Business Start-Up Guide

Many of our established and loyal customers have been with us since we helped them start up in business many years ago.

Most people who start up in business do so because they have a good business proposition and the enterprise and commitment to see it through, not because they are experts in the legal, financial, and fiscal aspects of running a business.

Indeed, these matters can often seem daunting, and even off-putting, to the budding entrepreneur. The good news is that you do not need to be an expert in these fields to succeed in business. All you need is the support of a team of trained experts. That’s where we fit in. Bring us your business ideas and we’ll help you to evaluate them in a constructive and realistic manner. We can also help you:

  • Decide on the most suitable structure for your business – sole trader, partnership, limited company or limited liability partnership.
  • Prepare a business plan, cashflow projections, budgets, and trading forecasts.
  • Assess your finance requirements, advise on the best sources of finance, and draw up the necessary proposals.
  • Establish a good working relationship with your bank.
  • Complete any registration procedures with Companies House, Inland Revenue, or Customs and Excise.
  • Deal with company secretarial issues.
  • Set up accounting systems for your internal use complying with statutory requirements.
  • By outsourcing your accounting and payroll procedures.

1. BUSINESS STRUCTURE

The main structures for trading in the UK are as a sole trader, a partnership, a limited company or a limited liability partnership. This next section outlines the advantages and disadvantages of each structure in order for you to decide which best suits your short and long term goals. Apart from these matters, there are also tax and national insurance considerations in deciding which structure to adopt.

1.1 Trading as a Sole Trader
This is the simplest business structure. You can trade in your own name, or use a business name. If you have no premises or employees and turnover is below the VAT threshold, you only need to inform the DSS (Department of Social Security) and the Inland Revenue before you commence trading.

1.1.1 Advantages of trading as a Sole Trader
This is a simple business structure requiring the minimum administrative assistance.

1.1.2 Disadvantages of trading as a Sole Trader
As you trade as yourself you have unlimited personal liability. This means that you are liable for any debts of the business and your personal assets could be used to pay debts. Ultimately your creditors could make you bankrupt.

1.2 Trading as a Partnership
A partnership automatically arises where at least two people agree they will own the business and share the decision making responsibilities. There need be no formal written contract although it is advisable to have one.

1.2.1 Advantages of trading as a Partnership
Partnerships work well where there is symbiosis – where the skills and contributions of each partner complement each other and where fundamental decisions are reached after full and considered debate. Partnerships may be perceived as having more credible status in the business community than sole traders. Partners are taxed in a similar way to sole traders, upon the taxable profits of the business, divided in accordance with the profit sharing arrangement of the partnership.

1.2.2 Disadvantages of trading as a Partnership
Occasionally large legal bills arise from disputes within partnerships. You should be careful with whom you enter partnership agreements.
Similar considerations apply concerning unlimited personal liability as with a sole trader.

1.3 Trading as a Limited Liability Partnership
Previously, the only way that limited liability was available was to trade by way of a limited company. However, from 6 April 2001, an alternative vehicle, the Limited Liability Partnership, or ‘LLP’, is available. Such structures are still relatively unusual and are not discussed here in any detail as their use in business start ups is rare.

1.4 Trading as a Limited Company
A company is seen as a separate person in the eyes of the law, and it is quite separate from the individuals concerned, even if they are the directors and shareholders of the company.

1.4.1 Advantages of trading as a Limited Company
The company can own property, execute contracts, and incur liabilities as a separate legal entity. This is the principle advantage of running a limited company. The liability of shareholders is limited to the amount of capital unpaid on their shares, although often lenders to a new limited company will need personal guarantees from its directors.

There can be tax and national insurance advantages in trading as a limited company but this needs to be carefully planned.

It can also be easier to reward employees with part ownership of the business and to eventually transfer ownership of the whole business, as a limited company.

1.4.2 Disadvantages of trading as a Limited Company
There is more bureaucracy involved in operating as a limited company. More forms need to be completed and information regarding the company’s ownership and annual financial accounts are available to the general public at Companies House.

2. REGISTRATION PROCEDURES

2.1 Forming a Limited Company
New companies can be incorporated within 48 hours if necessary.

We can assist in the preparation of the documents required by Companies House.

2.2 Inland Revenue Registration
The procedures for notifying the Inland Revenue very much depend on how the business is set up.

2.2.1 Sole trader/Partnership
You will need to advise the Inland Revenue of the commencement to trade within 3 months to avoid a penalty. Tax years run from 6 April to 5 April although your accounting year will not necessarily co-incide with the end of the tax year.
We will advise you concerning tax liabilities arising.

2.2.2. Limited Companies
A form CT41G will normally be issued to each new limited company by the Inland Revenue and we can assist you with its completion.

Companies need to send their accounts and tax information to the Inland Revenue within 12 months of the end of the accounting period. We will normally prepare the Inland Revenue forms required, and deal with any queries arising.

Tax needs to be paid nine months after the end of each tax accounting period. This is usually the same period chosen for preparing the accounts.

2.3 VAT Registration
Registration for VAT requires the completion of an application form which can be downloaded via the Internet from Customs & Excise.

VAT is based on turnover and costs rather than profits and once registered detailed information must be kept to record amounts of VAT added to sales and VAT charged to you for business supplies.

These are the important VAT points to remember:

  • VAT cannot be reclaimed on a supply unless supported by an invoice giving details including the supplier’s VAT registration number.
  • A surcharge arises if VAT returns or payments are consistently submitted late. Returns and payments are normally made quarterly.
  • VAT cannot be reclaimed for goods or services not used in the business.

We can assist in VAT registration and provide specific VAT advice required either generally or during routine inspection.

2.4 PAYE Registration
Registration for PAYE is normally completed by telephone and in due course a reference number will be issued and a yellow payslip booklet issued for payments to be made. Payments are normally made monthly.
3. OUTSOURCING

3.1 Payroll
We can assist in setting up and running payroll schemes for your business including end of tax year returns.

We can also provide support during PAYE/NI inspections.

3.2 Accounting and Book-keeping

3.2.1 Establishing the System
Advice can be provided on setting up books and records, which normally will involve computerised accounting systems.

3.2.2 Maintaining the Records
We can directly maintain accounting records for you if required and produce monthly or quarterly management accounts.

3.2.3 VAT Returns
From your own records or if we maintain the records for you, we can assist in the preparation of VAT returns.