Small and medium-size businesses are the backbone of the British economy. Defined as a company with fewer than 250 employees, they make up a staggering 99% of all companies in the UK – around 5.5 million in total.
The thought of being your own boss appeals to many, especially those aged 16-25. According to a new study by Opinium Research, 40% of ‘Generation Z’ are looking to start their own business soon, with over half hoping to do so by their late 20s.
However, more research by the New Entrepreneurs Foundation shows around 50% of 18-24 year olds have been deterred from starting their own company. Reasons for this include a lack of investment, knowledge and industry contacts.
If this applies to you, we’ve put together some key bits of information to help you approach the challenging yet exciting journey of starting your own business.
The first task is to recognise which type of company you are. For start-ups, the most commonly used options are either sole trader, limited company, limited partnership or public limited company. Each one has different legal implications and require certain tax responsibilities – accountancy advice is recommended to know which preference is most suitable.
The next step is to outline the company structure in a detailed business plan – there are plenty of templates to be found online. Combine this with a cash flow analysis and profit/loss forecast for added clarity. However, remember to stay as prudent as possible when doing so… unexpected costs always pop up from somewhere.
Planning your brand is the next step. It’s not implausible that another company has taken your name, website or logo. Carry out due diligence to avoid being sued in the future. The government website has more on these rules here.
Setting up a business bank account is a legal requirement for limited companies (not for sole traders but highly advised) so it’s best to scout around as soon as possible. Check comparison websites for the best deal.
Obtaining cash flow is likely to be at the front of your mind. Of course, a significant amount will likely be needed to get off the ground and create a presence within the industry. Many start-ups require funding assistance to do so.
Your options here include the government backed Start-Up Loans Company who offer up to £25,000, along with banks and other high-street lenders. Private investment or crowdfunding can also be sought, usually in exchange for equity. Also, check for government grants depending on the type of business and industry.
One of the most important parts of starting up a company is to have your accounts in order, especially when dealing with the HMRC. It’s a part often neglected due to its monotonous nature, meaning some SMEs suffer penalties or don’t become tax efficient.
At Neil Smith Accountancy, not only are we experts in tax affairs, but we’ll also help you with the necessities of setting up a new business. To get in touch, please visit our contact page.
If you’re planning on setting up as a sole trader, you can find more information on whether sole traders need a business bank account here.