Starting out in business?
Have a good idea and want to start out in business? This checklist will help with those important first financial steps.
Business structure
Getting the business structure right from the outset – for you and your business – is essential. It could avoid unnecessary complication and cost at a later stage. The right business structure may give you flexibility, limit your financial risk and help reduce tax bills. Typical structures can be:
- Sole trade
- Partnership
- Limited liability partnership
- Limited liability company
All these business structures will require registration with the tax office. A limited liability partnership or company will also require incorporation at Companies House.
Business planning
Whilst you will understand your business idea, other potential investors, banks, and stakeholders may not. A documented business plan will add credibility to your idea and should cover the following areas:
- a description of the business
- who will buy the product or service
- strengths and weaknesses of the business
- why the business is a good idea and the market opportunity
- anticipated difficulties with the business and how you will overcome them
- a three-year financial budget and cash-flow forecast. (your financial figures may be outline but should demonstrate the viability and potential of the business)
- a sales marketing plan to support the financial budget with sales analyses by customer, sector, product, services etc.
- capital requirement and funding proposal (setting out how much finance you need from who, for how long, at what cost and when you will repay)
- what agreements you have with your business partners, shareholders, directors etc.
- staffing and labour requirements
- business premises requirements (will you rent or buy?)
Business taxes
Tax is a certainty in life – there is no business exception to this rule. You will be liable to pay tax on profit. You may also be liable to collect tax from others on behalf of the tax office. It is essential that from the outset that you clearly understand how and when your business taxes are payable.
Your liability to taxes will vary depending on your business structure, size of business and whether you employ staff. The amount of tax will also vary according to your entitlement to allowances and relief.
Your business may be liable for the following taxes:
- Corporation tax on company profit
- Income tax and National Insurance on sole trade and partnership profit
- Value Added Tax (VAT) on the supply of goods and services
- Pay As You Earn (PAYE) deductions from employee salaries
- Employer’s National Insurance on employee salaries
Bookkeeping and accounts
You may decide to keep the bookkeeping records yourself or delegate the task. Either way, it is important to ensure you keep the accounting records up to date - it will save a lot of stress at a later stage. Also, you should not distance yourself from the numbers as it is essential to know the financial position of your business.
Your choice of accounting system may depend on the volume and complexity of transactions. A manual cashbook may be suitable from the outset but as your business grows an accounts software package may be a preferable way to record and control your accounting records.
If you are an employer it will be necessary to operate a payroll. Payroll can be a time-consuming activity at the end of each month and often is outsourced.
What next?
Starting out in business can often appear daunting – but the good news is that you do not need to be an expert in financial and taxation matters to succeed in business. Vale & West can help shoulder this burden and provide advice from the outset to allow you to focus on making your business a success.
Please contact us to find out more about how Vale & West can help you start out successfully in business.
