Although this may sound obvious, it is surprising how many people start their business without a proper business plan, cash flow forecast or a budget.

So if you haven’t done it yet get a pencil and paper, and write down your business objectives; your product or service; your intended customers; your competition; your USP (unique selling point- what makes you different from the rest) and project your finances. Do a SWOT (Strengths Weaknesses Opportunities Threats) analysis.

Work out your projected income and expenditure over time. Assess whether you will need funding or not and if so consider how you are going to get it.

Do your homework and change your dream to a reality.

The 4 most common ways of running a business in the UK are Sole Trader, Limited Company (Ltd Co), Partnership and Limited Liability Partnership (LLP). Each has its advantages and disadvantages, depending on your attitude to Risk, Administration, Ownership, Tax and Status.

Advantages?

• You can start trading at once.
• You are self-employed; you are your own master/mistress.
• Less administrative tasks than with LLP and Ltd Co.
• Your financial circumstances are private.
• You can convert to Ltd Co later.

Disadvantages?

• If your business fails, you are personally liable for the business debts.
• Your House and personal assets can be seized to satisfy those debts.
• Unless it’s registered, your business name is not protected.
• You still have to register yourself and staff for tax.
• Difficult to borrow money to expand.
• The public may see you as a one-man-band-fly-by-night.
• If you fail, you don’t get full State Benefits when unemployed.
• You and your business are one and the same, so difficult to sell.

Suitable for?

Those of an independent mind who are confident of their success.

Advantages?

• Suitable for most commercial purposes.
• A Company is a separate legal entity from its owner/s and Director/s.
• You can start trading almost at once.
• In the event of failure, your personal liability is limited.
• Less likely to be seen by the public as a one-man-band-fly-by-night.
• Easier to borrow money to expand.
• Easier to sell business.
• Can have tax advantages.
• Different types of Company to suit purpose.(See below)

Disadvantages?

• More red tape and administrative duties.
• Annual Accounts and Returns to Company House.
• Your Accounts are public.
• Separate self-assessment Accounts to be lodged yearly with HMRC.
• Penalties for late filing.
• Directors may still be asked to guarantee Company loans.
• Directors are personally liable for debts if they ignore the rules.

Suitable for?

Anyone aged 16 or over, or another Company.

Advantages?

• You can start trading at once.
• The burden of running a business is shared with your partner/s.
• You are self-employed.
• The Partnership Accounts are private.
• You may be able to raise capital by taking on another partner.
• Less administrative tasks than with an LLP and Ltd Co.
• You can convert to Ltd Co later.

Disadvantages?

• If your business fails, you are personally liable for the business debts.
• You are also liable for business debts caused by your other partner/s.
• Your House and personal assets can be seized to satisfy those debts.
• Unless it’s registered, your business name is not protected.
• You still have to register yourself and staff for tax.
• Written agreement to define how the business is to be run.
• Difficult to borrow money to expand.
• If you fail, you don’t get full State Benefits when unemployed.
• You and your business are one and the same, so difficult to sell.

Suitable for?

Those of a like mind who are confident of success.

Advantages?

• Suitable for most commercial purposes.
• An LLP is a separate legal entity from its Members.
• You can start trading almost at once.
• In the event of failure, your personal liability is limited.
• Easier to borrow money to expand.
• You can raise capital by introducing a new Member.
• Easier to sell business.
• Internal organisation as flexible as a Partnership.
• You are taxed as a Partnership.

Disadvantages?

• More red tape.
• Penalties for late filing of Annual Accounts and Returns.
• Your Accounts are public.
• Members may still be asked to guarantee Company loans.
• Members are personally liable for debts if they ignore the rules.

Suitable for?

2 or more Professionals, such as Solicitors and Accountants, as well as Trades.

A Company is a “legal person” which is separate from its owners (known as shareholders or members) and the people who run it (known as Directors). Often it is described as having a ‘separate legal personality’ to differentiate that it is a person in its own right as opposed to the directors, shareholders and other stakeholders.

A Company, like humans, can own property, enter contracts and conduct business, borrow money and do most things that humans can legally do.

A Company needs at least one Director to act and sign on its behalf.

Some examples;

Company Limited by Shares- for commercial trade and services.

Company Limited by Guarantee- for Clubs, Charities and not-for-profit organisations.

Community Interest Company- for social enterprises that want to use their assets and profits for the good of the community they serve.

Property/Flat Management Company-for the easier running of blocks of flats with multiple owners.

Public Limited Company-for larger businesses who wish to raise capital on the Stock Market.

Dormant Company-for those wanting to reserve and protect a special name, but are not yet ready to start trading.

Off-the-Shelf Company-for those wanting to give the appearance of a Company with a history.

Unlimited Company-for owners who wish financial secrecy; no need to file accounts, but liability unlimited.

Holding and Subsidiary Companies-Company A holds Company B (the subsidiary) if A has a majority of voting rights and rights of appointment in B.

Anyone above the age of 16 who is not disqualified by law.

One.

There has to be at least one person to own the Company (known as the shareholder or member). Can either be a human or another “legal person”, such as a Company.

And there must be at least one human person to run the Company (known as the Director).

The Director and Shareholder can be the same person.

Your chosen name must not:

• Be used by someone else
• Be similar to someone else’s
• Use certain restricted words
• Use offensive words

Check to see if your chosen name is available on our Home Page

If making a submission online, it takes about 10-15 minutes to complete the application form.

Once you have checked the information you entered is correct, you can proceed to incorporate.

During Companies House Business hours (Monday- Friday 9am-5pm), it should take no more than 3 hours for the process to be completed.

Applications by post take a lot longer.

To complete the process you need to provide the following information;

• Your FULL name, including middle name/s
• Your permanent residential address
• Your date of birth
• Your occupation
• Your e-mail address
• You will be asked 3 security questions
• Details of any other Company you have been a Director of within the last 5 years
• The name of your new Company
• Type of Company. E.g. Company limited by shares, guarantee or an LLP
• The registered Office address of your new Company
• The shares. (At least 1 has to be issued).
• Your credit card details.

No. And you don’t have to sign anything either.

Its all done on-line

A Director is an officer of the Company, responsible for its day-to-day running.

A Company can have more than one Director.

A Director does not have to be human; it can be another Company.

A Company must have at least one human Director.

A Director must run the Company in accordance with its internal rules and the law.

If a Director does not run the Company correctly, s/he can be held personally liable for losses, and be fined.

Anyone who is

• Aged 16 years or over
• Not an undischarged bankrupt
• Not disqualified by the Courts from being a Director

A foreign national resident abroad can be a Director of a UK Company.

A Company or LLP can be a Co-Director to a human Director.

Yes.

A Shareholder owns all or part of the Company.

A Director runs the company.

A Shareholder can be a Director and vice-versa.

Most small Companies are owned and run by the same person or people.

A Company Secretary is the Officer of the Company responsible for keeping its official records up-to-date at the Registered Office and at Companies House, for giving notice of meetings and ensuring that the Company complies with the law.

A private Limited Company does not need a Company Secretary.

If there is no Company secretary appointed, it becomes the Company Director’s responsibility to ensure that the Company’s records are maintained.

Failure to maintain records can result in fines being imposed.

A Registered Office is a Company’s official address where official correspondence can be sent by HM Revenues and Customs and Companies House and notices served.

Every UK Company must have a Registered Office.

Post received at the Registered Office must be regularly checked.

Anywhere in England, Scotland, Wales or Northern Ireland that has a valid postal address.

Companies sometimes choose to have their Registered Office at their Accountants, Solicitors or Company Formation agent’s offices.

If your Company is to trade from your home, you can use that as the Registered Office Address.

A Stakeholder is a person who has a direct or indirect interest in a company but who is not a shareholder. Examples of Stakeholders are employees, customers, suppliers, the Government, and the wider community who may all be affected by the actions or inactions of the Company.

In considering its stakeholders a company must act in a socially responsible way. There will always be competing needs and objectives that pull a company this way and that. But having due regard to this, a company must ensure it acts responsibly.