Yes. To run a business from your home, you may need permission from your mortgage provider or landlord, local planning office (if you’re planning on making major alterations to your home) and the local council (if you’re going to get lots of customers or deliveries, you want to advertise outside your home or if you need a license to run your business). You may need insurance for your business. Home insurance may not cover this (eg stock, computers, customers visiting your premises).
How do I market my business?
This can be done in a number of ways. When starting out think about free advertising, for example on Social Media or through word of mouth (with friends and family).
If you are planning to sell online or have a service that customers will search for online then a website is a necessity.
As your business grows you may think about advertising in local / national media outlets or consider sponsorship.
Do I need a business bank account?
Yes. It is important that you do not use your own bank account for business sales and payments as this is against the terms and conditions of your personal account.
When choosing a business bank account make sure you choose wisely. Many have introductory offers; however the costs rapidly increase after this period of time.
Do I need a business plan?
Yes. A business plan is a written document that describes your goals and direction, and will outline how you will achieve them. It includes business strategy, customers & target audience, market research, objectives, sales projections, marketing, advertising and financial forecasts.
A good plan will give you all information in one place, focusing your ideas. It is also a document that is required when looking for funding.
It is important that you also complete a cash flow forecast before you start trading. Cash flow is often the main reason businesses fail, not lack of customers or sales.
It is not a rigid document and will be revisited a number of times through the life of your business.
When do I need to register with HMRC? Do I need to register with HMRC for VAT?
If you are a Sole Trader with a turnover under £1,000 annually, then you do not need to register, however it is mandatory if it is likely immediately before you start trading.
However, there are some anomalies to this rule, for example; if you have losses within the business and the turnover is less than £1,000 you may wish to register to be able to carry them over to the next financial year.
You must register for VAT if your VAT taxable turnover goes over £85,000 or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt.
You can also register voluntarily if your business turnover is below £85,000. You must pay HMRC any VAT you owe from the date they register you. Therefore, you need to add VAT to all sales from this date. This is beneficial if you are buying from suppliers who charge you VAT, because this can be offset against VAT owing to HMRC.
You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them.
What legal status should I choose for my business?
Choosing a company structure and your legal status is very important and will fall under one of the following:
Charity / Community Interest Company
When you start a business working for yourself you can be referred to as sole trader, and this means that you have complete control over how your business is run, you make all the decisions and take all the profits. A sole trader can hire employees, and you can start trading almost immediately, without too much initial investment or overheads. A partnership operates on the same basis whereby the partners are liable for all company debts and are required to complete a partnership tax return as well as an individual one.
The biggest difference between limited company status and the sole trader or partnership status is that a limited company is treated as a separate entity from its owners, with its own legal existence. Most importantly, the company’s finances are separate and distinct from the personal finances of the owners. If you are setting up a venture that needs substantial start-up capital, limited company status will give you more protection if your venture fails. It may also be more beneficial from a tax point of view to set up as a limited company, depending on your personal circumstances and expected earning potential. Shareholders (or members) of the company can be individuals or other companies. They are not liable for the debts of the company unless they have given personal guarantees.
Can I change the legal status of my business at a later date?
Yes. As your business grows, you may decide you need to alter the legal structure, so it is more flexible to meet your changing needs. Alternatively, you may find that a particular status does not suit your circumstances.
Where can I find finance?
There are many places to look for financing options when starting a business.
First port of call would be the high street banks. Approach your bank first, as they have a history with you. They have personal and commercial loans available.
Your E-Factor Business advisor will be able to help and direct you towards any grant funding that may be available, depending on your business type.
When starting it may be better to approach friends and family to invest in your business or use your own personal finances.
What insurance do I need?
Every business is vulnerable to risks such as claims for compensation as a result of injury or negligence, contractual disputes, accidental damage, fire, flood or theft. It is important for business owners to consider the risks their business may face and take out appropriate insurance cover. Some types of business insurance, such as employers’ liability insurance and vehicle insurance, are required by law, however there are many other insurances and this list is not exhaustive.
Public liability insurance is a must for most businesses and covers the cost of compensation claims arising from death or injury to members of the public, customers and suppliers, or loss or damage to someone’s property occurring as a result of business activity. This type of insurance is advisable for any business owner who has contact with members of the public, who visits clients or suppliers on their property or who has clients visiting them, for example at a home-based business.
Local authorities and other organisations may refuse to deal with a business supplier or contractor that does not have a specified level of public liability cover.
What considerations must I make before taking on commercial premises?
Choosing the right commercial premises in the ideal location can be a crucial decision for a business, whether it is just starting up, moving into a new area or seeking space for expansion.
When choosing premises for a business, it is important to consider costs, location and the type of premises required.
Renting business premises involves entering into a lease, or a licence to occupy the premises, with the owner of the property or landlord. A lease is a legal document issued by the property owner or landlord that gives a business the exclusive right to occupy premises as a tenant for a fixed term, in exchange for the payment of rent. Some commercial premises are available on short-term, flexible ‘licence to occupy’ arrangements that provide ‘easy-in, easy-out’ terms.
What are my legal obligations from employing staff?
When looking to employ staff for the first time you must consider the following;
Wages – the national minimum wage MUST be adhered to. Also consider the national living wage.
What problem, want or need does your business solve? By answering this question, you will very quickly answer if there is a viable business in your idea.
Once you have an idea carefully consider if you have the time and flexibility to start a business. Will it fit with your family and commitments? Will you run it part time or full time alongside another job? It is important to be realistic as starting a business requires time, hard work and resilience.
Before progressing conduct some market research. Who are you competitors? Why would a customer choose you over your competitors? What are you offering that is different? Have you thought about price, quality, and location? You don’t always have to be the cheapest or most expensive if you have something different to offer.