Thomas Walker explains what start-up entrepreneurs need to do to set up their business entity.
The start up of your own business is exciting, the possibilities are endless and everyday you get to work on something you’re passionate about. Going about company formation in the right manner is crucial to the success and progression of your business. It should come as no surprise that this is likely to leave you feeling anxious because establishing your business is anything but as straightforward as it may first seem.
Whether you’re thinking about starting out, or you’re already embarking on your new start-up venture and have some questions, this blog post is for you. You might have a viable business idea, you may have worked long and hard to develop your concept, but what do you do next to launch it correctly? These are the 8 things you need to consider.
Of note, two of the headings in this post have been written specifically for a limited company formation. If you select an alternative vehicle, you can still use much of the guidance here, just be sure to do your research around what you need to file and the types of shares available (if applicable).
Firstly, you’ll need an effective business plan. It’s understandable that you just want to dive in and start generating substantial sales, but without a detailed business plan, you’ll quickly lose sense of direction and purpose. As an absolute minimum you should include objectives and goals, the resources you’ll need, your profit estimations and your business structure.
Bear in mind that your business plan doesn’t have to be set in stone, it’s to keep you focused on your goals and how you’ll progress towards achieving them.
You must figure out early on if more funds are needed to keep the business afloat or trading. How are you going to obtain this finance to run your business efficiently? Whether it’s self-funding or loans, you’ll need to plan and manage things carefully to get the most out of the finance.
This will require you to set out a very detailed budget before you even spend a penny. If you haven’t had to do this before, then secure the help of someone who has. Every area in your business should be counted for and your budget should be adhered to as closely as possible.
You should also think about creating a personal budget to ensure that you can live comfortably while building your business. Estimate your expenses and create a cashflow projection for the first year of your business.
Your business trading structure and the choice you make will impact on:
It’s important to understand the different entities and think both short-term and long-term with your end goals in mind, you don’t want to limit yourself before you’ve even began! Be sure to pick what is right for your needs, not what’s worked for other entrepreneur’s in your network.
Registering your business with various bodies may be one of the last things you’re thinking about when trying to get your ideas off the ground or, you may simply just be unaware of these requirements, but it’s essential.
Admittedly it all depends on the structure you choose. Assuming a limited company formation, be sure to action the following:
Incorporation at Companies House
Tax, HM Revenue Customs (HMRC)
You’ll need a business bank account from which you can trade. Take the time to pick the right bank and account for you. Specifically, consider these questions:
Early on you should think carefully about your share structure. There isn’t one particular structure your company must use; the options vary between ordinary shares, non-voting shares, preference shares and redeemable shares.
The key is to get the correct structure in place before incorporation because changing afterwards, whilst far from impossible, is likely to require significant professional advice. This will take time and therefore cost money to implement, so think carefully to ensure you’re set up as optimally as possible from day 1.
Dependent on your sector, different legal issues may be applicable to you. Your business should have a health and safety policy. It should include a risk assessment, what to do if there’s an accident and fire equipment. For further information, visit the Health and Safety Executive (HSE) website.
Public liability insurance is legally required, and you must have a certificate proving this displayed in a public area. If your company allows for members of the public on your property, then you must ensure that you’ve got insurance that’ll cover you if anything happens, such as a customer injuring themselves.
You might also want to consider other insurance such as employer’s liability and business interruption.
It’s not surprising that setting up an efficient method of recording your income and expenses may be a sheer afterthought, especially when your focus is on the smooth running of your business and generating sales. The pain from this afterthought can be felt at the end of the year when you find yourself unravelling months of receipts, invoices and bank statements to get a clear picture of your profits and prepare the necessary submissions to HMRC.
Setting up an effective accounting system from the ‘get-go’ is preferable. If done correctly, it will provide you with accurate and timely reports on profitability and your financial position. It’s likely that most of your time and efforts will be indulged in the everyday running of your business, so any system you adopt should be setup in a way that doesn’t divert much of your time and attention from what you do best, running your business.
There’s a wide number of accounting software packages in the market to choose from or simply, you could outsource your bookkeeping function entirely. Ultimately, establishing your business effectively is indispensable to future growth and success.
The content of this post is up to date and relevant as at 26/09/2016.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.