Starting a new business?
Starting a new business can be challenging and daunting at first, but with a good plan and research you can simplify the process.
Start with an Idea
When first starting your own business, your initial business idea needs to be developed into a tangible product or service that can be marketed and sold.
Protect your intellectual property
If you have a business idea or if you have invented a product that can be manufactured and sold then you will need to protect your intellectual property to make sure nobody copies it without your permission.
An idea can be developed into a business:
Research your market – identify your target customers. Conduct focus groups and find out what their perceptions and attitudes are towards the idea.
Develop and plan – test your product or service on real customers then adapt or change it and then test it again. Continue this process until you have developed a product or service that meets the needs and wants of your target customers.
Find suppliers or business partners – source suppliers and partners that will benefit the distribution of your product or service
Set up your business – determine which legal structure is right for your business and then register for tax.
Get funding – explore the different sources of business finance that are available from bank loans, government-backed schemes to crowd funding.
If you are unemployed then support and financial help can come from your Jobcentre Plus. Business support helplines in your local area will also offer help and advice on starting or growing your business.
Choosing a legal structure for your business
The legal structure that you choose for your business will determine your legal responsibilities:
- The paperwork that must filled in to get your business started
- The taxes that will have to be managed and payed on time
- The percentage of profits that you can draw from your business
- The personal responsibilities that you may face if your business makes a loss
You can change the business legal structure you initially chose at start up to a new structure that suits your business better.
Types of business
The main types are:
- Sole trader
- Limited company
An ‘unincorporated association’ can be formed if you’re setting up a small organisation like a sports club or a voluntary group and you do not intend to make a profit. Other business structures that assist people or communities, eg ‘social enterprises’ can be formed as well.
If you choose to work for yourself, then you are classified as a self-employed sole trader even if you have not notified HM Revenue and Customs (HMRC). As a sole trader you run your business as an individual and not as a legal entity. All your business’s profits after you’ve paid tax on them are yours.
A limited company is a business entity that can be formed to run your business. It has a legal entity of its own and all responsibilities remain with the company as do its finances. Any profits after Corporation Tax has been paid, is owned by the company which it can then share amongst its shareholders.
‘Ordinary’ business partnership
A business partnership allows you and your business partners to share responsibility in a personal capacity for your business. All profits from the business are shared between partners where each partner pays tax on their share of profits.