You’ve decided to set up your own business, but what next? What are the rules and requirements to make your business official and most importantly, legal?
We have put together this guide to answer some of your questions and help you get started.
Registering Your Business
Sole Trader or Limited Company?
Every business big and small must be set up with a legal structure, and it’s worth knowing all the facts when deciding which format to use. When starting a business, especially on your own, many people set up as a sole trader. As a sole trader, there is no legal distinction between you and your business; therefore, you personally are liable if there are any issues, not your business.
Another alternative is to set up a limited company where your business has its own legal identity, which is separate from its owners, who are classed as shareholders and its directors. Limited companies can be set up if you are a one-person business or have employees.
There are pros and cons for setting up your business, either way, take a look at the handy table below easily view the difference between the two.
If you require any advice on how your business should be set up, we recommend speaking to an accountant or qualified business advisor.
Data Protection laws – do they apply to you?
Data Protection is serious business, and if you breach the laws, you could be fined or face worse. Suppose your business requires you to store and process your client’s personal information. In that case, you will need to register with the ICO (Information Commissioners Office) and also take the time to fully understand the laws around processing personal data. The ICO’s website has lots of helpful guides on the subject, and we would recommend taking their short online self-assessment questionnaire, which will let you know if this applies to you.
Health and Safety Regulations
Now this can depend on the work you are carrying out. For example, if you are a hairdresser and use bleaching agents or similar chemicals, then Health and Safety laws will apply. If you simply wash and cut hair, then the Health and Safety Laws do not.
Another example is a self-employed accountant, who as a rule the laws would not apply if he is working from his home office with no clients or colleagues visiting. If that same accountant was to take on a work placement student then Health and Safety comes into force as he would need to ensure the health, safety and welfare of that student in the workplace.
We recommend spending some time researching on the Health and Safety Executive website to see if the laws will apply to you.
Working From Home
Running your business from home is a great way to save money on rent and rates in the early days of starting your business. To ensure that you are working within the law you may need to contact your mortgage provider or landlord to gain permission, especially if your business will involve clients coming round to your property. If you will be making alterations to your home, i.e. converting a garage to a treatment room, then speak to your local authority planning department as you may need to gain planning permission and authority for the change of use from residential to business use.
You will also need to contact your home insurance provider to inform them of any business taking place in the home, especially if it involves others coming into your home. Not informing them may lead to future claims becoming invalid.
If you are working from home for 25 hours or more a month, you can claim a proportion of the cost of council tax, heating, lighting, phone calls and broadband as a tax allowance. It’s calculated as a flat rate per month depending on the numbers of hours worked and ranges from £10 up to £26. Not a tremendous amount of tax allowance, but as a famous supermarket said ‘every little helps!’ To find out more visit the gov.uk page here.
Don’t forget your insurance
We all hope to go through life with no hiccups or accidents, but they do happen, often when we least expect it. When you set up your business always take out the appropriate business insurance to protect you against everyday risks such as human error, damage to stock, and cover legal expenses that can run into tens of thousands of pounds.
Public liability insurance is a must as it covers the cost of claims made by members of the public for incidents that occur in connection with your business activities. The diagram below gives an example of risks which can be covered with your business insurance. As with any insurance, it is always worth shopping around but do not cut corners or costs with this as it’s vital to have adequate cover to protect you, your business and your reputation.
We have covered a lot of information here and hope you have found this useful. It does take some time to set up the various policies and systems but do this now as you will not have a lot of time to look at these things when your business is up and running.
If you are looking for advice specific to your business, especially relating to tax and business structure, then please discuss with a suitable professional. If you would like any further advice or assistance with marketing your business, please contact us!