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Wednesday, 06 May 2015 08:57

Getting Things Right From The Start With Your New Business

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In my role as an Accountant and tax advisor I meet many people who have started a new business and a common misconception I hear is “ I don’t need an Accountant for the first year “.

Whilst it is true that you may not need to file any accounts until you have completed your first year of trading, I would suggest that meeting with an Accountant in the early stages of starting your new business is a really good idea.

Getting the right advice at the outset will ensure that you get things right from the start. No-one wants to sit down with an Accountant after their first years trading is complete to hear “why did you do this or why did you do that, or if only you had done this you could have saved lots of tax”

There are lots of considerations when starting your business and making the right choices for your business could make a big difference to your overall tax liability.

Some of the things you should seriously consider when starting your business are as follows:

  • What legal status should you trade under? Would you be best off as a sole trader, partnership, Limited liability partnership or private Limited company? You need to make this choice from the start as you cannot change this retrospectively.
  • Should you register for VAT? If your turnover exceeds £81,000 then VAT registration is, in most cases, compulsory. However you can register voluntarily with a turnover below £81,000 and this could be beneficial for you.
  • Are there any special schemes you could take advantage of such as the flat rate scheme for VAT, or cash accounting for VAT and income tax?
  • Would it be beneficial to provide certain benefits through the business such as a company vehicle or medical or life assurance.
  • If you have a business partner have you considered a partnership or share holders agreement? Have you decided how you will split the business profits between you?
  • Have you thought about how you will keep your accounting records ? What systems will you use to ensure you have a good handle on the business finances and to ensure you give a good set of records to your Accountant at the end of the year in order that they can process your accounts efficiently and cost effectively.
  • What terms should you negotiate with your customers and suppliers to ensure you can maintain the business cash flow and remain solvent and profitable.
  • Have you considered what finance the business may need and how you can seek to raise this. There are many ways of accessing finance such as traditional Bank loans to crowd financing, venture capital and schemes such as EIS and SEIS.

You may have other considerations and concerns apart from those listed above and taking professional advice from the outset can help ensure you make the right decisions.

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    Despite what many people say, starting a business is easy, however, it is also easy to get it wrong!

    You can grab a bucket of water and chamois and become a window cleaner.

    You can register a limited company for under £20 in 15 minutes.

    You can start a partnership with a shake of the hand.

    See, it is easy.

    However, if you do not set the foundations correctly, you will probably have some issues further down the line, which could cost you your business.  Here are a few things to look at or consider when starting up.

    1. Are you ready for hard work?
      In many cases, people coming from a cosy commercial background, working a 9-5 and being paid the same amount at the end of every month, get a wake up call when they have to work 12+ hours a day, 7 days a week or they do not earn anything for several months.  Make sure you have realistic expectations from the start - plan for the worst and every on top is a bonus!
    2. Make sure you have a partnership agreement
      I have been asked to intervene on too many occasions where, after the startup honeymoon period, one person ends up doing more than the other.  This is also relevant in cases of illness and maternity, where one person is taken out of the business for a period of time.  At the very least, make sure you have a written agreement about who will do what and where responsibilities lie.  In many cases this will need to be revised, as the business grows, but you all have to understand where you all stand.  A shareholder agreement will also save a lot of stress should one person want to do something major, such as bring another person in, sell the company or simply get out!
    3. Don't automatically become a Limited company
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  • The Signs That You Should Start Your Own Business
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      It suddenly dawned on you that that you wanted something different or better and are now motivated to make the change
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    7. You're fed up of the daily commute
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    8. You're happy getting your hands dirty
      If you do not have an issue with rolling up your sleeves and diving in, you will enjoy starting a business, as there is a lot of effort in the early stages.   OK, sometimes it might not be that enjoyable, but that doesn't bother you... does it?
    9. You hate working for others
      If you seriously can’t stand taking orders, loathe your boss and all his (or her) demands, start planning your exit strategy of becoming your own boss.
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    11. You have always wanted to be your own boss
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    13. Redundancy looms ahead
      In these uncertain financial times, jobs for life are not as common as they once were.  If you face redundancy, starting your own business should definitely be potential career move to look at.
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      You may be key to your companies success, but, sadly, are taken for granted.  Why not take your talents and use them on the open market?
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    18. You are always looking at the angles
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    I am sure that there are lots of other reasons - if you can think of any, add them in the comments box, below.