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How to set up a business

Step 1: Market research and business plan

Market research is key to your business being successful. It will also help you determine whether or not people will actually pay for your goods or services. Researching your market will also help you to develop your product or service by test-driving it on your customers and fine tuning it to make it more marketable.

All the information you have gained from your market research can be put together in a business plan. A business plan is a good way to summarise how your business will make profit and how it will satisfy consumer needs.

Your plan will also be extremely useful when trying to convince others of the benefit of your business and will come in handy later when applying to the bank for a business account.

Step 2: Decide how you are going to structure your business

There are 3 main business structures you can use to start up:

  • A sole trader is someone who owns and is in charge of their business by themselves
  • A partnership has more than one person running the business
  • A limited company is an organisation that you can set up to run your business, and has 'members' who each own shares in the company

When you have decided what type of structure your business will take you should inform HM Revenue & Customs (HMRC). You can inform them via their website or you can call their Newly Self-Employed Helpline.

Step 3: Funding your business

Getting funding for your business can be a daunting prospect which is why it is important to do your market research. This will identify whether there is a genuine consumer demand for your goods or services.

Often entrepreneurs use their savings as it is becoming increasingly difficult to get funding from banks. The bank may want you to provide some kind of security before they give you a loan. This could be your house or your car and secures the bank’s position just in case you are unable to repay the loan.

There may be grants you can apply for to help you start your business or you may be able to find an investor. If initial funding is the problem, there may be some government-backed support that you can apply for.

However, all of this will depend on your personal circumstances.

Step 4: Setting up a business account

As a sole trader, you do not have to set up a business account. But, it might help you to keep your personal finances and your business finances separate.

If you are setting up a limited company then you have to set up a business account. Before opening your account you will need to provide the bank with a business plan detailing what you want from your bank and what services you need before you open an account.

Step 5: Register for VAT and keep proper records

You may have to register for VAT (Value Added Tax) in the UK if your sales are over £79,000 for the last 12 months. To register for VAT, follow the steps on the HMRC website.

Every 3 months you will have to submit your VAT returns online and pay any outstanding VAT you owe.

Ensure you keep accurate and detailed records as this will enable you to submit your tax forms.

A sole trader can deal with their tax affairs themselves or employ a professional, such as an accountant or bookkeeper. Partnerships and companies are more likely to use a professional accountant.

Step 6: Get insurance

It is important you have insurance to protect any equipment that you need to run your business and to cover any activities your business carries out. If you are working from home, your home insurance will not be sufficient as it only covers what you have for domestic use in your home. If you do not tell your home insurer you are working from your home you may lose your cover altogether.

If you employ staff then you must have Employer's Liability Insurance, to cover you in case of an accident at work. You will also need public liability cover if you have customers or clients coming to your place of business.

More information on start-ups and company formations can be found here


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Dated: 26/07/2013

Author: Greg Cox



Setting up a business


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