It is the ambition of many people to run their own business. Some may have been made redundant and find themselves with free time and financial resources. Others make the decision to start up in business to be more independent and obtain the full financial reward for their efforts.
Whatever the reason, a number of dangers exist. Probably the greatest concern is the possibility of business failure.
Read on for guidance on some of the factors which need to be considered before trading begins.
This factsheet cannot cater for every possibility and any decisions should be supported by professional advice.
In order to make your business a success there are a number of key factors which should be considered:
In addition to these general considerations there are a number of more specific matters.
The business plan
The business plan is the key to success. If you need finance, no bank manager will lend money without a sensible plan.
Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.
There are three common types of business structure:
The appropriate structure will depend on a number of factors, including consideration of taxation implications, the legal entity, ownership and liability.
There are minimum requirements for the contents of business stationery, both paper and electronic, which will depend on the type of business structure.
Books and records
All businesses need to keep records. They can be maintained by hand or may be computerised but should contain details of payments, receipts, credit purchases and sales, assets and liabilities. If you are considering purchasing computer software to maintain your records, obtain professional advice.
The books and records are used to produce the accounts. If the records are well kept it will be easier to put together the accounts. Accounts must be prepared for HMRC and if a company is formed there are strict legal requirements as to their layout. The accounts and company tax return must be submitted electronically to HMRC in a specific format (iXBRL).
A company and a LLP may need to have an audit and will need to make the accounts publicly available by filing them at Companies House within a strict time limit.
When starting in business, taxation aspects must be considered.
When starting a business you should consider the need to register for VAT. If the value of your taxable sales or services exceeds the registration limit you will be obliged to register. If you are VAT registered you will also need to consider appropriate software to ensure that you comply with the Making Tax Digital requirements.
For the business to get off the ground or to enable expansion, it may be necessary to employ staff.
It is the employer’s responsibility to advise HMRC of the wages due to employees and to deduct income tax and national insurance and to account for student loan deductions under PAYE. The deductions must then be paid over to HMRC. Payroll records should be carefully maintained.
Under Real Time Information an employer must advise HMRC of wages and deductions ‘on or before’ the time they are paid over to the employee.
Employers are also required to automatically enrol all eligible employees in a pension scheme and to make contributions to that scheme on their behalf. Enrolment may be either into an occupational pension scheme or the National Employment Savings Trust (NEST).
You will also need to be familiar with employment law.
There are many pitfalls to be avoided in choosing a property. Consideration should be given to the following:
Comprehensive insurance for business motor vehicles and employer’s liability insurance are a legal requirement. Other types of insurance such as public liability, consequential loss, business assets, Keyman and bad debts should be considered.
Putting money into a pension scheme can be a way of saving for retirement because of the favourable tax rules.
Whilst some generalisation can be made about starting up a business, it is always necessary to tailor the strategy to fit your situation. Any plan must take account of your circumstances and aspirations.
Whilst business success can never be guaranteed, professional advice can help to avoid some of the problems which befall new businesses.
We would welcome the opportunity to assist you in formulating a strategy suitable for your own requirements. We can also provide key services such as bookkeeping, management accounts, VAT return and payroll preparation at an early stage. Please contact us to find out more.