Considerations When Starting A Business

Starting your own business is an exciting venture, but it also comes with various challenges and considerations. If you are starting, or have recently started a business in the Nottingham area, we at AHACCOUNTANTS can provide you with professional and tailored advice to help you navigate the process.

Many individuals aspire to run their own businesses for various reasons, including redundancy or the desire for independence and financial rewards. However, it’s essential to be aware of potential pitfalls, including the risk of business failure. Below are key factors to consider before you begin trading.

Initial Considerations

To ensure your business’s success, consider the following essential factors:

• Commitment: Starting a business requires determination and enthusiasm. Be prepared for the demands it entails.
• Skills: You’ll need a mix of managerial, financial, technical, and marketing skills. If you lack any of these skills, consider partnering with someone who possesses them or investing in training.
• Market Viability: Ensure your product or service has a tested market and does not infringe on existing patents or rights.

Specific Matters to Address

1. Business Plan
   A well-structured business plan is crucial for success. If you seek financing, no bank will lend without a sound plan. Your business plan should include a comprehensive examination of how your business will start and grow, detailing your product or service, target market, operational mode, capital needs, and projected financial outcomes.
2. Business Structure
   Choosing the right business structure is vital and may include:

1. • Sole Trader: The simplest form of business, requiring minimal legal formalities. However, personal and business liabilities are intertwined.
   • Partnership: Similar to a sole trader but involves two or more individuals. It’s advisable to draft a written partnership agreement.
   • Limited Company: A separate legal entity that limits personal liability but requires compliance with legal regulations.
   • Limited Liability Partnership (LLP): Offers limited liability while being taxed as a partnership.

3. Business Stationery
   Your business stationery must meet legal requirements, depending on your chosen business structure.
4. Books and Records
   Maintaining accurate records is essential for all businesses. Records can be kept manually or digitally and should include details on payments, receipts, credit purchases, sales, assets, and liabilities. Seek professional advice if considering software for record-keeping.
5. Accounts
   Well-maintained records are critical for preparing accounts, which must be submitted to HMRC. Companies and LLPs may require audits and must file accounts with Companies House.
6. Taxation
   Understand the taxation implications of your business structure:

1. • Tax on Profits: Varies by structure; taxable profits often differ from accounting profits due to non-allowable expenses.
   • National Insurance (NI): NI contributions are typically lower for sole traders and partnerships compared to company directors.
   • Value Added Tax (VAT): Accurate VAT accounting is vital. If your taxable sales exceed the registration threshold, you must register for VAT.

7. Employing Others
   If you plan to hire staff, you must manage payroll, deduct taxes and NI, and enroll eligible employees in a pension scheme. Familiarize yourself with employment laws and responsibilities regarding HMRC notifications.
8. Premises
   When selecting a location, consider:

1. • Suitability for your business needs
   • Compliance with legal regulations
   • Local bylaws
   • Physical access and restrictions

9. Insurance
   Comprehensive insurance coverage is crucial, including legal requirements for employer’s liability and business motor vehicle insurance. Consider additional policies such as public liability and business asset protection.
10. Pensions
    Contributing to a pension scheme can be a valuable way to save for retirement, taking advantage of favorable tax rules.