Many people aspire to one day run their own business but many people are put off taking the plunge because they are concerned about the complications and issues surrounding starting up in business.
They may well have a fantastic idea, product or skill to bring to market but the worries of legal status, dealing with tax and HMRC and simply the worry of the unknown are putting them off.
When I meet with anyone considering taking the plunge I will often hear the same questions and concerns. Should I be a sole trader? Is Limited company right for me? How and when do I deal with tax implications? VAT? Who do I need to inform and register with and when? The list can seem endless and daunting especially when in those early days you need to concentrate on getting the business going, finding those first customers and getting that first sale through the door.
Speaking to someone who can take these worries away is vital. Most accountancy firms will offer free initial consultations to allow you to ask these questions and help to take these first steps. Getting things right initially is essential and investing some time early on getting things correct will save time, money and hassle later. Often there is a fear that the question being asked is stupid. The phrase “the only silly question is one that is not asked” is more often that not correct in this case.
Certain questions you may have can be easily and simply answered for instance, you have three months from commencing trading to advise HMRC of your new sole trader status but other questions may well be more complex and the right answer for you will depend on a number of circumstances. A prime example of this is the age-old question should I be a Limited Company or trade as a sole trader. You will find if you approach the bank to open your business account this will be the first question they ask. There may be a very good reason from a tax perspective for choosing one option or the other but from a personal circumstance, this may not be right for you. Discussing your personal circumstances, type of business and environment you will be working in will all help your adviser build up a picture so they can provide you with the answers you need to make the right informed decision that suits your circumstances.
” Should I be a sole trader? Is Limited company right for me? How and when do I deal with tax implications? VAT? Who do I need to inform and register with and when? “
VAT is another prime example of an area that can appear simple and straightforward to answer. The current VAT registration limit is £83K turnover. At which point you must register, however you can register early. Yes this is an added admin burden but you may be dealing with a larger business who can reclaim the VAT in any case and by being VAT registered your business can appear larger and more established. You can also consider the various VAT schemes, flat rate is an example here where you may be better off depending on the business circumstances.
Over the coming issues I plan to look at the questions often asked by new startups and will be looking at issues ranging from legal entity to trade under, the difference between the various legal entity options, tax implications, VAT, registration of trading, company formation, records to maintain and expenses that should be claimed for and many more….
Are you looking for the Financial Forecasts article? It will now appear in the next edition of 4 Business.