This is often thought of as the boring bit. The bit that maybe we can skip over or ignore for as long as possible. You set up a business because you love what you do, right? Not because you want to do the boring admin parts…
Unfortunately if you skip the legalities you will only end up creating a hobby not a business.
When you set up a business in the UK there are a couple of organisations you need to contact. This is a must.
These are Companies House and HM Revenues and Customs (HMRC).
Before you register with these companies you first need to decide what kind of business you are going to set up. Your options are as follows:
Self Employed – this is where you are working for yourself, and have become your own boss. You keep the records and accounts and you get to keep all the profits. But you are also liable for the debts.
Limited Company – These are companies in their own right, and the founders finances are kept separate. Your liability is limited.
Partnership – This is for those who want to be self employed but work with a friend or collegue. Two or more people share the risks, costs and workload.
Social Enterprise – This is a business that is trading for social and environmental purposes… there are additional legal structures if you consider going down this route… to find out more go to www.socialenterprise.org.uk
What About VAT?
It doesn’t matter which company status you choose you will still have to register for VAT. In the 2015/16 tax year the VAT threshold is £82,000. VAT registration is compulsory if your UK turnover is over and above this amount. You may also wish to register for VAT if you think you will be going over the threshold in a short space of time.
A common question I get is “Should I register for VAT?”
My answer is simple. If you are not registered for VAT you are sharing with the world that your turnover is less than £82,000.
You also need to be mindful that if you are not using accountancy software that makes VAT returns simple (like XERO for example) then you will have a lengthy paperwork process.
Of course as you know I am not an accountant, but we have joined forces with The WOW Company UK and will be bringing you an online programme that will take you through the different ways to set up your business and how to organize your accounts.
Paul Bulpitt will be delivering this programme in association with the Corporate Escape Programme. He is the Co-Founder of The WOW Company UK and also Head of Accounting at Xero UK.
Watch out for this in the coming months and do let us know if you would like to be informed of its release date by emailing Steph and she can keep you updated.
It is essential that you get the foundations right in your business, so you do not come unstuck as you grow.