The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Set Up Your Business
Setting up your own business isn’t easy, there are several steps you need to take to ensure you’re on the right path and have everything in place ready to succeed. This infographic by DLR Accountants looks at these very steps, from choosing the company type (such as a limited company or sole trader) to the various factors you need to bare in mind. These factors include business finances, national insurance, employing staff and tax.
The bottom of the infographic gives you a glimpse into what kinds of company see the highest profit margins. Profit may not be everything when you first start your company, but early profits can really help to properly boost your business. Did you know that e-commerce and online auctions only see a 7% profit? In comparison, street vendors can get up to a staggering 23% profit.
It’s amazing to think that even smaller businesses like street vendors are capable of such great profits. Your business idea may not be similar, but this chart can help you see what kinds of business do better. By the looks of it, there is a pattern in the form of customer engagement. More engagement means more profits, so choose your business wisely, then use this guide to help you make it official!
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Guide To Setting Up Your Business
TYPES OF COMPANIES
PRIVATE LIMITED COMPANY
There must be at least 1 ‘Director’ to run the company.
You need to register the company in order to get a ‘Certificate of Incorporation’ which shows the company date of formation, company number, and proves the company legally exists.
When you register you must make a ‘statement of capital’ – this is the number of shares the company has and their total value, and the name and addresses of all shareholders.
There were an estimated 4.9 million private sector businesses in the UK at the start of 2013, the highest estimate since 2000.
SOLE TRADER
Sole Traders must register with HM Revenue & Customs (HMRC).
A sole trader runs their own business as an individual, also known as being ‘self-employed’. This means you can keep all the company profits after you’ve paid tax on them.
You must register for Self Assessment with HMRC as soon as possible after starting your business.
You need to register the company in order to get a ‘Certificate of Incorporation’ which shows the company date of formation, company number, and proves the company legally exists.
Being a sole trader doesn’t mean you have to work independently, you can still employ staff, it just means you are responsible for the company.
There were 127,000 more non-employing businesses in 2013 than at the start of 2012.
BUSINESS PARTNERSHIP
When you register for Self Assessment you need to choose a ‘nominated partner’. This is the business partner who is responsible for keeping business records and managing the partnerships tax returns.
A business partnership and individual partners must register for a Self Assessment with HMRC and follow certain rules for running and naming the business partnership.
Business partners are responsible for any business debts, bills, sending personal Self Assessment tax return annually, paying income tax on your share of the profits, paying NI, and the nominated partner must send the partnership’s tax return.
In a business partnership, you are running a self-employed business, but all the business partners share the responsibility. This means you can share profits and each partner pays tax on their share of the profits.
Business partnerships represented 11.2% of total enterprises in 2013, down 0.7% from the previous year.
FACTORS TO CONSIDER
BANK ACCOUNT: Open a new business bank account or use an existing one.
NATIONAL INSURANCE: You will have to pay national insurance if you’re self-employed & earn over a certain amount.
EMPLOYING STAFF: You must pay the national minimum wage & have a contract of employment with your staff that states the employment conditions, rights, responsibilities and duties.
FINANCE & SUPPORT: Opportunities include government & EU grants, loans, overdrafts, shares, leasing equipment, and invoice financing.
VALUE-ADDED TAX (VAT): You must register for VAT with HMRC if your business turns over more than £81,000.
The ideal business premises will prevent you from paying unnecessary costs and will cater to your business needs. Firstly need to consider your business needs and what you can afford.
Working from home can be much cheaper than renting an office space.
List what it is that you need from your premises, and what is essential.
Choosing the right location will have an impact on customers and staff.
Consider car parking and local transport.
Size and layout of the building and office – little space will limit the chances of growing the business in the future.
Check if the facilities are good enough for employees or if there are any special requirements needed.
BUYING
To buy a premises means there’ll be expenses such as: purchase price, maintenance and repairs, solicitors fees, building surveys, stamp duty.
You will also need a commercial mortgage and find a 15% deposit to qualify for the mortgage.
You’ll own the property meaning you can stay there as long as you like, change the layout, and decorate it how you wish.
RENTING
Most businesses choose to rent because it’s easier, cheaper, and more flexible. You can agree to the conditions of the business lease in advance, and you are usually well protected legally.
Consider that you’ll likely be in charge of maintaining and repairing the building. You might not be able to change any interior layout and your rent may at some point increase.
To rent you’ll have to pay a premium to buy the lease. Commercial leases usually run for a minimum of 15 years, so choose your premises wisely.
WHETHER BUYING OR RENTING…
Always check all legal terms, such as hidden clauses, obligations or costs. Use a commercial property solicitor to check through your lease or mortgage.
Consider the costs of equipment such as IT, stationary, vehicles, furniture, and paying a removals company to move you into the premises.
ONLINE BUSINESS
It is estimated that by 2020, 90% of all transactions will take place online.
With any business, it is important to make a business plan, complete market research, identifying audience, assessing the demand and competition.
You must register for VAT if your sales are likely to exceed the annual threshold of £79,000.
Online traders have to take into consideration the Data Protection Legislation when storing important information about customers.
Creating your own website will save you money, but if you want the most professional profile possible you can pay a web designer to design one for you, which will cost around £2000 for design, domain name registration, and the arrangement of hosting of your site by an internet provider.
![Guide To Setting Up Your Business [Infographic]](https://cdn.confessionsoftheprofessions.com/infographics/business-guide-infographic.jpg)
