Setting up a Business

Issues to consider

(special thanks to Geoff Leese)

Setting up a Business

• Big decision

• Mixed emotions

• Need to Consider– Legal regulations– Tax regulations– Raising capital– Managing finances

Finance

• A number of grants and funding schemes exist a useful website is:

• http://www.grantnet.com

• BUT if you need to approach a bank be ready to answer the following:

‘How much profit do you expect to make ?’

‘when can you pay us back ?’

• Good cashflow management is essential

Legal implications

• Need to choose the legal structure

• Depends on– Size– Finance– Tax – liability

Type of structure

• Sole trader– Simple, only have to deal with inland revenue

as long as stay below VAT threshold– Unlimited liability means that if the business

fails all personal assets can be seized

Type of structure

• Partnership– Need to set out terms and conditions in a

written agreement called a deed of partnership with the help of a solicitor

– Has unlimited liability unless registers as limited liability partnership

Type of structure

• Franchise– May need to approach bank for funds– Sign a franchise agreement– Sensible to use a solicitor– Choose one who is an affiliated member of

British Finance association

Type of structure

• Limited company– Must Register with Registrar of Companies at

Companies House

• Complete the following– A memorandum of association– Articles of association– Form 10– Form 12

Memorandum of association

• Company’s name

• Registered office

• Where it will do its objects

• The form is set out in a set of tables

‘The companies (tables A to F) Regulations, 1985’

Articles of association

• Sets out rules for the running of the company’s internal affairs.

• Model articles are provided in the tables on previous slide

• Must be signed in front of a witness and delivered to the registrar

Form 10

• Details of first director(s), secretary and the intended address of the registered office.

• Company directors must give date of birth, occupation and details of any directorship held in last two years

• All officers appointed must sign the form

Form 12

• Must be signed by a solicitor who is forming the company or by a director if a solicitor is not used

• Must be signed in the presence of a commissioner for oaths, justice of the peace or solicitor

Business names

• Limited companies & limited liability partnerships must be registered with Companies house

• Sole trader & partnership can trade using own name or trade under a different name subject to Business Names Act 1985

• Check that a name is not already registered with companies house

http://www.companieshouse.gov.uk/

VAT

• Turnover > £58,000 need to be VAT registered

• Goods or services have an additional charge of 17.5% that can be claimed back but must be paid regularly to customs & excise

VAT registered

• Record all outputs and VAT charged

• Issue tax invoices showing VAT charged

• Record vatable inputs and the VAT charged on them

• VAT return completed on a quarterly basis and returned to VAT office

National Insurance

• Tax towards contributory state payments

• Business is responsible for making contributions for staff and to take contributions from staff

• NIC’S depend on specific circumstances and so advisable to take advice from a solicitor or accountant

Conclusion

• This presentation has examined some of the issues to be considered when setting up a business

• Useful websites:

• http://www.businesslink.gov.uk

• http://www.startups.co.uk/