How to start your own business

Starting your own business can seem understandably overwhelming and complicated. Whether you’re still trying to come up with that knock out business idea, to registering your business all the way through to developing a business plan, building a website and much more. We’re here to help!

We’ve put together a step by step guide to support you along the way featuring:

Your type of business and what you need to do

• Understanding your financial, accounting and tax obligations
• Organising your business essentials
• Funding options for starting your business including investment, grants, loans and more
• Where to go to for support and government backed schemes
• Making a business plan

Your type of business and what you need to do

What you need to action will depend largely on the type of business you’re looking to set up, where you work and whether you will recruit any employees to help with your new business venture.

First off, once you’ve come up with your business idea and name, you’ll need to register your business. You can register your business in a number of different ways:

Sole trader

As a sole trader, you’ll manage your own business as an individual and are considered self-employed.

After you’ve paid your taxes, you may retain all of your company’s profits. You are individually liable for any losses your company incurs. You must also observe specific guidelines when operating and naming your company.It’s easier to set up as a sole trader, but you’re personally liable for your company’s obligations. You are also responsible for accounting. The Government offers guidance for how to register as a sole trader.

Limited companies

A limited company is a private company whose investors are only liable for the amount of capital they have invested. Setting up a limited company involves a number of steps, involving appointing important positions like shareholders or guarantors, and directors.

Therefore, unlike sole traders, profits are split among those working for the company and stakeholders like investors. However, you are also not liable for the company’s obligations. This is a more complex process, as it involves a greater number of stakeholders.

There are different rules for choosing a limited company name, for instance, if your name is seen to be too similar to an existing company it may be refused. You can see a detailed list of rules here.

There are still a number of steps beyond this, involving documentation and identifying people with significant control (PSC) over the company. You can see a complete list of steps here.

At the end of the year, a private limited company (PLC) is obligated to produce a complete annual accounts report, as well as a company tax return. These need to be completed in accordance with HMRC deadlines, and can also be used to calculate the amount of Corporation Tax they are required to pay.

Business partnerships

When entering into a partnership, yourself and your partner(s) both take responsibility for the business. This includes losses and profits – including tax – as well as bills for things the company needs, like equipment.

It is worth noting that a partner can be a limited company, it does not necessarily need to be an individual.

Setting up a business partnership also involves choosing a name and a nominated partner, whose role is to manage the tax affairs of the partnership. This also involves an obligation to maintain any accountancy or business records.

Social enterprises

A key goal of a social enterprise is to aid people or a community of people. A social enterprise can be set up as a limited company, charity (or charitable incorporated organisation – CIO), sole trader, or business partnership.

It can also be set up as a community interest company (CIC), which is a specific type of limited company that operates to help the community rather than the interests of shareholders.

Social enterprises are not exempt from tax, however, the government does offer tax relief for organisations who can demonstrate their work is beneficial to the community.

Organising your business essentials

When starting your own business, there are a number of key things you need to organise. One thing you need in this day and age is to ensure you have a website. There are pieces of software that allow you to build your own website, or you can hire a developer to build one for you. In an increasingly digital world, having this link online where customers can find your business is essential.

Similarly, it would be useful to set up social media accounts for your business on key platforms like LinkedIn. The specific platforms will depend on your business’s target audience. For instance, if you will be targeting young people, Instagram is a must.

You must also register your business with the government as one of the types mentioned in the first section of this article. You must familiarise yourself with the rules related to the type of business registration, as well as the function of the business. For instance, there is different legislation depending on the type of products a business sells.

Creating a business plan is also a must to organise exactly what you need to do, something that will be covered later in this article.

Funding options for starting your business

There are lots of funding options available, including investment, grants, loans and more, however, funding depends on the type of business.

Sole trader

Business loans are a key way to raise funds for a sole trader. These are typically from banks or private lenders, who typically lend a certain amount of money with certain conditions, such as timeframe to be paid back and interest. Start-up loans are another method of raising capital. This is a type of personal loan that is funded by the government in order to promote economic development and assist smaller local businesses.

Crowdfunding is another method of raising capital, which involves a campaign where a large number of people invest a smaller amount of money. This can be repaid through benefits like complimentary products, or as a more standard type of loan.

Limited companies and Business partnerships

There are a range of grants available to small businesses. These tend to be less risky than loans, although some grants are given on the condition that you also invest the same amount in your business. Grants are available from the government in a range of different sectors like research and development, however, different councils also have different types of grants available so it’s worth checking in your local area. For example, Leeds City Council operates a Business Growth Programme for small-to-medium sized businesses.

Limited companies are also able to apply for a range of business loans, either from the government or private loans. As previously mentioned, shareholders can acquire shares in the business in exchange for capital.

Social enterprises

There are a range of funding opportunities for social enterprises. This includes a range of grants that companies can apply for that will benefit the community. These can include educational opportunities, as well as health and social care and technological developments.

There are also loans available for social enterprises in the same way as limited companies.

Where to go to for support and government backed schemes

The UK government website is a great resource to find information related to their schemes. For instance, they offer start-up loans of between £500-£25,000. There are certain conditions that need to be met to secure a government-backed loan.

There are also a range of loans available from private organisations like banks. For example, HSBC, Lloyds and Natwest all offer business loans with a range of benefits.

It may also be worth consulting with a financial adviser to explore your options if you are unsure how much capital you need to generate to fulfil your goals. They could also help you to find out exactly which loans and grants you may be eligible for.

Making a business plan

A business plan is a document covering all aspects of your business. They are crucial when applying for sources of funding like loans and grants.

There are a range of templates online to help you generate a business plan.

Before you start writing a business plan, it is important to be aware of the resources available to you, for instance, how much existing capital you have to invest. Generating a business plan should help to bring your ideas together, however, you should try to have an idea of where you want the business to go and achieve prior to this.

Here are some key things to include in your business plan:

• Goals and strategies to achieve them
• Projected sales
• Marketing
• Market analysis
• Target audience analysis
• Value proposition (what makes your business unique)
• Budgeting

Here are also some key tips for you when writing your business plan:

• Keep it simple – this will help any potential investors get a clear idea of what the business is
• Proofread your business plan – cut out any potential errors (whether they be grammatical or information-based)
• Aim it at an external audience – write your business plan as though the reader has little knowledge of the business and/or market, this will help to ensure you are being clear in your plan

Good luck with starting your own business