- 10 Nov
What You Need To Know When Starting A Business
Before You Begin
- Decide on your business structure. Are you going to be a sole trader, in a partnership or a Ltd company?
- Do your market research. Ensure you know your market well, it will help you establish early on if you business idea is a viable one
- Complete a business plan. This is key, not only if you need to secure funding for your business idea, but as a road map of where you are starting from and where you see the business going.
- Establish a brand. This will be the cornerstone upon which your business is built, ensure that you take time to think about your business name, logo and business stationery. Remember first impressions count.
- Establish a web presence. Ensure that you have a well designed website that complements your brand and is a compelling sales tool.
- Understand your finances. Ensure you understand how to deal with bookkeeping and cashflow issues, you may choose to work with an accountant to help you with this.
- Take time to understand the basics about setting up a company, there is plenty of help available for this.
- Contact HMRC to inform that you are starting a business
- Set up a business bank account
- Decide on what equipment you will need to get started and factor this in to your business plan
- If you are setting up from home, consider whether a virtual office is right for you
- If you need premises think about whether you will buy, lease or enter services offices. Think about the location and ensure you have explored every option before committing yourself.
- Ensure you are aware of what regulations apply to your business before you start.
- Protect your intellectual property. Whether it be your logo or your groundbreaking innovative business idea, ensure you protect it by familiarising yourself with intellectual property law.
- Ensure you understand tax law, this is essential no matter what size business you are in
- Be aware of the different types of insurance required for your business, make sure you are prepared for the unknown
- Familiarise yourself with the legislation and regulations that apply to your business. Don’t forget about Health & Safety.
How do you choose between a salary, dividend or pension contribution?
It is important to take time to think about how much salary you wish to pay yourself when you work for your own company. Not only for cashflow purposes but also for tax efficiency. You should also consider how much you wish to pay into a pension fund and how much of the remaining profits you wish to take as dividends.
Providing it is your only income, you can take a salary that is covered under your personal allowance of £10,600 (2015/16) and it will be tax-free. It is important to realise though that if your business has more than one employee, including directors, then anyone with a salary of over £10,000 will need to be enrolled in the Company’s pension scheme.
Your company pension scheme can also provide you with tax efficiencies as for any contributions that you make you get a tax deduction for the cost. Remember from 6 April 2015, if you are aged 55 or over you are able to draw all funds from your company pension scheme but 75% of the fund will then be taxable. So please ensure that you take professional advice from a registered financial adviser before making any decisions about drawing funds out your pension scheme.
Finally, national insurance contributions are set at 12% on any salary over £8,060, so you could in essence pay yourself under this threshold and not have to pay any tax or NI, yet still receive NI credit towards your state pension. However, it is important to bear in mind that this means that you will be effectively wasting £2,540 of your tax-free personal allowance.