UNDER CONSTRUCTION

Hey! You are here early…. My website is still being populated. Feel free to browse to get an idea of what’s coming up but come back again next  month to see it in it’s full glory!

What to consider when Starting a Business

What to consider when Starting a Business

I recently gave a talk on how to start a business. Fast forward to Q&A and a hand went up from the back of the room. It was accompanied by a sheepish voice: ‘so.. uhm…how do I start a business?’

My first thought was ‘Did you miss any of the words that has been said in the last 90mins?’. I asked him to clarify his question. Turns out he had understood my talk perfectly but he genuinely had no idea how to physically create a business. It dawned on me at that moment that knowledge we sometimes take for granted are golden nuggets to someone else.

So here’s a practical guide to setting the right foundations for your business.

Business Fundamentals

It is important to have the right infrastructure in place when starting a business, especially one with a Big Vision. Get it wrong and you may struggle to raise investment down the line. It happens. I’ve seen it. It is easy to ignore the foundations but it’s so much easier if you start off on the right foot, rather than try to fix them later.

1 – You need a company

You need to physically set up a company. The cheapest way to do so is to do it yourself using Companies House’s webfiling. It costs £12: https://ewf.companieshouse.gov.uk/runpage?page=welcome

Here’s what you will need to set up your company:

  • A name for your company. There are a few rules about what’s acceptable or not and Companies House explains this. You can use the same name as your brand e.g. Brandname Ltd or choose something entirely else. My company name is Snap & Notes Ltd, which is different to my brand name, ‘Notes Party Co’.
  • An address where your company will be officially registered. This is public record so consider if want to use your home address or pay for a mailing service such as ScanMyPost.com
  • Name of the director of your business. This is the person(s) responsible for the business – Likely to be you.
  • Your share capital and who will be your shareholders. These are the owners of the businesses. It is common to allot a small number of shares at the start (e.g. £1). This is because the share capital (this £1) needs to be paid by the shareholder, so go for a low amount. You can issue new shares in the future date.
  • Names of person(s) with significant control of the company (i.e. ‘PSC’ (Persons of Significant Control) – These are usually people with 25% shareholdings.
  • Memorandum and articles of association – there is a standard set of these which you can opt to you use when you register your company online.

Once a company is incorporated, you will need to submit the following on an annual basis:

  • Annual accounts
  • Compliance statements

In addition to this, it’s worth bearing in mind that there are also other filings that need to be supplied to Companies House for every change made to the company (shares, articles of associations, directors).

Most filings can be done online through your Companies House webfiling account (directors appointment, director resignation, compliance statement, allotment of shares).

Some forms do still have to be submitted on paper and by post to Companies House.If you are ever in doubt , Companies House helpdesk are usually very helpful. They can be contacted on 0303 1234 500.

2 – You will need to register for taxes

You should to create an HMRC Gateway which will enable you to add the taxes to view, as and when they are created.

Corporation Tax

  • Corporation Tax – This will automatically be done once you create a company at Companies House.
  • Your Unique Tax number is a 10 digit number that will be contained in any correspondence received from HMRC with respect to Corporation.
    • The first Corporation tax return will be due 12 months from the date of incorporation and you will need to attach a full set of statutory accounts.

PAYE

If you are planning on employing people in the business, you will need to register a PAYE scheme with HMRC.

In terms of the information you will need to register for PAYE, the following will suffice:

  • Directors personal details (Address, UTR Number,  National Insurance Number)
  • Company information (registered office, registration number)
  • Expected number of employees in the next year
  • Date you will be paying your first employee
  • Bank accounts details

Once registered with HMRC, you will need to run a payroll (weekly, monthly…) and submit an RTI file on a monthly basis informing HMRC of the PAYE, NIC, Student loan deducted from employees. It’s also worth noting that PAYE/NIC and Student Loan deductions are payable by the company on 19th of the following month.

It’s also a good idea at this point to get your payroll software in place or to outsource the accounting function (depending on what works best for you and your company).

Possible payroll software providers that you may want to consider include the following:

  • Xero Payroll
  • Quickbooks Payroll
  • Sage One payroll
  • Clearbooks Payroll

VAT

VAT is not a compulsory registration for UK businesses until your turnover exceeds £85K.

  • Points to consider on whether you decide to register for VAT:
    • Once registered you can reclaim VAT paid on goods and services purchased for use in your business. However, you will need to charge VAT on all UK sales from date of registration
    • Service Purchased VAT can be claimed 6 months prior to VAT registration so can be a consideration with respect to the timing of your VAT registration.
    • Consider your pricing with and without VAT before registering for VAT. Who are your customers? Are they VAT registered business or are they individuals who cannot claim VAT.
    • You will need to prepare a periodic VAT return (Usually quarterly) so make sure you keep good VAT records.

When you are ready to register for VAT, the below list comprises key information that you will be required to provide:

  • The VAT number of any business which the director(s) of the new company have had involvement in the last 2 years
  • Each director’s personal details (Address, UTR number,  National Insurance number)
  • Company information (registered office, registration number)
  • Predicted turnover in next 12 months
  • Predicted EEC sales and purchases
  • Date of VAT registration
  • Your company bank account details

3- You will need to keep good accounting records

From the beginning, you should keep good accounting records for the company. There are a few ways this can be done:

  • Outsource the accounting function
  • Use a suitable accounting system
    • Xero
    • Quickbooks
    • Sage Online
    • Clearbooks

All accounting systems cater for different types of business so you should review the functionality before deciding which one to pick. There are also usually discounts available so it’s always worth shopping around for the best price once you have chosen the software package you want.

  • Spend time on setup
    • If you can set the accounting software up well (i.e direct bank feeds, creating bank rules, chart of account and report formatting) – This will save you time going forward – A little bit of pain now will reap rewards in the future!

4- Other things that are often forgotten

  • HR Management
    • Keeping track of employee data (e.g. salary, time off, sick days, next of kin) can be a task but there are some useful software that make this much simpler:
      • Charlie HR
      • Clearbooks
  •  Insurance – Make sure that you have adequate insurance in place.
    • If you are employing staff, then you should have Employment Liability Insurance
    • If you are selling a service – you should have Professional Indemnity Insurance
    • If you are selling goods – you should have Product insurance
    • And the insurance list goes on; forget to secure adequate insurance and regret it at a later date!
  •  Data Protection
    • If you hold sensitive personal data, you have a duty to protect this data. At a basic level should do 3 things:
      • Have a privacy policy
      • Register with ICO
      • Protect Personal data
  •  Company Register
    • These should be available for inspectional the Company registered address. These can be in the form of a physical register or as an electronic register

Following the above simple steps in the earliest days of your business will ensure you’ve met your obligations both legally and to your own employees and directors. Whilst financial planning and infrastructure may not be the most exciting part of the startup journey, it’s absolutely vital to ensure you are not vulnerable or in breach of regulations later down the line.

Ike S

A former city banker, Ike spends her time helping entrepreneurs build sustainable businesses. She is the founder of Notes Party Co, makers of cool party games and an advisor to Notes Beauty, a next-generation personalized beauty service (2019 launch). She has a background in consumer products and has been featured in The Guardian and Real Business Magazine.

Share:
Books I Recommend
Do Purpose – David Hieatt
Do Purpose – David Hieatt
Let My People Go Surfing
Let My People Go Surfing
Blue Ocean Strategy
Blue Ocean Strategy
Start with Why
Start with Why
Girl Boss
Girl Boss
Zero to One
Zero to One
Watertight Marketing
Watertight Marketing
The Advertising Concept Book
The Advertising Concept Book
How to Style a Brand
How to Style a Brand
Positioning
Positioning
Made to Stick
Made to Stick
Business Model Generation
Business Model Generation
Innovation Breakdown
Innovation Breakdown
Intelligent Entreprenuer
Intelligent Entreprenuer
Write to Sell
Write to Sell
Do Disrupt
Do Disrupt
The Jimmy Choo Story
The Jimmy Choo Story
Design of Business
Design of Business
Design a Better Business
Design a Better Business
The is Service Design
The is Service Design