Starting a new business can be daunting as there can be so many things that you need to do, so we’ve put together this guide to help new business. Below is a guide to help you navigate the products available to new businesses, and in many cases, we have conducted further reviews of these products/services which we have included links to.
What are the initial considerations when setting up your business?
Firstly, you will need to decide what legal entity your business will have (see below) as there are many pros and cons for each type and there are different processes to follow for setting these up. You will need to register your business for tax and National Insurance and if you want to be a limited company or partnership, you will need to register your business with Companies House.
You will also need to consider what you are going call your business and you will need to check that the company name is available and is not going to be confused with another business with a similar name. It is also worth checking at this point whether you can purchase an appropriate website address (URL) as you don’t want to go too far with a name then discover the URL is taken.
You will need to decide who are the owners of the business and what shareholder stake each person will have in the business and how will you document this. When you set up the company you can a create shareholders’ agreement which outlines the split of shares, it can restrict how shares can be transferred and it will regulate how shareholder activities are conducted. However, a shareholders’ agreement is not a legal requirement.
What legal business entity to you want?
You will need to decide what type of business you are setting up as this will determine the steps you will need to take. There are three types of business that you could set up which are:
- Sole trader – as a sole trader you are classed as self-employed and you are liable for the business. You can keep all the profits, but you will pay tax and National Insurance on your income.
- Partnerships – a partnership is where two or more people set up a business and have joint ownership and therefore shared personal liability for the business. Partners can share the profits from the business, but each will pay tax and National Insurance on their income. You can also register as a limited partnership which follows the same steps as a limited company.
- Limited company – you can set up different types of limited companies including a private limited company that can be limited by shares or by guarantee, and public limited company. Limited companies have a legal separation from the owners which means that they can’t be held financially liable if the business encounters any difficulties.
Registering your business
Where you need to register your business will differ depending on the legal entity of your business.
- Sole traders – you are typically self-employed in the eyes of the HMRC so you will need to register with them for Self-Assessment to pay tax on your income. You will also need to ensure you register for National Insurance at the same time to pay Class 4 contributions and whether you are going to pay voluntary Class 2 contributions. You will only need to register for VAT if your turnover over is over £85,000.
- Partnerships – you will need to nominate a partner to manage the partnership’s tax returns and keep the business’ records. You will need to register with the HMRC for your tax returns and National Insurance. If you decide to become a limited partnership, you will also need to register with Companies House and follow the same process as a limited company.
- Limited companies – need to register with Companies House providing details including your registered address, directors, shareholders and company secretary (optional). You can normally register for Corporation Tax through Companies House as well, but if you can’t, you will need to contact the HMRC.
Setting up a business bank account
When you are setting up a new business, you may want to set up a business bank account. If you are a sole trader, you don’t necessarily need to set up a business bank account as it is a personal income but many banking providers won’t necessarily allow you to make business transactions through your personal account. However, it may also be advisable to have a separate bank account to keep your business and personal finances separate as a business bank account can help you to track your transactions and simplify your accounting. It will also give you access to other business banking products including savings accounts, credit cards, overdrafts and loans.
Many banking providers offer a free initial banking period to new businesses or new customers. This normally means that you have several months (often six or twelve) without paying the monthly or annual account maintenance fee. There may still be some transaction fees to pay on some accounts. You can learn more about free business bank accounts on our review page. Selecting one of these providers can help you save money initially, but to save expensive or the hassle of moving bank accounts after the free period then you should also check and compare the charges at the end of the free term.
Some banking providers also offer new business and start-up bank accounts or specialist sole trader business bank accounts which can be more tailored to your needs and some offer a free term on these accounts. You can see our reviews on these through the links above.
When you select a business bank account you should think about the type of bank transactions your business will be doing as this can help you decide which account might offer the best deal. There are bank accounts that cater more for digit transactions and others that cater for more manual over the counter transactions such as handling cash and cheques. Often you will find that bank account fees vary for different transactions and some give you a monthly allowance for some transactions before charges apply.
What insurance do you need?
Insurance is an important aspect for many businesses as it offers them protection from every angle including lawsuits from customers, visitors and staff, protects your buildings, vehicles and assets including stock, and it can protect the owner’s liability and their professional performance.
The types of insurance that you need will vary depending on the type of business you have, the premises you have, the product or services you offer, where your business operates and the protection you want for yourself and other owners or staff.
There are many types of insurance that you can buy for you and your business’ protection which can be sold as standalone products or combined to provide you with more comprehensive cover. Many insurance providers offer a variety of cover as you can see in our business insurance provider reviews.
You may want to consider some of these types of insurance policies below for your business. We have provided links on these to our reviews which details each of the leading insurance providers and what their policies offer:
- Commercial property insurance – if you own a commercial property you will want to insure it and you may be obligated to insure it by your mortgage provider if you have one. You can often combine this cover with business contents and public liability cover as well as other cover options.
- Business contents – if you have a property that you store your goods in or you operate from you should probably get business contents insurance to cover all your equipment, stock, furnishings and fittings. If you operate your business from your home then you should check with your home insurance company whether your business items are covered whilst at your home or whether you need additional insurance.
- Office insurance – this is designed specifically for offices and it typically covers buildings, contents, trade stock, promotional merchandise, glass, personal belongings, electronic equipment on and off the premises (check what is included on the policy). Some policies can also incorporate some liability cover such as public liability, products liability and employer’s liability. Policies like this can cover all aspects of insurance which you might need, and some may offer some items as a tag on products to create a comprehensive package.
- Commercial van and vehicle – you will have a legal obligation to insure your vehicle/s with the appropriate level of cover. There are a variety of policy types including a single-vehicle, van/s, light or heavy commercial vehicles and fleets for those with a collection of vehicles.
- Goods in transit – this can provide extended cover for your stock whilst it is being delivered or transported. This can often be incorporated with other types of insurance as part of a package or as a tag on product.
- Public liability – this is a very important insurance cover that many businesses are obligated to have, and you may not be able to operate or work if you don’t have the correct level of cover in place. Public liability insurance protects your business in the event of an incident occurring where your business, employees or property have resulted in personal injury to a member of the public or their belongings/property. It will cover the legal costs, court costs and compensation costs. This type of insurance can be combined with other products or bought as a standalone product.
- Professional indemnity – this is to protect you from customer claims about your work. If you provide a professional service which you are held accountable for, you should take out professional indemnity insurance. This will cover any legal costs, court costs and compensation costs.
- Product liability – this provides protection in the event of your product causing harm to a third party and will cover the claim costs. This caters for designers, manufacturers, distributors and retailers. You can often purchase product liability insurance alongside public liability insurance or as part of a combined package.
- Employers liability – this is a compulsory requirement for businesses that have more than one employee that is not a family member. It protects both employers and employees in the event of an injury or illness resulting from their work. This will provide legal and compensation costs.
- Business protection insurance – this provides protection for your business which can include business protection, business interruption, income protection insurance, relevant life cover, business loan protection and critical life cover. These will provide support for your business when it needs it the most in the event of an incident or loss of a key person in the business and it can help keep your business financially stable. These types of cover can be purchased as an individual cover or as part of a mix and match policy to build the protection that you need.
- Director and officer insurance – this type of insurance is designed to protect the individuals that run a company from liability, and it will cover legal, court and compensation costs.
- Ownership, partnership and shareholder protect insurance – this may also be offered as shareholder and partnership protection which protects the owners in the event of something happening to another owner and so they can buy them out. Another form of cover is management liability which protects directors, officers and senior managers from liability for their actions and will provide cover for defence costs and settlements.
- Personal accident – this can be taken out to protect an individual or a group of people and can be bought as a personal or group accident cover. It provides those covered with a regular income or a lump sum if they have an accidental injury or die. Policies like this can also be referred to as income protection. This policy pays out to the individual injured or their family.
- Key person insurance – this helps businesses protect against losing a key staff member temporarily or permanent. It is for the benefit of the business, not the individual and it pays a lump sum to help the business to save guard itself and its profits. It can also help them to replace staff either temporarily or permanently by covering the recruitment costs.
- Freelance insurance – this is designed for those that work alone and are personally liable for their work. Many providers offer tailored cover that you can select which covers you want to include such as public liability, professional indemnity, stock and equipment, and income protection.
- Self-employed and sole traders – this is similar to freelance insurance as it protects the individual but tends to be more focused towards trades. Many providers offer a combination of products which can include public liability, income protection, product liability, professional indemnity, tools and stock.
- Tool insurance – this type of policy helps to protect your tools, equipment and plant equipment against theft, loss and accidental damage. It can cover your own and hired items.
There are also a variety of profession-specific insurance products available that incorporate different types of insurance that are deemed as required for that profession. These packaged policies can be tailored to your needs so you can select what elements you want to include (we have provided links to our reviews for this type of insurance and the providers offering it so you can investigate it further). Theses include:
- Builders insurance
- Bus and coach insurance
- Catering insurance
- Cleaners insurance
- Contractors insurance
- Courier insurance
- Dog walking insurance
- Event insurance
- Hairdressers and salon insurance
- Hotels and guest house insurance
- Landlords insurance
- Massage therapist insurance
- Minibus insurance
- Motor trade insurance
- Pet business insurance
- Photographers insurance
- Pub and restaurant insurance
- Roofing insurance
- Scaffolding insurance
- Shop insurance
- Takeaway insurance
- Taxi insurance
- Tradesman insurance
- Truck and HGV insurance
How to finance your new business
How are you going to finance your new business? Does it require you to raise capital? Will you be looking for investors to become shareholders or will you be looking for funding from financial providers?
As a new business or one in the set-up stages, your funding options aren’t as wide as established businesses. However, there are several banks and finance providers who do offer start-up and new business loans with loans from £1,000 with a variety of different terms. We have reviewed these start-up and new business loans for you so that you can see what each provider can offer.
You may also want to select your banking provider based on the other services they offer to provide finance options alongside your bank account. Some of the other finance options you may want to have in the future could include business credit cards, business overdrafts, business loans which could be secured business loans or unsecured loans, equipment and machinery financing, asset-based lending, invoice finance and commercial mortgage. We have also reviewed each of the leading providers for these financial products to assist you.
How to create a business plan
In order to get business finance, you may need to present a business plan to demonstrate what your business is offering and how you plan to make the business work. You can create a business plan using the following headings:
- Executive summary – in this section you should briefly describe the contents of your business plan.
- Company description – in this sector you should outline all the information about your business.
- Products and services – in this section you should describe the products and/or services that you provide.
- Market analysis – in this section you should define who your audience is and how you are going to sell to them and market your products/services. You should also include information about your competitors and how you differ from them.
- Management team – in this section you should provide details about the key members of staff and their experience that contributes towards the running of your business.
- Financial plan – in this section you should detail your finances including sales forecasts, balance sheet and profit and loss projections. If you are seeking investment, you should explain what you what to do with the funding.
Do you need an accountant?
It is really up to you whether you decide to get an accountant to do your books for you. If you are able to track your expenses, invoices and payments, and you feel comfortable doing your own accounts and tax returns then there is no reason not to. If your business is a limited company then there may be more requirements and you will be more likely to need an accountant.
If you are doing your own accounts you may want to explore and invest in some accounting and bookkeeping software that could ease the administration and time required by automating some processes (see below).
Business accounting and bookkeeping software
Investing in accounting and bookkeeping software can help you to reduce your administrative burden and ease your financial tracking. Software packages can include a variety of functionalities which includes sending and tracking invoices, managing payments, logging expenses and even assist you in tracking the number of hours you spend on jobs. There are many accounting and bookkeeping software providers available with varying offerings which we have reviewed to help you discover which of the software packages will be best for your business.
If you don’t want to invest in accounting and bookkeeping software at the moment, but you want to be able to produce quality invoices that you can track easily, it may be worth using invoicing software. This can help streamline your invoicing, monitor payments, send out reminders and you can even produce invoices on your phone and email them whilst on a job if you want to.
Do you need to pay VAT?
If your business is going to have an annual VAT taxable turnover above £85,000 or you think it will then you must register for VAT. If you sell items that are VAT exempt these sales need to be excluded from this amount as they are exempt.
However, you can volunteer to be VAT registered if you want to even if your turnover is below £85,000. Under these circumstances, VAT will be applicable from the day you register for VAT.
In order to take payment for your services or products, you will have to think about what systems you will need to have in place to manage different payment types. We have provided links where we have conduct reviews into some of the systems and products available to support small businesses. These include:
- Traditional cash registers and tills – there are a variety of tills available which can print receipts and store cash for those with a shop.
- Card payment machines – there is a choice of card payment machines available that can operate alongside a phone line, WiFi or your mobile phone to allow you to take payments anywhere.
- Electronic point of sale systems – these are systems that allow you to track your sales, take orders and payments, and can integrate with other devices like printers. Many are built around tablets to make them more portable. We have reviewed a lot of these PoS and EPOS systems and software which can help you to discover which may offer the services you need, this includes PoS and EPOS software, PoS and EPOS systems and iPad PoS and EPOS software.
- Online payments – if you want to take payments online you may need to have an ecommerce platform, a merchant account with payment processing to receive credit and debit card payments, payment gateways and online payments to integrate into your website or host your payments for you.
- Virtual terminal and phone payments – these allow you to take payments over the phone or by mail from customers and without the need for a physical card.
- Direct debit companies – if you want to set up direct debit payments to collect regular payments from your customers you will need a direct debt company to take these payments for you.
Setting up and choosing utility suppliers
If you have your own premises you will need to set up various utilities which include electricity, gas, water and telecommunications. When it comes to energy suppliers you have the option of shopping around for yourself or getting an energy broker to do the legwork for you.
Electricity and gas are important to set up straight away when you take over the premises as you will have been put on to a deemed rate which will have much higher rates as this article on electricity rates explains. If you are looking for a business gas supplier we have put together this piece reviewing the leading business gas suppliers.
If you need a phone and internet you will need business phone lines installed and our reviews can help you to select the right provider. However, you may opt to have a business VoIP phone system which operates over the internet and offers a range of mediums to communicate.
Creating an online presence
When you are setting up your business you will need to create an awareness of it with your target audience. In many cases, an online presence is essential to not only display your services/products but also give your business credibility. There are many options available to create a website which includes employing a website designer or building the website yourself using a website builder.
Building a website that can do your business justice might be beyond what you can do or you may not have the time to create the website yourself, so employing a website designer would probably be best. A website designer can build a website that is optimised to improve your chances of being found and ensure that the website is easy to navigate for your customers.
If you have the time and computer skills then you might want to save some money and build your website yourself as many small businesses do. There are a wide variety of website building platforms available which can simplify making a website such as WordPress, Wix and Squarespace. They provide the software to create a website without needing experience or coding knowledge. You can build a website using their design templates and their building blocks to create an effective website. Many website building platforms offer a range of plans which can include a free plan or trial period so you can create a website at very little cost, as you can read on our Best Website Builder review page about them.
If you are setting up a website where you will be selling products you will need to have ecommerce functionality so that you can securely take payments. There are a variety of providers of these which include WooCommerce, Shopify and BigCommerce. To help you decide which provider is right for your business we have reviewed the leading providers of ecommerce platforms.
Alongside building a website you may also need to source a hosting provider for your website. To help you find the right hosting solution that is affordable we have reviewed the leading providers of web hosting.
You may also want to explore how to increase your business’ visibility on search engines and if you do, we have written some pieces on search engine optimisation and paid search. You may also want to create a presence on social media so that you can build a following and promote your offerings through another channel. We have also created a guide about social media marketing which might be worth reading.
Printing promotional materials
To get the word out about your business it is also worth considering printing some promotional materials such as:
- Business cards – to hand out to customers, have on your counter or leave with quotes.
- Leaflet and flyer printing – to leave in high footfall areas, noticeboards and your counter.
- Poster printing – to put up inside your business or in high footfall areas.
- Stickers and label printing – these could be for your product labels or to hand out to customers.