People tend to think that you need a large chunk of capital to start your own business; however it is possible to get started without needing to invest large sums of money into it. You might have a great idea, or just want a change of lifestyle that running your business may allow. Whatever your motivation it is possible to start off with a small budget. Here are three great tips to get you going.

1. Reduce your needs: You don’t need flash offices, or the latest laptop. Take a look at what you really need to get going, bearing in mind that you can upgrade later, once you are making money. Shop around, make sure that every purchase you make is the most financially savvy one.
2. Bootstrap: Depending on what you are offering, whether it is a service or a product, you could start small and just offer one item, or a couple to begin with to reduce the initial outlay, then you can plough your profits back in to your business to grow your offerings. This also allows you the opportunity to test the market, and the potential to change direction rapidly as you learn more about the demands of your marketplace. Remember as a small start-up your main advantage over the larger companies is the speed of your reactions. Think sailing boat versus ocean liner.
3. Funding: Just because you don’t have any money, it doesn’t mean other people don’t. Ask around. Your friends or family may be willing to invest (or not, as the case may be!) but there are lots of grants available. Ask around local business networks or the Chamber of Commerce for advice on grants. Consider going to the bank for a loan. As long as you are confident in your ability to pay the money back this can be a good route to take. Also, the bank will want to make sure that their funding is secure, so their seal of approval on a loan is a good indication that you have written a solid business plan.

At TLA Business Services we believe that you should work with your accountants throughout the year, helping you to grow your business into a successful enterprise. With help and guidance from our Business Builder Club we can work together to help your business achieve the goals set for it. To find out what makes us different contact us on 01905 21411

Do you have what it takes to become self-employed?

Everyone has skills, be they in washing cars or putting together multi-national financial transactions. The people valeting cars at the local shopping centres are self-employed, so what’s stopping you?

For people who are unemployed or earning very low wages, the risks of becoming self-employed are relatively small. An unemployed person who decides to become a market trader may lose a few pounds that he really can’t afford to, buying goods he can’t sell on, but he’s not risking a weekly or monthly wage by leaving a paid job to work for himself.

A car mechanic working for a local garage may well be able to make more money by branching out on his own. If it doesn’t work out though, he will have lost his job, his wages, and possibly pension contributions and other benefits too. It could take months for him to find other work.

Of the nine out of ten businesses that fail, many will be through no fault of the owner at all. Like everything else, business is unpredictable. We have all seen the effects of the economic collapse which has impacted on the small-business sector as much as on any others. In the United Kingdom the five-year survival rate is about 17%.

Common causes of failure include:

• Insufficient capital to get through the initial or expansionary phases
  
• Lack of skilled personnel
  
• Failure to demonstrate a sustainable marketing advantage
  
• Lack of bookkeeping and other administrative skills
  
• Failure to collect sums due from customers
  
• Reluctance to seek professional input and advice
  
• Inadequate attention to the business by the owners
  
• Inadequate insurance
  
• Over-pricing or under-pricing goods and services sold
  

Self-employment is not for the faint-hearted. Most people starting out underestimate the pitfalls and overestimate the upside potential. Equally importantly, they overestimate their own suitability to enter the world of the self-employed.

To get an indication of how suited you are to self-employment, answer the following questions honestly. The only person you can cheat is yourself.

To obtain the full version of this guide please request it via the ‘Contact Us’ tab on www.taxassist.co.uk/miketombs.

The possible options you have are as follows.

Sole trader

This is the simplest way of trading. There are only a few formalities to trading this way, the most important of which is informing HMRC. You are required to keep business records in order to calculate profits each year and they will form the basis of how you pay your tax and national insurance. Any profits generated in this way are automatically yours. The business of a sole trader is not distinguished from the owner’s personal affairs so that if there are any debts, you are legally liable to pay those debts even if it means selling your home and other possessions.

Partnership

A partnership is an extension of being a sole trader. Here, a group of two or more people will come together, pool their talents, clients and business contacts so that, collectively, they can build a more successful business than they would individually. The partners will agree to share the joint profits in pre-determined percentages. It is advisable to draw up a Partnership Agreement which sets the rules of how the partners will work together. Partners are taxed in the same way as sole traders, but only on their own share of the partnership profits. As with sole traders, the partners are legally liable to pay the debts of the business. Each partner is ‘jointly and severally’ liable for the partnership debts, so that if certain partners are unable to pay their share of the partnership debts then those debts can fall on the other partners.

Limited company

A limited company is a separate legal entity from its owners. It can trade, own assets and incur liabilities in its own right. Your ownership of the company is recognised by owning shares in that company. If you also work for the company, you are both the owner (shareholder) and an employee of that company. When a company generates profits, they are the company’s property. Should you wish to extract money from the company, you must either pay a dividend to the shareholders, or a salary as an employee. The advantage to you is that you can have a balance of these two to minimise your overall tax and national insurance liability. Companies themselves pay corporation tax on their profits after paying your salary but before your dividend distribution. Effective tax planning requires profits, salary and dividends to be considered together.

There are additional administrative factors in running a company, such as statutory accounts preparation, company secretarial obligations and PAYE (Pay as You Earn) procedures. A big advantage of owning a limited company is that unless you give personal guarantees (e.g. to a bank) your personal liability is limited to the nominal share capital you have invested.

Limited liability partnership

A limited liability partnership is legally similar to a company. It is administered like a company in all aspects except its taxation. In this, it is treated like a partnership. Therefore you have the limited liability, administrative and statutory obligations of a company but not the taxation and national insurance flexibility. They are particularly suitable for medium and large-sized partnerships.

Co-operative

A co-operative is a mutual organisation owned by its employees. One example of such an organisation is the John Lewis Partnership. These structures need specialist advice.

The business structure you choose can have serious implications on both your business and personal financial situation. Before deciding which to choose, it is well worthwhile seeking professional advice. In some cases there are benefits in starting in one structure then changing later; in other cases the correct structure may be reasonably easy to determine. We will be happy to discuss your plans and the most appropriate business structure with you. The most appropriate structure will depend on a number of factors including consideration of taxation implications, the legal entity, ownership and liability.