. In the early stages of setting up your business, you need someone that will help you plan your finances effectively and make sure that you are compliant with regards to the HMRC.
How should I structure my business?
Before you get started, you must decide whether you will operate as a sole trader, a Limited Company or as a Business Partnership. The latter will only apply if you have someone that you plan to set up the business. The legal structure you adopt will impact the tax you pay and how much legal and financial responsibility take on.
Should I be VAT registered?
Regardless of which company structure you decide on you can be VAT registered if you think that will benefit your company. The advice given by the HMRC is that you have to become VAT registered if your turnover (sales) exceeds the threshold £85,000 in a 12-month period. Most businesses wait to become VAT registered as they grow. However, in some cases, you may decide to become VAT registered from Day 1 for example if your expenditures are going to very high and you want to reclaim VAT.
Do I need a business bank account?
It’s very important if from the very start you can separate your business expenses from your personal expenses. This helps you to keep track of business income and spend. Also, it will help you to manage your finances better and submit your tax return accurately at the end of the financial year. As your business grows forecasting and planning for the future is critical, and this will be more accurate if you have a separate bank account. Shop around and meet with the advisors at the different banks to find one that will support you as you start your business.
These are three key areas that you need to consider as a start-up. Our next blog is going to give more tips to help you start your business.
We are proud to have helped a lot of business start-ups and understand fully the challenges that you face. If you need any advice, please do give us a ring on 01623 490 120 or email