Becoming Your Own Boss: Essential Advice
More and more people are starting their own businesses in the UK. There are certainly many benefits associated with becoming your own boss, including the potential to make more money, have more freedom and be doing something you love. But, starting a business is never an easy option, as there is so much that needs to be done that you may not have even considered as an employee. This is why organisation is key. Below, are the essential items you should do once you become your own boss.
- Choose a structure – The first thing you need to decide is what type of structure your business is going to have. This is a crucial decision, as it will influence everything else going forward. It is vital that you take the time to consider it carefully before you make your final choice. The options you have at your disposal are a limited company, a limited liability partnership (LLP), a partnership, a sole trader, and a not-for-profit organisation. The latter relates to the likes of community interest companies (CIC), companies limited by guarantee (LBG), social enterprises, and charities. Limited companies are separate legal entities, which are owned by shareholders, but this does not mean that they are necessarily going to work in the business. Partnerships are two sole traders working together. A sole trader does not mean you are working alone, it simply means that you are liable for all debts at the company. Finally, a limited liability partnership (LLP) does what it says on the tin – it means there is a cap on individual liability.
- Consider seasonal trading patterns – Before you start trading, it is important to look into seasonal trading patterns if they are relevant for your business, so that you have a good idea of the highs and lows for trading. For example, many retailers will make a monumental 80 per cent of their yearly profit during the festive Christmas period.
- Always think about tax – For every pound you make, it is important to consider the tax you are going to have to pay and plan for it effectively. So many business owners experience a nasty shock when they realise how much tax they owe, but if they had been more organised and regularly set aside adequate amounts to cover their tax bill in a separate account they would have been well prepared for this.
- Open a separate business account – You will need to open a bank account that is just for your business. And, you need to ensure you are strict about only using your business account for business use and your personal account for personal use. New business owners often make the mistake of mixing the two and live to regret it, as it makes it difficult to keep control of the financial status of the business. However, do bear in mind the fact that your finances are going to be connected, for example, if your personal credit rating is dropping yet your business is doing well, you will probably struggle to borrow money for your company.
- Hire an accountant – Every business needs an accountant to ensure the business is running efficiently and that you are handling taxes correctly – not paying too much and not paying too little. While hiring an accountant is essential, when you are becoming your own boss you should still make an effort to gain a basic understanding of accounting principles, as this will help you understand which areas of your business are profitable, which are not and which areas are ripe for growth.