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When you have your wonderful idea and you want to start a business, you
need to consider the form of your business and you've got a choice of
four legal forms, if you wish. You can be a sole trader, you can
be a limited company, you can be a partnership,
or a limited liability partnership.
And your choice will depend on several factors. You need to consider
your
commercial needs,
your tax position and how much financial risk you're prepared to take.
Usually startups go for either sole trader or
limited company,
and as you grow, you can always change the legal form of your business
after you start trading. Very important, you really need to get a very
firm handle on your tax affairs.
Again, a lot will depend upon what type of business form,
legal form you select for your business
and your accountant should be able to advise you on various tax matters,
because there are advantages and disadvantages
to being a sole trader or a limited company when it comes to tax.
For example, if you're a sole trader,
you will be paying a personal rate of tax on your profits after your
expenses. As a limited company, your tax rate would be much lower.
And again, you will need to decide whether to be VAT registered or not
and again there are disadvantages and advantages to being either.
For example, if you're buying a lot of stock or equipment when you
start your business, it might be useful to be VAT registered because you
can claim a lot of it back.
Also, if you expect high sales
from the beginning
and you will reach your VAT threshold of £77,000
then you ought to be VAT registered.
You can always deregister if your sales fall below £75,000.
Obviously, if you're planning to employ people, you will be paying national
insurance contributions, actually both for yourself and your employees, so you
need to consider that aspect as well. When you decide where to
run your business from, from home or from an office, you have to consider,
again, a number of factors.
For example, if you decide to be home-based, you need to look at your
title deed, you need to look at your mortgage obligations to see
whether there are any prohibitions of you running a business from your home.
If you run the business from home, your home might not be considered any longer
as a residential property and there might be tax implications.
There might be traffic or lots of visitors to your home, you have to
consider what your neighbours will say about that.
You might need to get planning permission. So, there is a lot
to consider.
Also, you have to be compliant with health and safety regulations,
environmental regulations,
so again, take advice before you decide whether to do it at home or whether
to hire an office.
When it comes to naming your business, you have to have
a few pointers in mind. It's an exciting time and you obviously want
to give your business a brilliant name
that encompasses what you want to do and also helps with your marketing.
It's not that easy to choose a good name, but also you need to
consider whether it's being used by another business.
Once you choose your name, you need to protect it. You can register it as a
trademark
and also you can register a domain name, or both.
There are organisations that can help you with both checking the
availability of the name and protecting it, like for
example, the Patents Office will
register your
trademark and there is a specialist website where you can check
domain names. Obviously, if you're a sole trader, you could always trade under
your own name,
but you have to bear in mind, if you trade under any other name than your
own or your registered business name, there are certain things you must do.
For example, you need to disclose your
ownership and registered address on your stationery,
on the sign outside your office and on your website.
So it is quite a lot to consider. However, I'd like to add that you
don't need to feel
abandoned to your own devices. There is a lot to
take on and a lot to consider
and equally there is an enormous amount of help
available to you.
Whether you're a member of the Institute or not, you can find
quite in-depth guidance on our website
and members have the additional advantage of being able to speak to one of our
specialist advisors,
so help is always at hand.