START UP BUSINESS ADVICE

START UP BUSINESS ADVICE

Creating a new business is exciting but also financially risky, so it pays to have a carefully thought out business plan from the outset. Clarifying the business vision and mission will help to structure the plan and devising a set of key values will assist should the business experience difficult times. Having a blueprint will keep the business on course and will also be useful if seeking funding – most start-ups require financial help from the beginning.

Options for financial assistance

Sometimes business owners, and their family and friends, financially support a new business and investment finance can also be sought from banks and other external bodies. Crowdfunding has become increasingly popular for raising relatively small amounts of money from interested individuals. A good, robust business plan is needed to secure funding via low rate loans or external investors. It is worth bearing in mind that commercial investors, such as ‘business angels’, are likely to want a share in the business that will yield high returns on their funding.

In the UK there are several schemes designed to help start-up businesses that are administered by local or national government, certain trade associations and business support organisations, as well as some charities. Some geographical areas offer incentives designed to attract new businesses to their regions. There are also schemes to encourage training and the use of technology and financial incentives for businesses that export goods or services.

Business responsibilities

Besides identifying sources of finance and negotiating a loan or overdraft facility, new businesses must ensure they have put in place the right legal structure for their business operations. Traditionally, models include setting up a limited company, where the shareholders are also company directors. They can keep the profits from the business once they have paid corporation tax. However, there are other structures in place that may be more suitable, depending on the nature of the business. A sole trader, for example, is an organisation where one individual is responsible for a business, even if there are other members of staff employed by it. That person keeps all the company profits, after having paid tax on them.

Known as an ‘ordinary’ business partnership, another alternative structure for a start-up is to share profits between two or more business partners, each of whom is then liable to pay tax on their share. In each case the business owner must ensure they are correctly registered for payment of tax and also, if they employ other people, for payment of national insurance contributions and tax for their employees.

Certain types of businesses that help people or communities can be structured as social enterprises and there are several different kinds, including community interest companies (CICs) and charitable incorporated organisations (CIOs). It is important to use the appropriate structure as social enterprises do not distribute profits to company directors and thus do not operate in the same way as profit making businesses.

Always take advice on financial and legal matters in advance of embarking on a business plan for a start-up – that way everything will be correctly in place from the beginning.

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