When starting a UK business, there are five key things that you must do. And, if you are like most people starting a new business, these are things that you will be relatively unfamiliar with:

1) Appoint an accountant

This may seem an odd priority to you when there are so many other things screaming to be done. However this takes first priority because many of the tasks listed below will be undertaken by you for the first time. At this time, a good London accountant will be priceless. They will advise and guide you through the minefield of starting a UK business painlessly. So, not only will the stress be reduced but you will also get yourself a pair of helping hands.

2) Chose a business entity

Decide whether you will operate as a sole proprietor, a partnership or a limited company. You should consider the ramifications at the very outset because while some things can be changed, others cannot. Explored all the pros and cons with your accountant before you make your decision

3) Tax

You need to make sure that your business is compliant with all the extensive tax requirements and regulations. When starting a UK business, you have to register with different authorities for income tax, VAT, payroll taxes if applicable and other possible requirements. Non-compliance will create problems for you and almost certainly result in penalties being imposed on you. Not only will your accountant provide advice but he may actually be able to handle registrations on your behalf.

4) Banking arrangements

The cardinal mistake that most newcomers make when starting a UK business is to mingle their business transactions and their personal accounts. Even if you are a sole trader working out of your house, it makes sense to keep your business transactions separate for a number of reasons. Find a bank manager and a bank who you believe will understand you and open several accounts for the new business. Use one current and one savings account for your regular transactions and have a separate savings account in which to deposit tax that you will collect till the payment becomes due. Then you will not have to run around to find the money when it becomes payable and you will also earn some interest in the meantime.

5) Choose your work location

Almost certainly, you will not need a fancy office to start with and working out of home is by far the cheapest option. Other options would include setting up a separate office or serviced offices if you can’t use your home. Maybe, you have lots of noisy kids who will interfere with work at home, or maybe you need to be in a particular geographical location so that you are close to your clients. The choice is yours and will depend on the requirements of your particular business.

However, the golden rule when starting a UK business is to keep your costs low. So, wait a while for the fancy new office and enjoy getting it out of the profits that your business has made, not paying for it out of the profits that you hope it will make.

North London Accountants – David Grant

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1. Should My New Small Business Be A Company, A Partnership Or Some Other Type?
2. Starting up Your Own Small Business: Three Really Critical Things to Remember

Maybe you have got the recession blues and are afraid that you could be fired shortly. Maybe you’ve just been fired anyway. Whatever the motivation, you’ve decided the time is right for starting up your own small business. A little thought and planning will help you to avoid the pitfalls and the mistakes that new entrepreneurs often make because there is no point in simply diving off the deep end. We explain below a few of the considerations involved in starting up a business from scratch.

Choosing the right business

choosing the right business is of course the key to doing well and anything else that follows flows from this basic decision. In the era of the Internet, it is possible to make money from virtually any activity that you turn your hand to. You have to make sure that there is a niche available in the market that you can exploit better than anyone else and where your skills will fit the opportunities. It also helps if you have a passion for the business you are about to start because the motivation and dedication inspired by this passion will improve your odds of success and see you through the initial hard times. For instance, if you enjoy teaching, consider starting up your own small business as a teacher, either face-to-face or over the Internet. If you are strong in financial matters, consider providing financial advisory services on a part-time basis.

Choosing the right format for your business

there are different ways that your new business can be structured. And, if you choose the wrong structure at the start, that can give you problems later on. Becoming a Sole Trader is the simplest structure to start. As a Sole Trader, you are your business. While it is simple to set up, there can be advantages of using another structure. For instance, if you set your business up as a Limited Company, then your business is its own separate entity. This might give you some valuable asset protection and tax minimisation advantages. Or, if you are going into business with somebody else (or as a group of people) then maybe a Partnership structure would be better. Or, even a Limited Liability Partnership structure which is a cross between a Limited Company and a Partnership. There is no one structure that is right for everybody, which leads us to the third really critical thing to remember when starting up your own small business, which is to find a good accountant who will help you find the structure that will be best for you.

Find a good accountant

It is often a good idea to get a good accountant on board as soon as possible. He (or she) will prove to be a jewel beyond price in your business planning and your fund-raising exercises besides providing general business advice in areas such as taxation. You will obviously lack many skills required in planning and implementation of your new business and an accountant can fill in a surprising number of gaps. You will find that your his fees may well prove to be one of your best investments when starting up your own small business.

North London Accountants – David Grant

Related posts:

1. Should My New Small Business Be A Company, A Partnership Or Some Other Type?
2. Starting A UK Business: The 5 Key Things You Must Do

As a small business owner, you will always have plenty on your plate and very little time to spare. Nevertheless, there are some things that you must get right. Here are 6 of the most common mistakes that business owners make and how you can one of the few that avoid them.

Accounting for small business mistake #1: not getting the right accountant for your requirements.

In a start-up small-business, money will be tight and you will be looking for ways to minimise your expenses. However don’t be tempted to cut corners on your accounting requirements by trying to do it all yourself. Almost as important, don’t hire a bookkeeper just because he (or she) is cheap when what you actually need is a professional small business accountant. A good accountant, used appropriately, will add value to your business by helping you to minimise expenses and taxes and maximise your profits.

Accounting for small business mistake #2: misrepresenting your financial affairs.

You may be tempted to adjust your income statement by categorising business expenses as personal expenses so that the bottom line looks good and the bank approves your loan application. You have just broken the law! And, the bank may recall the loan when they find out. The same principle applies to your tax affairs where you could be in even more serious trouble.

Accounting for small business mistake #3: don’t dip into the money that you have put by for tax payments.

If money gets really tight, you may be tempted to temporarily borrow the money that you have put by in a separate account to meet your tax bills. Bad mistake! Once you are on the blacklist of the tax authorities, they will hound you for the rest of your life and put every one of your transactions under the microscope.

Accounting for small business mistake #4: not establishing proper accounting procedures and policies.

You don’t need to write a book but it does make sense to set out in few brief rules about the policies and procedures for accounting that your business will follow. This is important especially if you have several employees or partners. Everyone concerned including you and your accountant will find life much easier. Ask your accountant to help.

Accounting for small business mistake #5: not using proper software or accounting tools.

Accounting software packages cost little but take all the headache out of your bookkeeping. No longer would you be faced with silly mistakes or accounts that don’t balance because of manual systems. It also makes life much easier for your accountant. This is an investment that is well worth your money.

Accounting for small business mistake #6:  not creating backups for your accounting data.

It is amazing how many people don’t bother to create backups for data especially when all the data is electronic. Your data could get wiped out or corrupted extremely easily and, in the absence of back-up, you could be in real trouble. Another cardinal error is to store your back-up in the same place as the original. Your backup is not of much use if it is destroyed in a fire along with your original data.

David Grant – North London Accountants

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Once you have decided that you are going to set up a small UK-based business, one of the most important things you should do as soon as possible is to find yourself a good accountant. His (or her) help and guidance will be invaluable in the setting up stage of your business. Here are the 4 key things that you should keep in mind while looking for the right small business accountant for you.

1) Be absolutely clear about what you want your accountant to do.

Accounting is a very large field and good accountants tend to specialise in specific areas. You should therefore be very specific in determining what you want your accountant to do for you.

It is most likely that all you will require basic accounting services to help in filing tax and company returns. In this case you should look for one person or a small practice. Not only will this be the most cost-effective solution but you are also likely to receive highly personalised attention.

However, if you are looking for more specialist support such as advice on the best way to start-up or grow your small business, look for a small business accountant that has relevant experience and specialisation in these areas.

2) Recognize your own responsibilities.

Your accountant can provide advice and guidance but ultimately the law will hold you responsible for all matters connected with your business. This includes any filing with tax or company law authorities. You must be aware that, under the law, ignorance is no defence. Also, you cannot evade your responsibilities on the grounds that you received bad advice from your accountant.

3) Your accountant will charge you for his time.

Accountants, like lawyers, usually bill by time spent on your account so don’t expect any free lunches. Remember that any contact with your accountant may cost you money so acquaint yourself thoroughly with what you’re going to be charged for and how much you can expect to pay. A lot of your basic questions can be answered with a little research on the Internet and the less time your accountant spends on you, the cheaper it is going to be.

You will find that some of the better small business accountants offer a free first consultation. Use this time well to ensure that there is a good match between your needs and your accountant’s services.

Some accountants offer fixed fees.  You will know where you are at the outset, with this kind of arrangement as long as you know what work the fee covers.

4) Look for value not cost saving.

You can get basic services from a bookkeeper especially if your accounting requirements are limited to keeping your books of accounts. But for all complicated matters such as corporate or personal taxation, you would be taking a risk if you do not use the services of a proper small business accountant. Remember what happens if you pay peanuts: you get monkeys.

David Grant – North London Accountants

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OK, so you are considering setting up a new small business. Are you making the same mistake that many new entrepreneurs make by not giving adequate thought or consideration to the structure and form of the business?

If you do not include deciding the correct structure in your planning at the very beginning, you may have problems later on.

The business can basically take one of four business structures (or entities). There are:

Sole trader:

As the name suggests, this simply means that you set up your business on your own. Effectively, you are your business. The business is an extension of you personally in all respects and is therefore the simplest and most uncomplicated way of doing business. Many small businesses start this way and the structure may be fine for straightforward businesses such as plumbing or carpentry or gardening and you can just start doing business without any fuss. However, some of your customers may require that you trade as a limited company in order to do business with you. It should also be remembered that if you register for VAT as a sole trader, it covers all of your personal activities.

You may wish to consider other structures for more complicated businesses where multiple skills and other complications come into play. You should also keep in mind that, as a sole trader, you are personally liable for all the liabilities of the business and in regard to any claims of negligence, which may arise.

You should also be aware that you are paying Income tax and National Insurance in a different way to which you would in other business structures, and that this may be disadvantageous.

Partnership:

This means that you work with other people as partners and that you all conduct the business jointly. In its simplest sense, it is like being a sole trader but there are a few of you who are all jointly in the small business together. It is advisable to document the business understanding in as much detail as possible laying down rules for how you’re going to operate and covering areas such as decision making, profit-sharing or drawings from the business. This is to avoid, as far as possible, any major disagreements or misunderstandings in the future. In the case of a partnership, each partner is individually liable for all the debts of the partnership.  It is advisable to obtain the services of a Solicitor to draft a partnership agreement.

Limited Liability Partnership:

This is a relatively new form of business organisation which is a mix between a partnership and a limited company. It runs like a partnership but the liabilities of the partners are limited as in the case of a limited company. Records have to be filed with Companies House much like a limited company.  There is also a small cost involved in preparing and filing an annual return with Companies House.  The taxation, however, is like a partnership. There is no constitution, as there is with a company.  For this reason, it is advisable to obtain the services of a Solicitor to draft a partnership agreement for the LLP. The LLP accounts, like those of a company are on public record, although these may be Abbreviated Accounts for small businesses.

Limited Company:

A limited company has the benefit of being a separate legal entity and you can therefore keep your personal affairs totally separate to your small business.  Your liability in this case would be limited to whatever you invest as share capital, unless you are trading whilst insolvent.  There could also be possible tax benefits though they should not be your sole consideration. There are a lot of rules and regulations governing limited companies and you will not have the flexibility or the freedom of the other types of business organisation. There is also a small cost involved in preparing and filing an Annual Return with Companies House. The company accounts, like those of an LLP are on public record, although these may be Abbreviated Accounts for small businesses.

Among the many advantages of setting up your small business as a private limited company in the UK are the following:

• limited liability of the shareholders
• officers of the Company are not personally liable (unless they are guilty of misconduct)
• there are often significant tax benefits to be had because governments all over the world encourage the formation of companies.

Each of these structures has pros and cons.  It is often difficult to change from one structure to another.  Therefore, invest the time necessary in talking with an experienced small business accountant, who will guide you to the structure that is best for you.

David Grant – North London Accountants

Related posts:

1. Starting A UK Business: The 5 Key Things You Must Do
2. Starting up Your Own Small Business: Three Really Critical Things to Remember