How Do I Set Up My Own Business?

We’ve seen lots of clients come to us over the last twelve months asking us “How do I set up my own business?”. COVID-19 has left so many people without a job or considering a different direction for their career and taking the leap to work for themselves. We wanted to bring all of our top tips for starting up a business together into one place to give you a handy guide to get started!

We’ve spoken before about the benefits of setting up a Limited Company compared to starting out as self-employed. Self-employment is the quickest and most straightforward way to get started, all it takes is a simple form to inform HMRC that you will be classed as self-employed and then you can get going. You will need to submit a self-assessment tax return each year before the end of January, but this can be done without the need for an accountant (not that we’d advise that!), so it can make self-employment more cost-effective.

Setting up a Limited Company is a whole different ball game. A Limited Company becomes a separate legal entity to any owners and shareholders. Any bank accounts, assets and liabilities are held in the company name, so there can be less risk involved for directors of a Limited Company. Your personal assets will be safeguarded against any claims or liquidation proceedings and you will only be risking money that you have directly invested in the business. 

Okay, I’ve decided to take the plunge, how do I know which type of business to set up? 

It’s always best to consult with an accountant to determine what type of business is going to be right for you. Then the next bit is the fun bit – choosing a name! If you register as self-employed then you will be registering yourself as your own name but you can opt for a ‘Trading As’ business name on your paperwork, signage, business cards, invoices etc.

A Limited Company is usually structured with directors who have a stake in the business in the form of shares (but not always). You need to decide who will be the directors and what role they will play. You can also elect to appoint a Company Secretary. If you want to be the sole director for the business then you can.

What does a director do?

A director will have certain duties and responsibilities that must be carried out. When the business is formed, a memorandum of association will be drawn up, which is a legal document signed by all shareholders who are forming the company, at the same time an article of association will also be created. This forms the basis of rules that relate to the running of the company and will be signed and agreed by all shareholders. The directors are responsible for ensuring that the business is following these rules in its day to day operations.

Directors are also responsible for keeping records, filing accounts and company tax returns, paying corporation tax and disclosing personal benefits that may arise for any business dealings. As a director, you can delegate some of these duties to staff members but you will still remain legally responsible. You may be fined or banned from your duties and future directorship appointments if you fail to comply with these duties.

What will my shares entitle me to?

If you are a director and your company is ‘limited by shares’ then you will have certain rights as a director. You will be able to vote on changes within the company and also receive dividends. It is likely that your company will have ‘ordinary shares’ which means that you will be allocated one vote per share when voting. If you are the only director of the Limited Company then you may, of course, have 100% of the shares. You can find out more about shares and shareholders here. If any of the shareholders hold more than 25% of the shares then they will be classed as a person of significant control. You will need to outline these people when you incorporate your company. 

What records will I need to keep?

There are two different types of records that you will need to keep for six years. Firstly, you’ll need to keep up-to-date records about the company itself including:

• Directors/Shareholders/Company Secretaries
• Results of any shareholder votes
• Details of debentures
• Details of indemnities
• Details of shares purchasing
• Loans or mortgages secured against company assets
• Register of people with significant control

You will also need to keep financial records:

• All income and expenditure of the business
• Details of the company’s assets
• Any debt owed by the business
• Any stock that is held at the end of the financial year
• Copies of stocktaking reports
• Details of all goods bought and sold (who they were purchased from and who they were sold to – unless you are a retail business)
• Receipts, petty cash books, orders and delivery notes
• Invoices, contracts, sales ledgers or till rolls
• Bank statements
• Any other relevant correspondence

Yep – there’s a lot of financial information to think about, and that is just the records that you need to keep! There will be so much more to do on a daily/weekly/monthly basis so we would definitely recommend finding a good accountant that you trust and you feel understands your business implicitly. We know of a really great one if you need any recommendations…!

Okay, I’m ready to go – what next?

Once you are ready to move forward, you can register your business with Companies House. You’ll get a certificate of incorporation and you are officially allowed to do a happy dance when this arrives in the post, it will have taken a lot of hard work and dedication to get to this point. And now it is over to you, it’s time to get the business off the ground and get your name out there! Social media is a great free tool that you can use to start promoting your business and also get to some free networking sessions – there are lots of really good Zoom-based sessions happening right now.

We would also recommend preparing a robust business plan, for the first twelve months at least, so that you know the direction that your business is heading. Then set yourself some goals from here so that you can check-in with your successes and progress as you go. You can also now register for a business bank account – there are a lot of different options out there so make sure you do your research.

And finally – good luck! Owning your own business will undoubtedly be a challenge, with lots of ups and downs along the way but it is so rewarding to see your own little empire grow directly as a result of all the time and hard work you put in. We’ll be right here with you, to support you at every step of the way! If you need any advice on how to set-up a business then make sure you reach out and give us a call, we’d love to help!

Backoffice Nationwide Ltd is a fully certified BACS Bureau, offering a complete backoffice solution with a wide range of facilities. We pride ourselves on providing a package, tailored specifically to the requirements of our clients’ individual needs, leaving them with valuable time to focus on their core business.