Creating a new business is an exciting event in anyone’s life. Often signalling the transition from salaried employee to dynamic entrepreneur, it’s a far simpler process than many people assume. However, a well-defined plan is essential if you want to avoid legal penalties or a period of enforced inactivity.
These are the key stages involved in creating a new business:
1. Decide whether to be a limited company or a sole trader.
It’s generally advisable to set up a limited company, where a director or directors assume responsibility for the company’s activities. This is a more professional setup than being a sole trader, and it’ll reassure prospective clients. You’ll need to appoint a company secretary, though this can be a ceremonial role. The secretary’s role will be to maintain regulatory compliance for business proceedings.
2. Choose your company name.
It’s vital to check with Companies House that your preferred name isn’t already being used by another firm in your industry. Registering an available title with Companies House is surprisingly straightforward – your business will be founded by temporary directors, who’ll immediately “resign” and name you as their successor. This process takes a few weeks and involves basic form-filling and ID provision, after which a Certificate of Incorporation will be issued.
3. Choose a domain name.
Almost as important as being able to register Your Name Ltd is reserving a matching web domain. There’s keen debate about the rival merits of a .com (global) or .co.uk (domestic) top-level domain; if they’re both in use already, potential customers may not reach your site. We publish a list of available and reserved domains for anyone creating a new business. We also include matching email addresses, reinforcing the brand with every outgoing message.
4. Create a website.
Having registered a domain, a website can be self-built using an affordable template tool like WordPress or outsourced to a web design agency. You’ll need to decide what pages the site should have, and come up with bespoke text and copyright-free images. If you’re not a natural wordsmith, freelance copywriters could undertake content production on your behalf. Ensure that the website is mobile-optimised and loads quickly, for search engine optimisation purposes. New sites with low traffic volumes struggle badly with SEO.
5. Appoint an accountant.
From the day your business is incorporated under the Companies Act 1985, you are liable for accurate record-keeping. Accounting is a mysterious process, with annual report figures often
bearing little obvious resemblance to your own (essential) Excel income/expenditure spreadsheet. Choosing a good accountant is crucial for adhering to tax laws and financial regulations, so ask people you know for recommendations. Ensure a prospective accounting firm belongs to professional bodies, and clarify whether their pricing structure involves a set monthly fee or pay-as-you-go costs.
6. Research financial best practice.
Ask your accountant’s advice about registering for VAT when creating a new business – this is rarely advisable unless annual turnover will exceed £85,000. Don’t assume company-owned or leased vehicles are cost-effective, either – tax liabilities often render this less attractive than using a privately-owned vehicle for work purposes.
7. Open a business bank account.
Setting up a business bank account is similar to opening a personal account. It ensures any income and expenditure is made in the company’s name, clearly distinguishing personal affairs from corporate responsibilities. Plus, handing over a corporate credit or debit card never gets old.
8. Produce an approximate balance sheet.
Estimate the minimum annual income necessary to cover accounting fees, website hosting, and other essential costs. Will you incur ongoing expenses like staffing or warehouse rental? Initial startup costs can be paid for with a director’s loan from your personal account to the business, though this should ideally be repaid eventually.
9. Look for financial assistance.
If you belong to a minority group, there may be grants or startup loans available. The same is also true for young entrepreneurs. Search for possible grant providers and complete each application process with a pre-prepared statement about why you’d benefit from assistance.
10. Consider business liability insurance.
This covers your company against lawsuits or compensation claims. Insurance cover is vital if you or any employees could be sued in the course of conducting your business.