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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
      In many cases this will be the best solution, as it offers levels of protection that being a sole trader or partner doesn't, however, there are lots of things to consider before making the decision - personal circumstances, finances, industry you are in etc.  Make sure you fully understand the implications of you chosen trading route.  Your accountant or a business specialist should be able to help.
    4. Shareholders do not need to be directors.  Directors do not need to be shareholders
      Simple, really.  But too many startups do not understand this.

    Baring these in mind will enable you to act in ways that will prevent headaches, heartaches and business failure - make sure that you do more than read them!



  • Starting A Great Business From An Everyday Activity
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    What this has, again, highlighted is that a relatively boring (despite what all of the branded TV adverts claim), can be transformed in to a potentially big and profitable business - good luck to them!

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  • The Signs That You Should Start Your Own Business
    Do you have an idea for the next big thing?  Are you fed up with the monotonous 9-5?  Want to have a better work life balance? Whatever your reason for wanting to start your own business, you will probably be making the best decision of your working life, however, how do you know you should take the risk? Here are a few signs that taking the leap might be the thing for you.  
    1. You feel stuck in a rut at work
      If you dread waking up every morning and having to make that commute, then you’re probably unfulfilled. A promotion or another role might abate the problem, as might a new job, but deep within you the prospect of an ordinary 9-to-5 just doesn't excite you any more. You do need to work out if you want a change of scenery or a totally new challenge!
    2. You have an idea for the next best thing
      Have you spotted a gap in the market?  Can you do something better or cheaper?  Have you invented the newest widget?  Whilst you could work with a third party, you will more than likely want to make things happen yourself
    3. You are independent
      Are you a problem solver or can easily work on your own?  You already have some good entrepreneurial traits!
    4. The lightbulb switched on
      It suddenly dawned on you that that you wanted something different or better and are now motivated to make the change
    5. You are always thinking and coming up with ideas
      Good entrepreneurs are always thinking about their idea, their business and maybe their next business
    6. You can afford to take risks.
      If you’re single, without young children or successful in your field and financially comfortable others, now may be the ideal time to follow your dream or be a little adventurous.
    7. You're fed up of the daily commute
      So you stand on a train for hours every day or sit in traffic jams on a regular basis?  Maybe you should look at starting a home business - over half of the UK's businesses are!
    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.
    10. You think you could to things better
      Maybe you're confident that you could run a business better than your boss.  Maybe you are an egomaniac.  Whatever the reason, if you have the belief and confidence, it is a great foundation for break.
    11. You have always wanted to be your own boss
      Whether you do not like being ordered around or you want to be more in control of your own destiny your want to be the decision maker
    12. You Want a better work/life balance
      Whilst running your own business can mean that you will be at home more ofter, have to work more sensible hours and commute less, it can also mean working 24/7, depending on the market you are in or the speed you want to move at.
    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.
    14. You achieve a lot at work and are not recognised or rewarded accordingly
      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?
    15. You're simply seeking a new challenge
      Maybe your board in your current position and just want to do something different.  Whilst starting a business with little experience or no knowledge is very risky, the process is very challenging and could fulfill a need.
    16. You want to acquire new skills and knowledge
      Well, you will certainly do this when you start a business.  You will have to build a new set of skills and get an understanding in many different areas - accounting, employment, health & safety etc
    17. You want to work the hours you chose
      In some businesses you can put in minimal effort for great rewards or the standard 9-5 isn't necessary.  However, be careful, some businesses will need a lot more work, especially at the start.
    18. You are always looking at the angles
      Some people look at strawberry and see a fruit. Other people see fruit, jam, compote, pies, flavourings etc.  If you see beyond want is in front of you, you have a good attribute to maximise potential.
    19. You’re a natural leader
      Having a great idea is one thing. Being able to communicate that idea and convince others to jump on board is another. Look at the great or famous entrepreneurs and you will see people who can enthrall, motivate and take people on a journey.
    20. Subcontractors are taking after your business
      You see your company emply people like you, but as contractors, earning more money and having greater freedom - you feel you want a piece of that!

    I am sure that there are lots of other reasons - if you can think of any, add them in the comments box, below.