Archive for the ‘Starting a Business’ Category
Forming a Limited Company for your new business- what are some of the costs and potential problems.
There are many compelling reasons as to why you may consider setting up a limited company for your new or old business. However, there are some important costs and other issues that you will need to take into account before you choose to opt for this particular trading structure. In this article I will look at a few of these costs and issues.
Firstly, when you form a limited company there will be administrative and legal costs associated with the set up. The company will need to be registered with Companies House and shareholders and directors will need to be elected, among other things. If you are transferring your existing business to a limited company, you need to prepare new stationery, register for corporation tax and apply for a new VAT registration number etc… You will probably also need to set up a payroll scheme for any salaries that the directors or employees are entitled to.
Secondly, you will need to prepare annual accounts for the company each year and these will have to comply with company law and the Companies Act 2006. Many people need to employ the services of an accountant to complete these statutory accounts as they are very detailed. As a sole trader or standard partnership you do not have to comply with the above legislation.
The abbreviated accounts (short version) and other directors/shareholders information as detailed on an Annual Return, are publicly viewable for anyone who wishes to see them. Therefore, competitors may be able to get a slight insight into the assets and liabilities of your company by looking at the abbreviated balance sheet. A sole trader and standard partnership can keep all of their accounts information private.
If your company has a turnover of more than £6.5 million then it will require an audit and this will need to be carried out by a qualified auditor or accountant. This additional charge can be expensive and divert money away from other business areas where you could use it.
Funds withdrawn from a company normally give rise to tax liabilities. However, as a sole trader or partnership you can introduce and take money out of the business with no tax consequence; tax is only payable on the profits for these businesses. Due to the increase in legal compliance, a director is more liable to civil or criminal action being taken against them if they do not comply with company law.
Lastly, individuals have greater freedom in how they can offset any losses they make in their businesses.
Like all business decisions, deciding to form a limited company or transfer your existing business to a company structure should be made with full information in front of you. It is likely that due to the extra legal and compliance issues you will need the help of a good accountant if you decide it is the best route to take. Contact Accountants in Birmingham for information and advice.
Top 5 Tips for Small Business Start-ups
Although you’ll no doubt have done a lot of solid preparation before going into business and no one with any sense starts a new venture lightly, there are one or two very obvious points that so often get forgotten as to have become clichés; one would think then that there would be little need to point them out, but disturbingly small business start-ups are still leaving the sensible side of their brains at home when they launch into the business world: with this in mind here are probably the five most often forgotten essentials to remember right from the start.
1. Call in the professionals. An accountant should not be an afterthought for your business. Certainly in the first few years of trading they’ll not only take action to save money later, but an accountant for a small business should be one of its main business advisors. The help and advice given now could save you a lot of money long term.
2. Plan for success. When the banks and other investors asked you for that business plan, you probably lost sleep over getting it just right, so, although looking at it now seems a horrible reminder of all that stress, why waste it. You worked hard on its content so use it. Update it regularly and often and it will act as a guide to keep you moving in the right direction.
3. This little business went to market. Marketing isn’t always the first thing on the list of ‘must dos’ when a small business starts up, but it certainly should be. Even the basics often get neglected. Competitor analysis for instance, do you know who your competitors are and what they are doing to compete with you? Will they respond to your appearance on the scene? What about your customers, what do you understand about their habits? Budgeting for marketing and starting before you open your doors is the only way a small business will survive.
4. Profit from the rest. New businesses run-up bills even before they start trading and when they do start to trade it is important to remember that your turnover it totally different from your profit, far too many new businesses confuse the money coming in with the money that’s left once the very many bills and overheads have been settled . If you do need to put money into the business it should always be to increase your profit rather than the turnover and knowing the difference between the two is so much more than a lesson in semantics.
5. Get technical. If a website was not the first thing you started to plan once the business looked set to begin then it should have been the second. There is absolutely no way that a small business in the 21st century can expect to survive without a web presence, but it is not enough to simply have a website, any business looking to succeed needs a competitively placed site that is visible to its customers. If SEO is something that you’ll need to Google then get an internet marketing firm on board to help.