Business Centre Your free guide on how to develop and grow your own business

Starting any new business venture carries an element of risk, however it can also be very exciting.

Whether you employ staff and take commercial premises, or alternatively work from home. It is important to plan for your success.

Firstly you need to establish whether there is a large enough market for your product or service. Some preliminary research will be necessary in order to find out who and where your competitors are, and how much they are charging. Try to gauge whether business is currently good for them, as this may indicate the potential for your own business to succeed.

Once you have done your research, and assuming that you still want to proceed with your ideas, the next stage is to consider your business plan.

Preparing a written business plan is your first step in business. If you need to raise finance from a bank or from outside investors, it is virtually essential.

A business plan is normally divided into two main sections. Firstly there is a narrative section explaining what the business will do, how and where it will be done, who will run the business and how it will be financed. The second section concentrates on the financial aspects, and normally comprises a profit projection, a cash flow forecast and accompanying notes. If you want some help putting your business plan together, click here and we will arrange for someone from Finance and Equity Consultants to contact you concerning your requirements.

It does not need to be a large document and in fact is likely to be more effective if it gives the reader all the relevant information in just a few pages. However, the more elaborate the proposed venture, the more detail is likely to be required.

Preparation of a business plan serves a number of purposes. Firstly, it makes you commit your ideas in writing. In doing this, fresh ideas (and potential hurdles)may spring to mind which may help you to clarify the precise direction that you wish to take, rather than set off without planning your route. If there are any fundamental flaws in your business plan, it is preferable to identify these at the outset, rather than hit an obstacle later on, when correction may prove costly.

The second purpose of a business plan is to encourage you to consider the financial aspects of the proposed venture, such as pricing policy, whether the business will provide you with the desired level of income, how much capital you will need to start up and how your bank balance is likely to stand from month to month. Only by quantifying your expectations will you know later on whether things are going as intended. The third purpose of a business plan is to assist in raising finance. This may be finance from private or corporate investors, but more commonly the finance will come from a bank.

If you approach a bank for loan or overdraft facilities, they will almost certainly ask you to prepare a cash flow forecast to enable them to consider your application. By having this readily available within the business plan, you can save time by avoiding the need for an additional appointment, and more importantly, the bank manager will see that your proposals have been carefully thought through beforehand. This is likely to help in getting your relationship with the bank off to a good start.

If you want a Professional Business Plan for your business Startup click here and we will arrange for someone from Finance and Equity Consultants to contact you concerning your requirements.

Having established what you are trying to achieve and how you are going to go about it, it is important to seek expert advice on the various aspects of your new venture.

Solicitor

Next, you need to consider whether it is appropriate to engage the services of a solicitor. The key issues on which you may require a solicitor's advice or assistance are as follows:

• Purchase or lease of property: You will need to consider any planning restrictions and ensure that you can use the property for its intended purpose. You will also need to be satisfied that you are not taking over any hidden liabilities.
• Standard terms of business: Careful consideration should be given as to how much credit you will offer your customers, and how this will affect your cashflow.
• Protection of your trading name and product: A business's brand and product are often its most valuable assets. They can frequently be protected by the registration of a trademark or a patent.
• Employment contracts: So far as possible, you will require flexibility in your contractual arrangements with employees while protecting the business against possible legal claims.
• Distribution, agency and franchise agreements: It is often only when a relationship breaks down that the inadequacy of the contractual agreements entered into by a business in its start-up phase really comes home to roost.

Click Here and we will arrange for someone from AFM Legal Services to contact you
by telephone to discuss your requirements.

Selecting a bank is the next issue. Armed with your business plan and the benefit of professional advice, you will by now have a clearer picture of what you require from a bank. If you expect to operate your account in credit, your main concern is likely to be that the bank charges are kept to a minimum. If you need finance from the bank, you will also be concerned with the relative cost and flexibility of a bank loan compared with an overdraft facility. Knowing the right questions to ask will help you to ensure that you explore all the options and make the best decision.

One of the most common questions raised by proprietors of new businesses is which bank they should use. If you have a good relationship with your current bank, then speak to your branch manager. If in doubt, speak to more than one and compare their terms.

Insurance Broker

The various types of insurance which you may need are as follows:

• Employers' liability: This is compulsory by law if you employ anyone. It covers personal injury and damage to personal property of employees. (This includes yourself if the business is operated through a limited company).
• Motor insurance: Check that all vehicles are covered for business use and that there are no important exclusions in the policy.
• Public liability: This covers personal injury and damage to personal property of the public. It is not compulsory, but is advisable, especially if you have business premises.
• Property damage: This covers buildings and contents for fire and theft. Make sure that the level of cover is adequate.
• Consequential loss: This covers loss of profits arising from interruption to the business through fire, theft, flood etc.
• Professional indemnity: This may be necessary in certain professions, particularly where client care is involved.
• Permanent health: This type of insurance is often overlooked. It covers you for loss of earnings when you are unable to work due to personal illness or disability. The required level of cover requires careful consideration and we can help you decide on this.
• Keyman life assurance: This is appropriate where the future of the business depends on certain individuals. Your own life cover should not be overlooked, especially if you have family dependants.

Click here and we will arrange for Parrock Insurance Brokers to contact you
by phone to discuss your requirements.

You will need to decide whether you are going to run your business in your own right or through a limited company. There are reasons for and against setting up a limited company and the decision often depends on the type of business you are in.

The size of the business can often influence the decision, and it is not uncommon to see a business set up in somebody's own name and then switch to a limited company after a year to two.

The most common types of entity are as follows:

A sole trader is a person who is in business on his or her own account. There are no statutory requirements governing the format of a sole trader's accounting records, nor is there any need to have them audited. However, it is important that the records are reliable enough to enable accounts to be prepared each year, and for VAT returns to be prepared, if you are VAT registered.

The best system for keeping your books will depend on the size and nature of your business. For some businesses, this will be a simple record, while other businesses may warrant a more sophisticated system. We will be pleased to advise you on the most appropriate method of keeping your records.

A partnership exists where two or more individuals enter into business together, in their own right. They will be governed by the Partnership Act 1890, and in more formal partnerships, they may also be governed by a partnership agreement. Each partner may be personally liable for the debts of the partnership and this liability is unlimited. The requirements for accounting records are similar to those of a sole trader, and again no audit is necessary. Sole traders and partnerships pay income tax on their annual profits. This is based on the earnings of the business and is paid regardless of how much the proprietors draw personally from the business during the year.

A limited company, by contrast, pays corporation tax on its profits, rather than income tax. The company is a legal entity in its own right, and is effectively the proprietor of the business. A company must have at least one shareholder (the owner) and at least one director (who manages the business). The directors and shareholders need not be the same people, but in practice, for the vast majority of smaller companies, the directors are also the shareholders. Limited companies are incorporated under the Companies Act 1985, which imposes accounting, reporting and public disclosure requirements. The liability of individual shareholders is limited to the amount of their share capital, except to the extent that personal guarantees have been given to third parties (eg. the bank).

While the company pays corporation tax on its profits, the directors from a personal point of view, have income tax deducted on any salary which they take from the company. Similarly, shareholders may receive a dividend from the company and they too may incur income tax on this. The decision as to whether to incorporate your business as a limited company will be based on commercial as well as tax considerations. This decision is a very important one, and each case is different.

Further points relating specifically to companies are dealt with later in this guide.

If you want help setting up your Limited Company, click here and we will arrange for AFM Legal Services to contact you by telephone to discuss your requirements.

For all businesses, there are a number of registrations which need to be considered, and these are as follows:

Firstly, there is a legal requirement to notify the Inland Revenue that you have commenced business, and it is advisable to do this fairly promptly to be on the safe side. The Inland Revenue will then send you an enquiry form 41G for completion. Although this asks for only basic information, we suggest that you speak to us before completing the form.

The above procedure does not apply to limited companies, as the Inland Revenue will be notified automatically by Companies House. The enquiry form sent out by the Inland Revenue in respect of limited companies will be form CT41G.

If you employ staff, you will need to apply for a PAYE (Pay As You Earn) scheme to be set up. If you operate through a company, you will need a PAYE scheme even if you have no staff, as your own salary will need to be subject to PAYE and NIC (National Insurance Contributions).

If you want help setting up your payroll or want an accountant to do it at a fixed cost click here and we will arrange for BCP accountants to send you some information in the post.

If your business is not operated through a limited company, you will need to register separately for national insurance contributions. Contact your local Department of Social Security office and they will send you a registration form.

Whether or not your business is run through a limited company, you will need to register for VAT once your turnover (i.e. sales, fee income, etc) exceeds the registration limit (currently £52,000). In many cases it is advantageous to make a voluntary registration before your turnover reaches this figure. We will be pleased to advise you on this and on the other registrations already mentioned.

Many businesses need licences from local administration offices in order to trade legally. We can provide you with a checklist on request, and we recommend that you take legal advice if in any doubt.

How to plan your exit from the business

This is the most crucial thing you can ever do in your business life, but very few people do it.

It is potentially the biggest pay day you will ever have in your life. So why do most people never even give it a thought?

Click here for a sale strategy of how to sell your business, reduce or eradicate your tax bill on sale and make sure you receive the very best price for your business when the time comes.

If you want to find out how to prepare your business for sale click here and we will arrange for someone from AFM Legal Services to contact you by phone to discuss your requirements

The FSA do not regulate accountancy or legal services.