Starting a new business is an exciting and scary time. If you’re planning to set up a new business, you’ll be looking forward to being able to do things your own way.
Starting a new business is an exciting and scary time. If you’re planning to set up a new business, you’ll be looking forward to being able to do things your own way, without the pressure of directors and managers pushing you to do things you don’t believe in.
The most successful businesses are usually the ones that have put in the planning and thought beforehand. Here are some things you will need to consider:
You will need finances to run any business. In the early stages, you can’t expect to be earning much, so have you got money saved to cover your personal expenses while you establish your business? Furthermore, are you in the know about issues like company cashflow and employee payroll once you’re up and running? When calculating your company taxes, these issues are extremely important – a good accountant has the knowledge and experience to take charge of these things so you don’t have to worry.
This is probably the most common option. You’ll need to present a detailed business plan to your bank, so that they can view your predicted financial return. You will have to pay interest on anything you borrow, but there are usually very competitive rates.
This option is less popular than a loan, and rightly so! Overdraft rates are often high, so if you don’t clear your overdraft quickly, your business could suffer financially.
If you have a sizeable sum saved away, this is a viable option. Moreover, most banks won’t grant a loan if you don’t put some personal money into the equation.
Some industries can receive government grants to help with finances – an accountant could provide more information about this.
The nitty gritty
As your business gains momentum, you will find yourself needing to devote more time to it. Complex considerations will begin to surface, such as handling the payroll (employee wages), recording and validating cashflow, calculating VAT – a complicated area with various benefits and potential pitfalls – and making business plans/forecasts. Financial forecasts are essential for planning what moves to make in the future, and staying a step ahead of potential challenges that may arise.
For a small business owner, these issues can be extremely time-consuming and full of potential for error. Hiring a good accountancy firm can take that stress away from you.
Once you’ve secured your finances and premises, you will want to consider your business structure. Most small business owners must choose between setting up as a sole trader or as a Limited Company. Make this decision with the help of your accountant or financial advisor. Furthermore, if you are going to employ people then the issues of payroll and insurance have to be confronted head-on.
The type of business you set up will dictate your tax implications. The taxes of a sole trader are more simplistic than that of a Limited Company. However, going limited offers tax planning opportunities that sole trader status cannot. Think very carefully about what’s best for you – an accountant or financial advisor is your best port of call. They can also advise you on registering for VAT and whether to set up PAYE.