The economic shake-up caused by the pandemic has sparked a surprising surge in startups, with many people having great new business ideas.
In 2020, 726,000 new businesses were started in the UK – up 14% on the previous year. In fact, the UK outpaced the global average for new startups in 2020 considerably, with the global growth rate at just 6%.
But having a great idea and writing your business plan are just the start of the process. Here is your checklist of things to get in place.
1) Review your business plan
A lot of work goes into a good business plan. If you have already prepared yours, check that:
- it contains sufficient market research to justify your venture
- you’re clear about what your products and services will be
- you understand your value proposition, e.g. how you will deliver value through what you do, compared to others in the market
- you have an outline of how you will find customers
- you have some targets by which to measure your success.
2) Decide on a business structure
If you are starting out on your own, the default option chosen by many would be to operate as a sole trader. Or, if there is more than one of you, a partnership.
These involve less red tape than incorporation – you simply declare your earnings on your annual self-assessment – but this simplicity leaves you personally liable for any business debts.
Many people prefer to form a limited company or limited liability partnership. These shield you from personal liability unless, of course, you acted illegally or recklessly.
A limited company is also subject to corporation tax, which may give you more flexibility in how you are taxed. It does involve an obligation to register your company with HMRC and Companies House and submitting additional reports each year, which many people delegate to us.
3) Open a business bank account
Depending on your chosen business structure, it is either good practice or mandatory to open a business bank account so that your business finances are kept separate from your personal life.
While it may be simple to just go with your existing bank, you should shop around to appraise the offerings of different banks. Charges, quality of online access, service levels and even bank manager/adviser support may all vary quite considerably. So, find something that’s right for you.
We would also recommend choosing cloud accounting software at this stage. Not only will it smooth your bookkeeping from day one, it will help you comply with HMRC’s Making Tax Digital initiative, which is being rolled out and will be the way everyone has to operate sooner rather than later.
4) Register with Companies House and HMRC
If you are forming a limited company, you will need to register it with Companies House and with HMRC. Limited companies need to file accounts at Companies House and submit a corporation tax return to HMRC each year within a strictly enforced time limit.
If you go down the sole trader route or are the nominated partner in a partnership, you’ll need to register for self-assessment with HMRC and keep details of income and expenses to complete your tax return.
5) Insurances and licences
Depending on what you do, you may need to buy certain insurance policies from day one. This could include professional indemnity insurance or employer liability insurance.
Some businesses, such as food sellers, or those that play music, may also need to apply for licences or permits.
An expert by your side
Starting your own business is an exciting moment, but there is a lot to get right, and some big decisions to be made. It is better to start off with an expert by your side.
Please get in touch with us if you would like to discuss your options. We specialise in helping technology and people-focused businesses but work with other sectors too. We would love to help you get started on your business adventure.