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Starting A Business - The First Steps
Thinking of starting your own business? If so, you’ll know it’s an exciting, yet daunting prospect. Even so, it is important to ensure that every decision you take is the right one for your business. To start with, you should prepare a full business plan and establish sources of funds and tax-efficient borrowing. Your business plan should set out what your business is going to do, detail the research you have carried out to prove that a market exists for your product or service, and give projected figures for the first six to twelve months of trading. You should get yourself an accountant if you do not already have one, and discuss with them whether your business needs a PAYE scheme or should be VAT registered. An accountant will also help you assess the business structure that will best meet your needs: sole trader, partnership, limited liability partnership (LLP) or limited company (Ltd company). There are both advantages and disadvantages for each structure with respect to control, perception and costs. Another important consideration is selecting the right year-end for your business. If you plan to become self-employed, failure to notify the Inland Revenue within three months of the last day of the month in which the self-employment begins will result in a £100 penalty. There are several reasons why a limited company is often considered better than working as a sole trader or in a partnership. Forming a limited company can make sense when the limitation of liability is important. Trading through a limited company can also be an effective way of sheltering profits from personal tax as profits paid out in the form of salaries, bonuses or dividends will normally be taxable at an individual’s top rate, whereas profits retained within the company can be taxed at a rate as low as 0%. Although leaving profits in your company can be tax efficient, you need money to live on. You should take professional advice as to the most advantageous ways for you to extract profit from your company. A salary may meet most of your needs, but don’t overlook the use of benefits in kind and dividends, which may save you income tax and could also result in a lower National Insurance bill. -------- David Miles is the editor of the Advice 4 Businesses website. Advice 4 Businesses is a free information resource for anyone running their own business or thinking of starting one. The site contains articles and advice on all aspects of starting and running a business, and can be found at http://www.advice4businesses.co.uk. Copyright (C) 2005 David Miles. |
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More articles on starting a small business Starting a Business: Who Wants to be an Entrepreneur? 5 Doorways to Building a Business Business Bank Accounts: How to Choose a Bank For Your Small Business |
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