ARTICLE OF THE MONTH AUGUST 2016
ARTICLE OF THE MONTH
SETTING UP BUSINESS IN THE UK
Great Britain is a popular country for setting up and developing business. There are relatively straightforward rules and regulations relating to organisation and management of businesses, well established banking infrastructure, and relatively transparent tax legislation. In this article, we will share with you our knowledge and expertise in relation to your start-up and beyond. My name is Darren Bull, and I am the Senior Accountant here at Red Square London. I will briefly take you through each key stage from evaluating your business idea and choosing the business structure to choosing office space and finally launching your venture. Here at Red Square London, I and our Finance Director and Business Consultant Laurie Evenson-Goddard work hand in hand to guide and assist your every business and accountancy need.
Business Plan and Business Structure
Once you have decided what kind of business you want to start, market research should be the next important part of a start-up’s preparation and business planning. Fundamentally, an effective research plan involves two elements: desk and field research. Here at Red Square London we have an excellent team that can hold your hand through every step of this process.
Laurie often reminds our clients about the need to understand their clients, their needs and wants, how products/services will be delivered, how big or small should the team be, whether there is a need for premises, where should business be located, and how much initial and projective costs will one need. All these, and other consideration, should be incorporated into your first business plan. It is important to have a professionally prepared business plan to avoid errors. Main point of a business plan is to explain your business idea, spot potential problems and set out your goals.
Before you choose your business structure and spend your first pound on developing your business, you should have a very clear idea about taxes you and your business will be required to pay in the UK. Let’s have a look at the main tax liabilities, if you choose to conduct your business through a limited liability company (Ltd), which is the most efficient structure in many circumstances. As it stands at July 2016:
- Corporation Tax on profit made by a Ltd company – 20%;
- Capital Gains Tax on profit received after the sale of an asset, for example, property – 18% and 28% depending on income;
- Income Tax – this is tax on your income received from your business like salary and dividends. The current income tax rates are: 20% on income from £11,000 to £43,000; 40% on income from £43,001 to £150,000; and higher rate of 45% on income exceeding £150,000. Dividends above £5,000 can be taxed at 5%, 32.5% and 38.1%;
- Stamp Duty on Share sales – you pay ‘Stamp duty’ at the rate of 0.5% of the value of the chargeable consideration on each document to be stamped. In other words, on each share.
Choosing the right business structure
Choosing the right business structure is very important. For your convenience, I summarised some of the main legal vehicles, through which you may want to conduct your business, below:
For: low cost, easy to set up; full control; very little financial reporting. Against: personal tax liability; sole traders may lack credibility in the market.
For: bear in mind the above considerations; more potential to raise finance. Against: bear in mind the above considerations; partnerships mean more participants, hence increased potential for disagreements.
Limited liability company (Ltd)
For: your liability as a shareholder is limited to the value of your shareholding; favourable tax structure is possible. Against: increased administrative and regulatory demands; most of the corporate and statutory documents are public, including accounting records.
Limited liability partnership (LLP)
For: advantages of limited company and partnership combined. Against: profit taxed as income as opposed to Corporation Tax rates; partners must disclose income; LLP must start to trade within a year of registration.
So you have done your market research and decided what activity your business will undertake, you have agreed which structure your business vehicle will use. Now the next step is to choose your business identity.
How to choose the perfect name for your business
Choosing a good company name is important. It’s essential that you strike the right tone with your business’ name. More importantly, successful companies do not just have good names; they develop a strong brand identity and in time, brands can literally sell themselves.
Often, the name of the business has personal meaning for our clients. However, even if this is the case, it has to reflect the nature of the business in some way. If you structure your business through a limited liability company, you need to remember to check the availability of a name first. This check can be performed at Companies House. Some names are simply not allowed to be used as company names.
Create a logo that properly represents your business
As developing technology helps the average consumer access information quicker than ever before, it’s never been more important to communicate a lot about your business in as little time as possible. One great way to do this is by ensuring your logo properly represents your business.
Your logo has the power to do so much more than simply make your business look professional. It can tell a customer about the industry you serve and the products you sell. A good logo can also convey the personality of your brand, which in turn can build a customer’s emotional attachment to your business – important for retaining loyal customers.
Before you start designing your logo, a good idea is to wright a mission statement, maybe just one line that captures your business ethos. For example, here at Red Square London our mission statement is: ‘Russian speaking lawyers for you, your family and your business™’. We have different professionals to assist with all of your legal and business needs. Once you’ve produced a logo that embodies your company’s mission at a glance, make sure you trademark it to protect it from use by other companies. However, it is not always necessary to register your trade mark. In some cases, you can insist on its protection as well as your mission statement’s protection simply by indicating that it is your trademark and you do not allow its use by anyone else. Here at Red Square London we can do this for you and take this worry away to leave you free to concentrate on your business.
So you now have the start of a business: you have a business concept, a vehicle to facilitate the concept, a name for the vehicle and a logo to build the brand and get you noticed. But running a business is far more than selling a product or service for a profit. There are many behind the scenes activities that people don’t take into consideration like hiring staff, running a payroll system, producing statutory accounts at your year-end, paying tax on your profits. This is where a good accountant can help run your business and remove the burden of administrative mundane tasks.
How to choose an accountant
It’s a crucial decision choosing the right accountant. It takes far more than qualifications and years of experience to be the perfect fit. Even with years of experience and a big city name behind them doesn’t mean the accountant is right for you.
The first thing you need to consider when going through your list of potential accountants is whether or not any of them have some degree of familiarity with your business. It won’t be much help if you hire someone used to dealing with manufacturing companies if you run a leisure business as they won’t be familiar with specific legislation.
Also, look at the size of the firm. A small to medium-sized business accountant will specialize more in the kind of accounts issues common to medium sized firms. They are also likely to charge less than a larger firm and give more direct access to a more experienced accountant. Here at Red Square London we can offer a solution to all your questions. If you want the best from your accountant, you need one that is approachable and understands both, you and your business on a personal level.
So you’ve chosen a friendly, knowledgeable, experienced accountant that fulfils all your requirements. You have a business concept and have set up your business structure, so now it’s time to look at where you will trade from.
What to consider when choosing office space for your business
A universal answer to the question of what makes the perfect office space doesn’t exist. The kind of space you need, and will be comfortable in, depends entirely on the type of business you’re running. The same goes for the amount of space needed per worker. If all you require is a small desk and a phone connection, you don’t need masses of square footage and could possibly work from a spare room in your house. However, if your office also acts as your shop floor – a place to meet with clients – you’ll want a bit more space and possibly a more attractive and accessible location. Sometimes location could be your dominating factor and you might compromise on space to take the business where it needs to be. You may notice that certain types of companies open up very close to their competitors. This is because consumers like choice. If you want to eat out, you may find that you go to a food court so you can make a choice once you are there. Consumers can be swayed to your product by the branding and the service you give over a competitor. You may find that your choice of location is made on the basis that you are the only business providing your service in the area so this could be your factor. Certain businesses do most of their trade over the internet so with this type of industry your location may not be a factor at all. When moving into any premises weather renting or buying you are entering into a legal contract. Here at Red Square London we can get our legal department to review and facilitate your move. It is important to project-manage the move. Our business consultant Laurie Evenson-Goddard can help arrange and move your business into its new premises and make sure you’re ready to trade from day one.
Red tape checklist: what your small business needs to know
In the United Kingdom there are certain rules and regulations you must follow when starting up a business. When setting up in business, an understanding of the red tape involved is a must, or you could find yourself in serious trouble. It is essential that you get advice and understand the factors below to ensure you have a good understanding of the relevant laws and regulations involved in starting a business. Here are some factors for you to consider;
- Tax Law – your chosen accountant should guide you through this and there are many different taxes, regulations specific to those taxes, and ways of paying them.
- Intellectual Property Law – your lawyer will be the person to help you here and make sure you don’t get into trouble.
- Employment Regulations – these are important and if you do not comply with these, the consequences can be serious.
- Insurance – this will protect both you and your business and again this is a legal requirement in certain instances. There are different types of insurance so make sure you are protected with the right ones.
These are the main outlines that you need to consider. If you are in doubt, then its best to consult an expert and at Red Square London all this can be done under one roof and in-house.
Key selling techniques that could help your start-up
You will use a whole range of selling techniques in your business. Here are just a few of them:
- Direct selling – this is when the business sells its products or services direct to the customer, ‘face to face’.
- Selling wholesale – if you’re not selling directly to the customer, you could be selling to a wholesaler or reseller, who then sells the products on to the consumers.
- Telesales or online sales – If your products can be bought over the phone or online, this type of sale is very time and cost efficient.
Look at your market and this goes back to stage one ‘market research, business plan and business structure’. If you have done this right, then you will know how to best sell your goods or services.
I hope this has given you a brief insight into starting up your business and some of the initial procedures you need to take into consideration. Red Square London is registered and regulated by the ‘Solicitors Regulation Authority of England and Wales’. We are licensed to carry out legal work. Furthermore, being a ‘Family Office’, we can offer you many other services, including support and assistance with your personal or business finance.