How to set up your first-ever business (without the stress)
Let’s face it: saying that 2020 has been a disruptive year is, if anything, an understatement.
But for some, that shift has actually been the kick in the rear that they’ve been waiting for to do something new.
If you’re something of a go-getter yourself, now could be the moment you’ve been waiting for. You’re ready to step out into the world and make your own way. You’re ready to be your own boss.
Except… how does that work, exactly?
“We’ve seen plenty of people start with a business idea who feel caught out at the first hurdle,” says Andrew Cooke, Strategic Director at co-working and workspace provider Bruntwood Works. “But while the initial anxiety about the admin and legal stuff might put some off, the benefits of establishing your own business quickly outweigh all of that.
“The good news is that it’s never been easier to set up a company than it is today. We’re seeing countless businesses get off the ground in our co-working spaces. It’s exciting to see how the difficulties of 2020 have actually awoken the inner entrepreneur of so many, and to have played a part in their initial success.”
So, if you’re ready to launch your dream business — where do you start?
Register your business
The first step is to go to the UK Government website to register your business.
You have a couple of options:
- Register as a sole trader — The simplest way to set up a business. The only catch here is that you’ll be personally responsible for your business’s debts, as well as for the accounting. Be mindful that if you get into a lot of debt as a sole trader, you’ll have to pay it off even if you shut down your business. To set up as a sole trader, you have to tell HMRC that you pay tax through self-assessment, so you’ll need to file your own taxes each year.
- Start a limited company — Limited companies are a little bit harder to set up than sole traders. However, they come with one major benefit: you can keep your personal finances separate. That means you won’t be personally liable to pay debts the business accrues. There are a few more management and reporting responsibilities, so you may want to get in touch with an accountant to help you set up a limited company.
- Partnerships — The easiest way for two or more people to run a business together. Like a sole trader, you’ll have accounting responsibilities, but with a partnership, you share responsibilities for debts with your business partner.
Freelance or self-employed?
One of the many questions you might ask yourself at first is whether you want to go freelance or set up a business — and what’s the difference, anyway?
While freelancers and business owners are both responsible for registering their business (freelancers should register as sole traders) and for their tax returns, they are perceived differently by potential clients. Freelancers are known for working on multiple short-term projects, so clients tend not to make long-term commitments with them.
If you have ambitions to grow your company, you’re better marketing yourself as a business rather than a freelancer.
Choosing a name
Generally speaking, you can call your company whatever you like, as long as:
- It isn’t offensive
- It ends in ‘Limited’ or ‘Ltd’ (for limited companies)
- It isn’t the same as another business’s name
You can check to see whether your chosen name is available on the government’s website.
The cost of registering
While you might need a pot of money to help your business grow in the first few months, you’ll only need to pay £12 to register your business. You can pay by credit or debit card. Simple!
1. Check the rules
Different industries have different rules for what you can and can’t do or sell. Make sure you do your research so you know you aren’t breaking the law.
Here are a couple of examples where you’ll need to follow industry-specific rules:
- Setting up a bar? You’re going to need an alcohol license.
- Selling products online? You need to provide customers with key information first.
- Playing music? There are specific licenses you need for both recorded and live music.
Not sure what licences you’ll need? The government has a licence finder you can use to make sure you’re fully covered.
2. Get insured
Insurance is a big deal for businesses — and, like car insurance, some of it is actually mandatory.
You’re legally required to have the following types of insurance:
- Employer liability insurance — Covers the cost of compensating employees who suffer injury or illness due to their work. The only time you don’t need this is if you don’t have any employees.
- Commercial motor insurance — Like car insurance for businesses. You need this if your business uses vehicles.
- Professional indemnity insurance — Covers the cost of compensating clients for any loss or damage they suffer because of negligent services your business has provided. This is a legal requirement for regulated professions like solicitors, accountants and financial advisors.
The time is now
Andrew Cooke, Strategic Director at Bruntwood Works is hopeful about the new generation of entrepreneurs.
“2020 made us appreciate how satisfying it is to control our own destinies. It’s provided breathing room for people to think about what they actually want from their future; for many, it’s to launch their own business.
“It’s been especially satisfying for us to provide COVID-safe spaces for people to do that. Now, we’re witnessing those start-ups blossom.”