The first step when you are starting a business is to create a business plan. This is particularly important if you plan to seek investments from potential investors. A business plan can be as simple as you want, however the more detail you add the stronger it will appear to investors.
As a starting point your business plan should include:
The next step in starting your business should be to consider names for your business. This can often be quite a time consuming step as finding the right name for your business that adequately describes what you do and is still available is not easy.
If you wish to set up as a sole trader then your main consideration will be whether the name you have chosen is available as a domain name. You should seek out .com and .co.uk domains as these will typically draw more traffic to your site.
If you wish to set up as a limited company then you also need to consider whether your desired name is still available on companies house, if it is then registering on companies house will give you protection from preventing anyone else from registering your name as a LTD company.
Once you have established the basics it is also necessary to be aware of your on-going responsibilities which will vary depending on your business structure.
The company has on-going reporting and filing responsibilities in each financial year.
The company must register for VAT if it expects turnover to be more than £77,000 a year.
Directors must send in a self-assessment tax return each year and pay tax and National Insurance through the PAYE system if the company pays them a salary.
In order to decide which structure to choose it is important to weigh up the pros and cons based upon your individual circumstances. Important questions to ask yourself should be:
Do I want my finances to be separate from the business?
Am I willing to devote time to setting up a company or LLP and dealing with the extra administration involved in running it?
Am I comfortable with financial information about my business becoming public (i.e. filed at Companies House) if I go down the company or LLP route?
Will my business be seen as more professional or established if it is a company or LLP which is registered and regulated by Companies House?
Insurance is a protection against damage and loss and is imperative for any business to mitigate risk.
In order to decide what insurance cover you need for your business you must first consider what risks your business is exposed to and balance this against the cost of insurance.
Insurance is important no matter what trade you are in and is definitely worth considering as it can give you peace of mind so that if the worst does happen, your insurers will help you get back into business as quickly as possible.
Typical insurance policies can vary and include:
Employers’ liability – all employers of staff based in England and Wales must, by law, purchase Employer’s liability insurance coverage of at least £5 million. This will pay out if an employee suffers personal injury at work.
Public and product liability – this type of insurance is also common most policies will provide indemnity cover of £2 million, which can be extended to £5 million for the majority of trades, including cover for personal liability of employees and directors in the UK.
Temporary employees – up to five temporary employees (including sub contractors).
Legal protection – to protect you in case a customer sues you; this sometimes includes cover for contractual disputes and debt recovery.
Money – if it gets stolen on your business premises or in transit.
Assault – compensation for death or injury to an employee as a result of an assault.
Many business insurance policies also offer, as additional paid-for options:
Property damage – accidental loss or damage of equipment, stock and tools.
Contract works – for construction works, material and plant.
Business interruption – increased loss of income (but normally unavailable for the construction trades).
Legal and Contractual Considerations
Contracts are a key part of any business. Certain contracts must be in writing but most day to day contracts, including those for the sale of goods and services, can be made verbally.
However, to protect you and your customers, it’s much better to make sure you conduct your business using watertight and legally-binding written agreements.
Why use standard terms and conditions?
Reasons to use standard terms and conditions include:
making everyone aware of their rights and obligations from the outset.
allowing the parties to focus their energy on agreeing the specifics of a particular order.
comfort that you are contracting on terms you can comply with.
makes it easier for your employees to conclude contracts.
What they cover
The standard terms will apply to every order or transaction you undertake. They should cover all the topics that apply to all your transactions, including:
The specifics of the transaction will be set out in an order and will include:
You must make sure your standard terms apply to all orders
For the terms to be legally binding and apply to your orders, you must bring them to the attention of your customers before an order is made.
It is no use relying on terms printed on the back of your invoice after the goods or services have been provided. You should include a copy of your standard terms in any:
If you are conducting business via a website, you will need to ensure customers agree to the terms before placing an order, preferably by clicking an “I agree” button.
Particular rules apply to standard terms
The position here depends on whether you are dealing with another business or a consumer and whether you are selling goods/services via a website.
When a business deals with an individual consumer, certain terms will be included by law in the agreement and cannot be excluded. These terms are often referred to as a consumer’s “statutory rights.”
If you are selling to consumers via a website, further considerations come into play, including a right to return goods within seven days for any reason.
If you are dealing with a consumer, it’s also much more difficult for you to exclude or limit your liability if something goes wrong.
When a business deals with another business, there is more scope for excluding statutory terms and for limiting or excluding liability but care must still be taken.
HMRC may wish to inspect your business records to ensure that:
Why do I need to keep records?
The key requirement of an accounting system is permanence.
You are not allowed make business records in a form where they can be erased or changed.
All accounting and bookkeeping rules are based around a systemic requirement to:
If the business can be shown to be making a profit within that accounting period, then it may have to pay tax on the accumulated profit earned.
Whether in hard copy, electronic or any other form:
A company must state its name, in legible lettering, on the following –
On all of its business letters, order forms or any of the company’s web sites, the company must show in legible lettering –
Whenever an email is used where its paper equivalent would be caught by the stationery requirements then that email is also subject to the requirements. The above also applies to Limited Liability Partnerships.
Working From Home
Nothing could be simpler but you should still check that your mortgage allows you to do this and notify your insurance company, as this may be viewed as a change of use.
Special trades Certain businesses, including:
have separate regulations relating to their premises and/or need a special licence to trade. Contact your local Planning Department for more information.
Trading laws A large number of trading laws apply to trading in the UK, at least some of which are likely to apply to you and which include: