Starting a business
All businesses begin with an idea. Perhaps you have a barn you want to convert into a holiday cottage, or a dream to open a wine bar - or maybe you've built a website that receives thousands of hits a day. Whatever your idea, you will need a solid business plan to sustain it and let it grow.
Starting a new business can be a notoriously risky venture, with around 50% of all start-ups failing within the first three years of their launch date. It may save you money in the long run - not to mention time and mistakes - to hire an accountant at the early stages of starting your business.
Although it is important to start your business with a positive mindset and a hopeful outlook, it can pay to be careful during the preparation stages. Thinking up a good idea, catchy name and sleek logo is only the beginning of an often complicated process of research, registration, record keeping, finance forecasting and HMRC paperwork.
This guide will explain methodically, and as simply as possible, exactly which steps you will need to take in order to start your new business, whether it's just you and a computer, or you and 200 employees.
Business ownership structure
Starting a business step 1 - Decide on a business ownership structure
For tax purposes, all businesses must be registered with HMRC before they open for trade. HMRC will require you to identify your business's ownership structure. The main business ownership structures are:
- Sole trader - If it is just you who owns the business
- Partnership - If two or more people share ownership of the business
- Limited Company - If ownership is shared amongst numerous investors with limited liability
Limited liability partnerships and limited companies are not required to register with HMRC because Companies House will do this for them.
The ownership structure you choose will affect certain aspects of your business, such as:
- Any potential risks and liabilities - such as responsibilities for debts upon the event of liquidation
- Registration expenses
- Types of tax you are required to pay - e.g. Corporation Tax and Capital Gains Tax
- Renumeration - whether you receive earnings as salary, dividends, drawings etc.
Starting a business step 2 - Research and plan
By this stage you will have decided what kind of ownership structure your business idea requires. The next step is to conduct as much research as possible in order to compile your business plan.
A business plan is a formal document outlining every single detail of your business concept, from target audience, to branding, to financial forecasting. The point of a business plan is to act as a communication tool between you and the outside world e.g. HMRC, your accountant or potential investors.
If your plan isn't convincing, it won't be taken seriously. Your business plan should include the following:
- a clear overview of your business concept
- your future plans, goals and objectives
- details of owners and managers
- details of the products or services you wish to sell
- market research into both the industry and target consumers
- marketing strategies (including proposed pricing, physical distribution and promotion)
- legal and administrative requirements
- financial plan (including cash flow, projections, budgets and trading forecasts).
Although the financial plan comes last, it is an absolutely vital part of your business plan and, without it, you are unlikely to be taken seriously by any potential investors or authorities.
Register your business
Start a business step 3 - Register your business
All businesses are legally required to register with HMRC for tax and National Insurance reasons. Limited companies must also register with Companies House.
For more information on how to register your business, follow the relevant links below:
Registration is not set in stone. If your business develops and at a later point you wish to change your business ownership structure, you can re-register.
How an accountant can help you start a business
Many accountants and accountancy firms offer business advice services to their clients and will help during the preliminary start-up stages.
Whether you want full control over all of your financial matters, or whether you would rather leave it entirely in the hands of an external body, an accountant can be on hand to help and guide from the very beginning.
An accountant can help you set up your business by:
- helping you decide which business ownership structure to follow
- helping you with your financial plan
- handling all registration papers
- acting on your behalf throughout all HMRC correspondence.
If you would like to find out more about how accountants work, how much they charge and how to find one, please visit our FAQ page.
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