There can’t be many things more exciting than starting your own business: you’ve got the idea, the energy, the passion to succeed. And despite the obstacles that will inevitably present themselves, the satisfaction of making it work is tough to match.
However, amid the excitement of making the first sale, or hiring the first new staff member, there are a few things that every start–up needs to make sure they have in place.
The UK system or tax administration has become a little simpler and user friendly in recent years, so getting started on your tax arrangements isn’t as difficult as it once was. With that said, you’ve got to get the basics right. You must register for Corporation Tax the moment the business comes into existence through its incorporation.
In addition, you should be aware of the need to register for VAT if your income exceeds £85,000. It’s also worth pointing out that registering for VAT even before you reach that threshold may have some advantages, and will present your business as a more established one right from the start.
Banking on growth
Once that’s done, you will need a bank account of some sort to ensure your funds are properly managed. Opening a new business account has become more complicated in recent years but nevertheless you can avoid the worst of the delays and hassle by working with a good adviser who can guide you through the process. In addition, if you take on staff, you will need to set up a payroll system to make sure they’re paid on time (as well as HMRC).
So now you have your banking and payroll arrangements set up, and the taxman is taken care of, what next?
Funding the future
One of the key things is to understand fully how your financial situation looks now, and how it might change as the business develops. So, ask yourself, how will you finance the stage of growth? For some (lucky) start-ups, revenue from sales will be sufficient to fund future growth – perhaps with some help from the bank in the form of an overdraft – for others, however, that might mean looking at alternative sources of finance.
In some cases, it may be that taking on private investment will be the answer. The rise of business angels and private equity in recent years has led to the development of various tax schemes to encourage investment into smaller firms. Perhaps the most accessible is the Enterprise Investment Scheme (EIS) which gives certain tax breaks to investors keen to help start-ups. There is help available to ensure your business qualifies for the scheme’s benefits.
If taking on private growth capital isn’t a possibility, then a growing number of tech start-ups are looking to crowdfunding as a way of raising funds. The peer-to-peer lending platforms work by allowing investors to finance loans to SMEs at fixed rates of return. Funding Circle, Ratesetter and Zopa lead the way there (with Funding Circle even receiving government backing for investment in small firms).
Then there are the equity Crowdfunders that allow businesses to sell shares to investors. Crowdcube and Seedrs are probably the best known in this space. These platforms have evolved from niche players to genuine aggregators of alternative finance. Many crowdfunding platforms are now mandating that investments by EIS/SEIS compliant so make sure to check your status.
None of these require an MBA to sort out, but they can rob you of the most precious resource: time. That’s why it’s important to work with the right adviser who can help you navigate what can be quite laborious processes.