It is the ambition of many people to run their own business. Some may have been made redundant and find themselves with free time and financial resources. Others make the decision to start up in business to be more independent and obtain the full financial reward for their efforts. Whatever the reason, a number of dangers exist. Probably the greatest concern is the possibility of business failure. Read on for guidance on some of the factors which need to be considered.
This factsheet cannot cater for every possibility and any decisions should be supported by professional advice.
In order to make your business a success there are a number of key factors which should be considered:
- commitment – starting a business is demanding. Determination and enthusiasm are essential.
- skills – you will need managerial, financial, technical and marketing skills. If you do not have these skills personally, they can be found in a partner or employee, or acquired through training.
- your product or service should have a proven or tested market, but must not conflict with the patent or rights of an existing business.
In addition to these general considerations there are a number of more specific matters.
The business plan
The business plan is the key to success. If you need financing, no bank manager will lend money without a sensible plan.
Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.
There are three common types of business structure:
- Sole proprietor
This is the simplest form of business since it can be established without legal formality. However, the business of a sole proprietor is not distinguished from the proprietor’s personal affairs. The sole proprietor files a schedule C with its personal tax return.
A partnership is similar in nature to a sole proprietor, but because more people are involved it is advisable to draw up a written agreement and for all partners to be aware of the terms of the partnership. Again the business and personal affairs of the partners are not legally separate. A further possibility is to use what is known as a Limited Liability Partnership (LLP).
The business affairs are separate from the personal affairs of the owners, but there are legal regulations to comply with.
The appropriate structure will depend on a number of factors, including consideration of taxation implications, the legal entity, ownership and liability.
Books and records
All businesses need to keep records. They can be maintained by hand or may be computerized but should contain details of payments, receipts, credit purchases and sales, assets and liabilities. If you are considering purchasing computer software to maintain your records, obtain professional advice.
When starting in business, taxation aspects must be considered.
- Taxation on profits
The type and rate of taxation will depend on the form of business structure.
For the business to get off the ground or to enable expansion, it may be necessary to employ staff.
It is the employer’s responsibility to deduct and remit the proper taxes and comply with all quarterly and annual filings. Payroll records should be carefully maintained.
You will also need to be familiar with employment law.
There are many pitfalls to be avoided in choosing a property. Consideration should be given to the following:
- suitability for the purpose
- compliance with legal regulations
- local by-laws
- physical restrictions such as access.
Comprehensive insurance for business motor vehicles and workman’s comp insurance are a legal requirement. Other types of insurance such as general liability, consequential loss, business asset, Keyman and bad debt should be considered.
How we can help?
While some generalization can be made about starting up a business, it is always necessary to tailor the strategy to fit your situation. Any plan must take account of your circumstances and aspirations.
While business success can never be guaranteed, professional advice can help to avoid some of the problems which plague new businesses.
We would welcome the opportunity to assist you in devolping a strategy suitable for your own requirements. We can also provide key services such as bookkeeping, QuickBooks training, and payroll preparation at an early stage.