SB: Small Business Start Up Discussion

ILoveSaving

Dear Savvy___Sue

Thanks for the information. The business would be to hold small sewing classes of no more than 4 children / adults at a time in my dining room / sun room. I do have a couple of old CRB certificates from about 8-9 years ago. So yes the parents would be leaving the children for an hour or two and sometimes it could be for a 1-to-1 lesson. I don't think CRB's actually have an out-of-date to go by, but I have heard that if I do want to have an updated one I have to go through an umbrella body, (details were from Business Link).

It is good to know I might not need to do home alterations. However my next port of call is to see if the council will let me, due to extra cars pulling up outside?

Thanks again.

chalkie99

worto03 wrote: »

Hi everyone - this thread is a brilliant resource, thanks to all inputting to it!

We are about to start a business (well my other half is anyway) primarily doing paint-a-pot mostly with children but many other crafty things as well, we have a premises organized but apart from that are just at the beginning of the process.

We (think) we have decided to go as a sole trader rather than a limited company due to
- less complex accounting requirements.
- our customers will not be VAT registered although our suppliers will be.
- we don't need to raise capital as we are using savings to startup the business.
- low profits expected for the first couple of years at least.

We are in the process of setting up a meeting with business link to discuss what has become a gigantic and rather overwhelming list of questions that we have on various subjects but I think if we can talk to someone with the right experience a lot of them will be obvious once they know our plans.

Anyway one question has been bothering me, I've read that it's a good idea to pay yourself a salary straight away which we like the idea of as it's a fixed amount with anything else being reinvested back into the business on new kit paints etc etc but how would that work - we expect to make a loss in the 1st year so what do we pay ourselves out of, out of our savings?, is a salary of around £8000 a year a good idea for tax purposes as it's just under the personal allowance?

What did you guys do around a salary when you were starting up?

hope I've made some sense, I'm hoping a lot of things will become clearer after we've spoken to an accountant, CAB and business link!
Cheers,
worto.

Looks like your questions might be passed by with others coming after so I will try and answer a couple of points at least.

Sole Trader or Limited -

Less complex accounting - Yes, although the Ltd route is not that much more onerous. It does mean submitting a separate form to Companies House each year as well as the HMRC returns. Additionally, your director names and address details and basic financial performance can be searched online by any interested parties.

VAT registration - Irrelevant to whether you are Ltd or not.

Registration is compulsory when turnover exceeds £73,000 in either case, and voluntary under that amount.

we don't need to raise capital - not particularly relevant. If you did need a loan then a personal guarantee is usually required whether Ltd or not.

low profits expected Is this a full time venture or is there income from elsewhere?

If the personal tax allowance is already being used up by other employment then the Ltd route may prove advantageous.

Salary - as a sole trader there is no such thing really. You make a profit (or not!) and are taxed on the profit (less your personal allowance of £7475) which is yours to spend or invest as you wish.

If you went the Ltd route then, yes, you generally want to take a salary not exceeding the personal allowance of £7475 after deduction of which the Company pay 20% Corporation Tax and the net remainder can be drawn as dividends at no extra cost, effectively saving you the National Insurance contributions. (Up to the 40% tax band limit).

the other thing you might want to consider is the main reason for being a Ltd Co. - i.e. the legal protection it affords you.

Imagine if one of the little dears has a mishap and the parents decide to go for compensation. Now suppose for some reason your insurance company wriggle out of it. In those circumstances you can, at least, fold the company and walk away with your house and other possessions protected.

Hope that helps!

worto03

Looks like your questions might be passed by with others coming after so I will try and answer a couple of points at least.

Thank you - I was thinking I'd be missed when the page changed

Salary - as a sole trader there is no such thing really. You make a profit (or not!) and are taxed on the profit (less your personal allowance of £7475) which is yours to spend or invest as you wish.

If you went the Ltd route then, yes, you generally want to take a salary not exceeding the personal allowance of £7475 after deduction of which the Company pay 20% Corporation Tax and the net remainder can be drawn as dividends at no extra cost, effectively saving you the National Insurance contributions. (Up to the 40% tax band limit).

Thanks - that explains that nicely.

low profits expected Is this a full time venture or is there income from elsewhere?

If the personal tax allowance is already being used up by other employment then the Ltd route may prove advantageous.

This will be a fulltime venture for my other half who will have no other income - I already work full time so we're hoping (edit - hoping isn't quite the right word we have done some figures!) that the family can live off my wage until the shop starts to make money.

the other thing you might want to consider is the main reason for being a Ltd Co. - i.e. the legal protection it affords you.

Thats something we've not discussed so thank you - I just assumed we'd get the relevant insurance to cover us, this is supposed to be a low risk venture with some savings we have - I really can't risk it effecting the family home - we have 2 young children. Looks like the one major decision we thought we'd made might need a revisit!

We plan to use an accountant anyway so I guess more complex accounts isn't so much of an issue as we'll have an account to advise us.

I'll do some more research into the downsides of becoming ltd. (looks to be mostly setup costs and higher accountant fees) maybe thats the way to go after all.

This seems to be a reasonable guide sole trader vs ltd

Cheers,
worto.

Savvy_Sue

ILoveSaving wrote: »

I don't think CRB's actually have an out-of-date to go by, but I have heard that if I do want to have an updated one I have to go through an umbrella body, (details were from Business Link).

No, they don't actually go out of date, but organisations will usually have policies of how often they renew them, ours (charity working with vulnerable adults and children) does them every 3 years, others might be more often.

I wasn't aware that an individual could use an umbrella body to get themselves checked out, I thought only employers (including those using volunteers) could request such a check. Of course if you were setting up as a Ltd Co and employing yourself, but you may not want that level of complexity!

Personally I never asked music or dance teachers if I could see their CRB check: I either trusted them or I didn't! I'd expect that for something like you're doing, you'd either ask me to stay on the premises, or not object if I chose to do so.

Mind you I am of the school of thought which says a CRB check is only of use on the day it was issued, and only of limited use then, and by the time it reaches the applicant it's barely worth the paper it's printed on.

ILoveSaving wrote: »

It is good to know I might not need to do home alterations. However my next port of call is to see if the council will let me, due to extra cars pulling up outside?

Are you a council tenant? I was kind of assuming that you knew you'd have to check with your landlord / mortgage provider that they didn't mind you running a business from home, and that you'd sorted insurance. If parking is an issue outside your home, make sure you've given thought to this. Will everyone actually drive?

I don't suppose you need planning permission, but we are looking at change of use for something at work, and are required to have a sustainable transport plan - so we are saying that staff will continue to use public transport / cycles to get here.

ILoveSaving

Hi Savvy__Sue

No I am not a council tennant, I have my own home and I have written to the mortgage provider already, just waiting for a response. I have insurance quotes too but dont want to start them off until nearer the time I could start my classes.

The only parking issue is that I live in a cul-de-sac, but I could direct customers to where they could park temporarily with no problem. The only thing would be if parents chose to sit around in the street waitng. This is the only area I have not looked into properly yet, but as you say not everyone would come by car and I am only planning to have classes on 2 nights a week and 2 mornings, which hopefully should not be as much of a bother as a constant stream of traffic coming and going.

I suppose we have used dance schools etc in the past too and no I never asked to see any CRB checks either, so thanks for the advice.

HiMyNameIsLauren

If you don't have an accountant - get one now. They will advise you on Ltd company set-up. Don't just go for one of these companies whom help you set it up. I did this and, ha, fell in to a few small holes that my accountant then dug me out of. An accountant is worth their weight in gold, go and find one now, instead of using an online shark, because to be quite honest, once you've used one of these services, afterwards, you'll be left thinking, "What, is that all they had to do?!".

ksdussal

Thank you for this informative post..Your points are very useful .

jamiehec

Hi all

I'm thinking about starting up a computer repair shop in my local town. I have a big knowledge of computer repair and have been working in I.T for the past 3 years.

I need some help on where I should begin, how would I go about getting a business loan? I have no money to put into it so would be looking into getting a loan of about £25k.

I have been looking into some small retail units which are around 11k per annum.

I have a few family relatives which experience in I.T who have said they're willing to help out.

Do you think I should go ahead with my business idea? Is it ideal at my age? And if so where shall I begin to get things moving?

Thanks for your help

Savvy_Sue

I'm probably going to sound a bit negative, but ...

jamiehec wrote: »

I'm thinking about starting up a computer repair shop in my local town. I have a big knowledge of computer repair and have been working in I.T for the past 3 years.

Are you sure there's a market for this? There's a quote from I don't know who: "There may be a gap in the market, but are you SURE there's a market in the gap?" So you start by doing some serious research: who would your competitors be? where are they located? how would you get their business?

Bear in mind I don't know when I last had a computer 'repaired' at work or at home, as in needing an actual piece of hardware replaced. If it gets to that stage, I'm probably ready to replace. But I have a contract at work and someone comes out to me.

You could do worse than take a look at these threads: here and here.

jamiehec wrote: »

I need some help on where I should begin, how would I go about getting a business loan? I have no money to put into it so would be looking into getting a loan of about £25k.

I know this is brutal, but forget it. No-one is going to lend you that amount of money if you can't at least match it. You have no history to prove you can make a go of this. Your first step is to work out how you can start up without borrowing - be that by starting cheaper, or smaller, or whatever, or saving madly. Or both, of course.

jamiehec wrote: »

I have been looking into some small retail units which are around 11k per annum.

No-one can tell you if that's a good or silly price, but remember that you'll have to add to that business rates, insurance, utilities, waste disposal (can be quite specialised with the innards of computers) and staff (at least one part-timer / cover person) - if you're in a retail unit you have to be there when you say you'll be there, and that means having at least some backup.

jamiehec wrote: »

I have a few family relatives which experience in I.T who have said they're willing to help out.

And are they as good as you are? And in what way will they help out?

jamiehec wrote: »

Do you think I should go ahead with my business idea?

You have a lot of work to do before you could even think of going ahead, and you might find the businesslink site useful.

jamiehec wrote: »

Is it ideal at my age?

I'm guessing that your age is 'quite young', but I don't see how anyone could possibly answer that. If you are young and with no responsibilities and you can set it up without getting hugely into debt so that if it all goes wrong you can walk away without that round your neck, it may indeed be ideal. And some people like a fresh-faced enthusiast speaking geek diving into their machine to make it work again. Me, I've been using computers not quite since they were invented (I'm not THAT old!) and I tend to respond better to the pony-tails and beards of those who built their own machines in the days when that was the only way to get your machine to the spec you wanted ...

jamiehec wrote: »

And if so where shall I begin to get things moving?

See above, but don't think this is something you'll be making your fortune (or even a living) from any time soon ...

Actually, if you're IN a job, I'd tend to suggest staying there and working this (or some other) plan up slowly! Self-employment isn't all it's cracked up to be!

jacksterr

Hiya I have a idea for a small business which before I even think about going ahead with it need some help..

I'm thinking of starting up a McDonalds and KFC delivery service in my town, where customers would place an order for a McDonalds or KFC and a delivery driver would get the McDonalds or KFC and deliver to the customer.

I know there are services like this all over the UK so its not unique but just wondering if there are any legal complications/regulations involved in this?

I would be looking to run this business idea part time in the evenings and hiring a delivery driver on a part time basis.