Here at Biz Speed Legal we are keen to see people succeed and take great pleasure in assisting our readers with their entrepreneurial dreams and ambitions. This article covers some of the basics that you should consider if you wish to start or are thinking about starting your own business.
The benefits of self-employment
- Get to ‘Be Your Own Boss’
- Set your own working hours
- Potential to make more money than when working for someone
- Ability to work in a field or area you are passionate about
- Are able to work anywhere(if you choose to)
The negatives of self-employment
- No sick pay/ holiday pay
- May end up working long hours to make ends meet
- Potential financial risk
- Lack of job security
- Inconsistent income
- Potential increase in amount of stress and it’s affect on your health
- Required to do a Self-Assessment Tax Return
As you can see there a long list of different items to consider when looking at starting a business, and the above comparison is by no means exhaustive. A large part of the decision process will depend upon the type of business you wish to start. Each my bring along its own specific positives and negatives.
There are many different legal aspects to consider with starting a business but one of the most important is the legal business structure. Here in the United Kingdom we have four main different legal structures.
- Sole Trader
You run your own business as a self-employed individual. You keep any business profits after tax, but are personally responsible for any debts and losses your business makes. To register contact HMRC and register for Self-Assesment.
You and your partner (or partners) share the responsibility of your business. Including any profits, or debts and losses made. Each partner pays tax on their share of the business. Partners don’t have to be people, a limited company can be a partner of another business. To set up you require a business name, to choose a ‘nominated partner’ and to register with HM Revenue and Customs. The partner nominated is exoected to manage the partnership’s tax returns and keep business records.
- Limited Company
You can start your own business as a limited company, which is a legally separate entity from the people who run the business. The company has its own finances and can keep any profits it makes after paying tax. To set up a private limited company you will need to register with Companies House. You will need a company name, a company address, one or more company directors, details of company shares, to know what your SIC code is, (this relates to what your company does). Also required is an agreement from shareholders to create the company and rules and the details of anyone with more than 25% shares in the company.
- Social Enterprise or CIC(Community Interest Company)
A Community Interest Company (or CIC) is a business which has social, charitable or community-based objectives. It is a ‘not-for-profit’ company. Which otherwise trades like a limited company, except it has stricter regulation. To form a CIC you will need: a ‘community interest statement’ explaining what the company plans to do. To create an ‘asset lock’- legal limits on what money it can pay shareholders and a promise that it’s assets will only be used for its social objectives. Finally you need to get your company approved by the community interest company regulator(applications are automatically sent to them).
Create a Business Plan
After you have decided on the legal structure required for your business, you will need to develop a business plan for it. A quick google search online will reveal many freely available business plan templates and it is advisable to download and take a look at a few of these to gain an understanding of what is required and expected within the document. The business plan may include:
- An Executive Summary
- A Description of the Business
- Products and Services
- Marketing and Sales Information
- How your business will operate
- How will the business develop
- Financial Summary