Things to consider when setting up a business

1. What stage in the setting up process are you at?

  • Vague idea?
  • Business activity?
  • Name?
  • Started trading?
  • Premises?
  • Business plan - for you, your bank and investors.  To help you monitor your progress and  keep you focused.

2. Decision on type of business vehicle

  • Sole trader
  • Partnership
  • Limited liability partnership
  • Company limited by shares
  • Company limited by guarantee
  • Community Interest Company (CIC/CIO)

Consider what stakeholders expect you to be e.g. are you applying for funding? Does being a company give you a certain status?

3. Set up business vehicle

  • Register as self employed within 3 months of starting.
  • Apply for exemption for Class 2 NIC's if under £5,885 if you don't need your NIC stamp for pension.
  • Form company - Consider shareholders/directors/year ends.

4Bank

  • Set up a separate bank account, even if sole trader, keeps things simple & clear.
  •  If a limited company, you will need an incorporation certificate to open bank account.

5. Tax considerations

  • Will you have another job as well as setting up business? If so, personal allowance will be used up by income from that job & tax will be due on any profits made from new business.
  • If pay PAYE on other job, liability due on self assessment can be collected via PAYE code helping cash flow.

Deadline for self assessment - 31 January following end of tax year. Penalties will be applied for late filing. Payments required 31 January and 31 July each year.

  •  Corporation tax - due 9 months and 1 day after the year end of the company.

6. VAT

  • If turnover is expected to exceed the threshold of £81,000 the past 12 months or in the next 30 days will need to register for VAT.
  • Will need to submit returns on a quarterly basis, paying over difference between VAT charged on sales less VAT incurred on purchases.
  • If under threshold, consider status of being seen to VAT Registered?
  • If sales are mainly business to business would it be better to be VAT Registered?

7. Compliance issues

  • Companies - Annual Return each year to be filed at Companies House.
  • CT600 to be submitted to HMRC.
  • Abbreviated accounts to be filed at Companies House.
  • Self assessment - payments on account may need to be made if liability due to HMRC is over £1,000.

8. Cash flow

  • Very important to ensure you are billing for work as you go along. Cash is King!

9. Record keeping

  • Important to keep a record of income and expenses along the way. No need to use a fancy system, simple income and expenditure spreadsheets are enough.
  • Hard to go back at the end of the year and write up all transactions, items can be missed.
  • If need help, lots of cheap cloud based systems out now, which integrate with your bank account making it easier to keep track of income & expenditure.
  • Sage One 
  • FreeAgent
  • Quickbooks Online

10. GET ADVICE EARLY ONI!

  • Consider it as an investment, not a cost! Initial meetings are free.
  • NWES/MENTA.
  • Easy to pick up and correct mistakes as go along then to go back after a few years and realise that things have not been done correctly.

For more information please visit: www.ensors.co.uk/start-ups/

 

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