We've produced a booklet, Spin-Outs and Start-Ups - Common Pitfalls, containing lots of useful advice for those in the process of setting up a spinout company, or any other business. Start-Ups.
Starting to trade can often be pretty simple. You leave your job on Friday, open up your new premises or sit down at your new desk on Monday and away you go. However, setting up a new business properly is generally more complicated. Broadly speaking, there are four reasons for this:
- You need to consider whether your business is going to be financially viable.
- You need to decide how you are going to raise the money.
- You should consider how to structure the business in the most commercially effective and tax-efficient way
- You need to get the formalities right
Is your idea financially viable?
Anyone thinking of starting a business should prepare financial projections. If you’re going to be borrowing money to help you to get started, you need to be sure that you’re going to be able to cope with the repayments and that the return on the investment is going to be worthwhile. Even if the business costs nothing to set up, preparing profitability projections could show that there are better ways to use your time! Finally, the process of preparing projections, particularly with an impartial third party involved, always helps to focus the mind on the costs involved in the business and how they can be minimised.
How are you going to finance the business?
You might well need to borrow some money to start your business. That will usually mean going to a bank (who will, incidentally, require sound financial projections to have been prepared before they will even consider lending money to you), although you may be able to borrow money from friends or family. You might be in the fortunate position of being able to fund the business yourself - although it might still be desirable to maintain some flexibility by borrowing money instead of using up all of your savings. Whatever your situation, we can help you decide how much you need to raise and where to get it from.
How should you structure your business?
You have three choices
- Form a limited company
- Trade in your own right
- Trade in partnership with others
The taxation policy of the current government has made it very desirable, in most cases, to incorporate a limited company. However, there are still situations where it is more appropriate to remain unincorporated. We can help you to decide what is most appropriate for you.
Even if you are happy that a company is the appropriate vehicle for your business, there is still scope for getting it wrong! You need to make sure that the shareholdings in the company are organised in a way that is both fair to the participants in the business and tax-efficient.
What formalities do you need to go through?
For a company you’ll need to:
- Decide on the company’s officers
- Decide on the shareholdings
- Decide on a registered office
- Start a set of statutory books
- Register for corporation tax
- Set up a PAYE scheme
- Register for VAT if appropriate
- Maintain your company’s statutory records on an ongoing basis
If you’re not forming a company, you’ll need to:
- Tell H M Revenue & Customs that you have started to trade
- Register to pay National Insurance
- Set up a PAYE scheme if you will be employing anyone
- Register for VAT if appropriate
We can help you with any or all of the above tasks.
How much will this cost?
Of course, that depends upon your particular requirements. However, we’re always happy to provide a free initial consultation. We then prefer to agree a fixed fee with clients in advance, so that you receive no unexpected bills. Our quotes always include the provision of ad-hoc advice on general and specific issues throughout the year. We are much better able to help your business grow if we know what you are doing, so we welcome your calls and don't charge you for listening! If we are required to undertake specific projects outside the bounds of our quote, we will always endeavour to quote a fixed fee for that work.
Who should you talk to about this?
For more information on how we can help in this area, please call or email