Many of us have dreamed of starting up own businesses, but the process sounds daunting. The reality is, it doesn’t need to be. It’s actually easier than it seems!
Following a specific framework can make the process much simpler and much more manageable.
Here at Jamieson Law, we implement ‘The Legal Leverage Framework’, a set of proven steps to make the legal side of business and setting feel a bit less directionless.
Here are a few things you need to consider in the early stages to get you going:
What kind of business structure?
Before we begin, your decision will often depend on the tax implications so make sure you speak to an accountant to work out the best option for you.
This is basically you as a one-man band.
- A pro of being a sole trader is flexible in that you work for yourself as and when you want to
- You have freedom of decision making
- It’s easy to establish and your start-up costs will be relatively low.
- You are personally responsible for your organisation’s debt, so that if you get into any trouble, your house, car and bank accounts are up for grabs
- You will need to pay income tax on your earnings, and depending on which tax bracket you fall into, the tax could eat into your profits
- You will also need to file annual self-assessments with HMRC
- You may struggle to raise finance via investment.
A limited company is one registered at Companies House and you will see ‘limited’ or ‘ltd’ at the end of the name.
- If you set up a limited company, that company becomes a separate legal entity of which you might be both a director and shareholder. You can’t be held personally liable for any debts of the company, so that your house and car are protected
- A limited company tends to be more tax efficient as you pay corporation tax rather than income tax
- It is super cheap and quick – a one-off fee of £13 payable to Companies House
- You may be taken more seriously by clients and potential employees’ and it could be easier to raise capital from investors.
- Similar to a sole trader, you will need to file your accounts with Companies House annually
- Your accounts are public documents, so the Joneses know how much your company is making.
This is where you have two or more sole traders working together in the running of a business and so the same pros and cons apply to a partnership as they do to sole traders.
One thing to remember though: even if you are teaming up with your best friend, it is important to draw up a partnership agreement between you which sets out your roles and responsibilities, and what to do if it all goes Pete Tong.
Register with the ICO
This is the Information Commissioner’s Office and, thanks to our good friend data protection, this is one of the most important things you need to do.
When you process customer personal data (which is relevant to pretty much every business, whether you are selling goods or services), you need to comply with the UK GDPR.
Registering with the ICO takes literally minutes and will usually cost between £40 and £60, depending on your company size. If you don’t, the penalty is up to £4,000 (plus your registration fee).
You need to pay this annually but you will get a reminder from the ICO in case you forget.
It’s everyone’s favourite topic, right? Insurance is super important to protect you, your business and your customers/client.
These are the kinds of insurance you might need:
- Employers’ liability – you only need this if you have employees and if you sub-contract, they should have their own insurance.
- Public and product liability – if you are selling products and this is to cover you in case someone gets injured using your product
- Professional liability – where you are selling services, this insurance protects you against things like negligence, copyright or intellectual property infringement, personal injury and data breaches, to name a few.
Head over to our podcast ‘Legal Leverage’ for all of the Legal Leverage Framework details for you to learn from. Everything you need to know when starting your business and much more! Click here to listen.