21 Jul 2021
It’s best to implement a clear filing system for your finances from the start, as this will help when it comes to tax returns, invoicing clients and payroll.
As well as keeping track of receipts, maintaining detailed records will also help with financial forecasting. As a start-up, it’s important to regularly review and map out your profit projections – including cash flow and outgoings, as well as considering your best and worst case scenarios, such as how long you could survive without turning a profit.
But it’s not just your finances – you’ll also need to think about organising the day-to-day. Build in processes, detailing things such as how to fulfil an order or invoicing a client. By putting in place clear systems from the start, you can ensure that as you grow (and perhaps take on more staff), best practice is shared and similar standards are met each time, ensuring consistency for the customer.
Starting up a business is rarely a one-person feat, and establishing both a formal and informal network around your start-up could be instrumental to your success.
When you first start out, being able to rely on friends or family is important. Your nearest and dearest can serve as a sounding board for your latest idea, an agony aunt for when things aren’t going to plan – and even be the reminder you need to take a few hours off!
Whether it’s packing boxes or supplying dinner, keep your support network close.
We’d also recommend utilising digital networking platforms such as LinkedIn to build and maintain your professional networks, as well as keeping you in the loop when it comes to changes in the market or the latest trends.
And don’t forget the contacts you’ve made over the years – from school friends to former colleagues, you never know when an opportunity for collaboration may arise.
Selecting your business structure is one of the most important decisions you’ll need to make when starting out. The format you select will impact your finances and how you pay tax (more on that later on), as well as the degree of personal liability you’ll incur as owner.
The most common structures for start-ups include:
Sole trader – this is the easiest structure to establish, but it does mean you are personally responsible for your business’s debts. While you’ll pay income tax on your profits (rather than corporation tax), you will be responsible for correctly making these tax payments and if appropriate, national insurance.
Being a sole trader means you are in full control of your business, but this control comes at a price, as your business and personal finances are not legally separate, leaving you exposed to more personal risk than other structures.
Partnership – A partnership is the simplest way for two or more people to run a business together. You share the risks, costs and responsibilities of running a business.
Starting up a business can push even the closest of friends to the brink, so while you and your business partner(s) may begin with the best of intentions, it’s best to have a Plan B should things go south. We’d advise signing a formal written agreement to assist with any disputes later down the line. It’s also worth noting that should your partner be successfully sued, all partners must share the damages – so choose your companion wisely!
You could also opt to operate as a Limited Liability Partnership or Limited Company – these come with their own taxation rules and responsibilities. If you’re unsure about which structure best suits your start-up, make sure to speak to one of the team at Harding Evans.
It’s essential that you notify HMRC promptly that you’re setting up a business, as well as providing them with detailed information of your income and expenditure to ensure you’re being taxed the appropriate amount.
Your business structure will impact the paperwork you’ll need to complete – as a sole trader, for example, you’ll need to register for Self-Assessment to enable HMRC to collect Income Tax, whereas a limited company will be required to pay Corporation Tax.
By registering with HMRC, you’ll also be given the option to become VAT registered. It’s not compulsory until your turnover exceeds £83,000.00 but you can opt in voluntarily. There are benefits to doing so, including being able to reclaim the VAT that is charged to you by other businesses, but it can also increase the price you’ll need to charge for your own goods or services – we’d recommend discussing your options with a financial expert.
With so much to think about, it’s easy to push the legal aspects of starting a business to the side. However, this could cause serious headaches down the line, not to mention precious time and money.
You’ll need to consider the different type(s) of insurance you’ll need, if you’ll lease property (and the terms you’re bound to if doing so) and if you’re employing staff; contracts, pensions, the recruitment process and how you’ll manage your team.
We’d also recommend ensuring you’ve got watertight terms and conditions and trading contracts in place from the off, to avoid or mitigate any disputes that may arise further down the line.
We know how overwhelming this can be, which is why we’ve been working hard behind the scenes to bring you a whole host of dedicated start-up business content. We will be releasing this over the next few months in the form of blogs and podcasts, so make sure to keep your eyes peeled for more information.
In the meantime, if you require expert advice tailored to your business needs, make sure to contact our Commercial Services team either via email, email@example.com or by giving us a call on 01633 244233.