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Whether it is fulfilling an ambition to run your own business or perhaps an unfortunate event such as redundancy has led you to need to think about working for yourself, the thought of setting up a business can be quite a scary one.
In this ‘How to…” we have summarised the process you will need to go through to get your business up and trading in one month once you have decided what type of work you will do and of course; your important business name!
Step 1- Choose your business entity.
Terms such as freelancing, consultant, self employed etc are all used quite interchangeably when running your own business but the first step to take is to decide what legal entity you want to be. Gov.uk breaks this down into three options. Sole trader, partnership or to form a limited company. Read more guidance here
Step 2 – Business registration
You will then need to register your business with Companies House if you are forming a limited company. For sole traders or partnerships, you must register for self-assessment to ensure your tax liabilities will be correct as you move through your trading cycle.
Step 3 – Get a business bank account
Once you know your company name and have the business registration process in hand, it is the right time to start opening a business bank account. You cannot be VAT registered for example until you have one, so this is best to get done asap. Some accounts can be opened very quickly and in less than 24hours. Others may take longer so best to shop around and consider the duration needed as part of your decision making.
Step 4 – Research your accountant
At this stage, it is best to start approaching local accountants to take on the main workload of business accountancy for you. Whilst there are digital tools such as QuickBooks and Xero which allow you to do some of the work and keep your accountancy costs lower, there are certain things which may be easier or compliant to do via a Chartered Accountant. We suggest you speak to 2-3 and whilst not essential, an accountant in proximity to your business activities is best.
Step 5 – Do I need to register for VAT?
If your revenue is forecast to exceed £90,000 per year (was £85,000) then you must also register for VAT. However, it is often forgotten that even if you do not expect to turnover this threshold it can still be possible to be a VAT registered business. The advantage of this is that you can claim back the VAT on many purchases and transactions you make for your business though you will need to do a quarterly VAT return.
Step 6 – How much do I want to spend on accountancy?
Gone are the days of paper receipts and manual book-keeping. Tax and accountancy is now moving to be a more digital process and there are some excellent tools out there such as QuickBooks and Xero which will help guide you through a lot of the processes which can seem quite daunting when you get started. Monthly subscriptions are around £15-£30 per month but by doing some of the leg work yourself helps keep your costs you pay an accountant lower and means you can work on the admin side of the business easier and smoother. However, the role of the accountant is still important, and they can be on hand to help with other matters such as VAT returns, tax assessments, payroll and much more. The size of your business will ultimately determine the cost of an accountant per year. A sole trader or small limited company may incur costs of around £500-£1,000 per year for an accountant. A larger company with more members of staff could see costs be around £5k per year.
Step 7 – Get started
With all the basics in place and with the legalities of setting up your own business established you can get started with that exciting new venture knowing you have the foundations in place to make your business compliant and profitable.
Here at Gascoynes, we can help you with any questions you may have on starting your own business or provide accountancy support once you are up and running.
If you need any help, please get in touch with the team – the contact details of our local offices can be found here.
