Data suggests that there has never been a more popular time to start your own business. Company registrations are at an all time high in parts of the UK, and evidence suggests that more and more of us are forking out hard earned cash to attend entrepreneurial events.
Getting going with a business is far from easy however. The obvious starting point is an idea, which may be born out of a gap in the market or seeing a product or service and believing you could deliver it better. Then there is the financial side of things to consider – start up capital is of primary importance in the short term, but longer-term profit and sustainability must also be considered.
Legally, starting a business can be fairly straightforward. Sole trader status is afforded to anyone who registers as self-employed with Her Majesty’s Revenue and Customs (HMRC), and with a low turnover would not require VAT registration or the submission of annual accounts.
For most though, registering a company will be important, not least for the prestige that company registration carries in terms of convincing clients that you ‘mean business’, but also as it opens doors to bank finance and tax benefits that are just not available to sole traders.
Company registration is quick and easy and can now be completed online for a small fee. For those who want peace of mind, asking your local solicitor is a good option, as they can talk through some of the basics before you get going.
Company formation is more difficult when there are other parties involved. It is possible to register a ‘one person’ company, with one director and no company secretary, however when more parties are involved you will need to divide shares and may then require a shareholder agreement. This is something you will want to take legal advice on, even if you decide to write it yourself.
The process of starting a business becomes more complex when moving on to consider contracts for sale, terms and conditions of trade, renting of business premises and hiring of employees. Each of these areas is complex, and will again require expert legal advice to get right.
Whether you decide to run a company, or operate as a sole trader, you will have annual paperwork obligations. For a sole trader this will probably extend no further than a tax return, but for a company director this will also include an annual submission of accounts to Companies House, as well as other financial submissions to HMRC.
Getting to grips with your legal obligations early on is vital to avoid nasty surprises later on. This is especially true if you have never been self-employed before. There are financial penalties for the late submission of financial documents, which can be avoided by acting early. It is now possible to do much of the paperwork to run a business yourself, but it is still important to get good legal advice at the outset and from time to time thereafter, to ensure you stay up to date with regulations and to avoid missing important deadlines.