Starting in Business

This is a brief guide to the matters to consider when starting in business. It is not exhaustive and, as with most things, it is best to take appropriate advice at the earliest stage as this will save you time and money in the longer run.

Is the business proposition viable?

The most important matter to consider is whether you can turn your ideas into a profit-making business. It is essential to research your market, prices, demand for your product or service etc. before you spend time and money on an idea which has little chance of commercial success. This may lead to you committing financially to suppliers, landlords etc. for costs which the business will not be able to meet and for which you will probably be personally liable.

Business plans

A business plan will usually include both a description of your ideas, your assumptions, research etc. together with spreadsheets of cash flow and profit forecasts to support the narrative.

The benefit of preparing a business plan is that it will help focus your thoughts on your project and lead you to consider all aspects before starting your business. A plan will be essential if you are to approach lenders for finance to support your new venture.

The difficult part of preparing any profit/cash flow forecast is projecting income. Costs are relatively easy to estimate, especially overheads, but it is the income forecast upon which the business plan will turn, especially as it is easy to be over-optimistic.

Business vehicle

Businesses operate through a number of vehicles – from a sole trader (being the simplest), to partnerships or limited companies. It is not always easy to change between vehicles once they have been set up and it is important therefore to take advice on which vehicle to use before doing so. This advice will deal with tax aspects of drawing money from the business, personal liability etc.

Generally speaking, companies require more administration in the form of more complicated annual accounts, returns to Companies House (the government agency which oversees the administration of all companies) and tax returns. The tax aspects of companies are generally more complicated than for a partnership or sole trader.


Whichever business vehicle you choose you will need to register with HMRC for tax purposes and probably Value Added Tax. There are penalties for failure to register within specified time limits.


You may expect to employ staff and the legal and taxation aspects of this are particularly onerous. Employees gain rights resulting from their employment and you are legally required to operate a payroll and a Pay as You Earn scheme to deal with their remuneration and tax. Employers are now required to operate the government's auto enrolment pension scheme for all employees, subject to some minor exceptions.


You may need to rent property and this may lead to committing to a lease. It is essential to take legal advice before making any such commitments.


You will probably require funding to get your project off the ground. This can be found from a number of sources.

Bank funding will generally be available to support a well prepared and researched, viable business plan. Even if you trade through a limited company you will be required to guarantee the debt personally to ensure that the bank is able to recover its lending in the event of the company or business failing. It is common for banks to require from the owners a contribution towards the capital of the business to prove that they are committed.

Trade credit may be available once you’ve built up a record of payment to suppliers, although at first they may require cash on delivery or in advance.


Many businesses do not take advice on bookkeeping. Advice from an accountant at an early stage will ensure that you keep the minimum required bookkeeping records and they can provide advice to help you maintain them correctly from the outset. Not only will this keep your accountants’ fees down but will make the preparation of VAT returns etc. easier.


It is a legal requirement to take out the third-party and employer’s liability insurance. You may also need insurance for stock, property, vehicles, professional negligence etc. An insurance broker will advise.

Bank accounts

If you set up a company or a partnership it will need a separate bank account. If you set up as a sole trader it is also sensible to have a business account for all business transactions to avoid mixing them up with personal matters.

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