What do I need to do before creating an online business?

ashy_mashy

Not sure if any of this is relevant but in simple terms this is how the business will work:

- I am going to launch a website selling small items which are delivered to the customers. The items (stock) are originally bought from a wholesaler, and then stored at my house. The items are then advertised online on my website and once an order has been made, I package the item that has been ordered and post it to the buyer. Orders can only be made online, not by telephone or any other way as I will not have a business phone line. I will be answering people's queries by email. -

So are there any legal or other issues that I need to deal with in regards to setting up the business that I need to deal with. Do I need to register myself as a company? How do I go about doing that? What does it mean to be VAT registered and will I need to be VAT registered?

Thanks in advance!

Tomthumb

You will need to let the tax office know that you are self employed. Working from home, you may have to pay business rates and also take out insurance as you are storing goods in your home. Check the inland revenue website for advice on VAT (if you earn enough) and also ukbusinessforums are useful. Good luck!

mrs-d_3

I'm afraid I wont be much help as I'm not an expert but I thought I'll bump up your post so it doesn't get lost. It's something I'm considering in a near future (online business) and could use some info. Good luck.

Savvy_Sue

I think you do need to tell your home insurers that you're storing stock at home, and be prepared for an increase ...

ashy_mashy

Savvy_Sue wrote: »

I think you do need to tell your home insurers that you're storing stock at home, and be prepared for an increase ...

Do I have to insure my goods? I think I can afford the risk of anything happening to the goods so wouldn't really want to insure anything.

ashy_mashy

Tomthumb wrote: »

You will need to let the tax office know that you are self employed. Working from home, you may have to pay business rates and also take out insurance as you are storing goods in your home. Check the inland revenue website for advice on VAT (if you earn enough) and also ukbusinessforums are useful. Good luck!

Thanks, I'll check out that forum in a while. But incase anyone can answer, what will the tax office do once I have told them (how does it effect status)? Will I be charged extra? How would they keep track if I hadn't told them as it would be unlikely that they check every website? Will I be in trouble for not informing them?

What about people who have an online shop on ebay, do they need to go through legal processes?

anitamarie

Once you declare self-employed 3 things happen:
1) You receive the fanciest brochure you've ever seen on your new self-employed status (I shall leave aside my gripe on why this can't be emailed to save our tax £s) which tells you things to be aware of
2) You start getting billed c£30 a quarter for NI contributions
3) You have to do a tax return, which for you wouldn't be til after April next year telling them what you've earnt so they can bill you for income tax accordingly.

It must be said, the helpline for the newly self-employed is quite good.

Now, if you think you'll make less than c.£5k over a year from your self-employed income, tell them when you register and ask them about small earnings exemption.

I personally wouldn't invite the VAT man on yourself unless you have to, which depends on your turnover (threshold c.£55-60k, can't remember the exact figure).

What you should be aware of is that to trade online since Jan 2007 you must list your business name, address and contact number if I remember correctly. Understandably people get upset about spending money online with someone they don't know! Happy to discuss further with you as I run my own online biz and make websites for other people who do so, just PM me.

windswept

I have a website and an ebay shop, there is a lot to consider,
i.e have you got a business bank account and merchant account for taking online payments?
Are you building your site or having it built for you?
The key is research, as much as you possibly can before you commit to anything.
Do you know your intended market, have you looked on ebay to see how much your products will sell for - you might be in for either a nasty shock or a pleasant surprise. There are merchants on ebay selling at much less than even trade cost for some goods, a lot of people import direct from China.
Unless you really specialise, it's not easy. Do you understand seo, google analytics etc.

Savvy_Sue

ashy_mashy wrote: »

Do I have to insure my goods? I think I can afford the risk of anything happening to the goods so wouldn't really want to insure anything.

You could argue that one with your insurer but I'd still expect to have to pay an increase because they may say that the RISK has increased, ie if someone knows you are storing stock at home they may decide to burgle you anyway.

Plus they may want to put you onto a business rate rather than a domestic rate. Some insurers may just decline to offer cover if you're running a biz from home.

NOT telling them is IMO a dangerous option because if anything does happen and it comes out that you've been storing stock at home for business, EVEN IF YOU DON'T WANT TO CLAIM FOR IT, they may decline the claim totally.

richt71

ashy_mashy wrote: »

Not sure if any of this is relevant but in simple terms this is how the business will work:

- I am going to launch a website selling small items which are delivered to the customers. The items (stock) are originally bought from a wholesaler, and then stored at my house. The items are then advertised online on my website and once an order has been made, I package the item that has been ordered and post it to the buyer. Orders can only be made online, not by telephone or any other way as I will not have a business phone line. I will be answering people's queries by email. -

So are there any legal or other issues that I need to deal with in regards to setting up the business that I need to deal with. Do I need to register myself as a company? How do I go about doing that? What does it mean to be VAT registered and will I need to be VAT registered?

Thanks in advance!

Ashley..I'd suggest 2 things check your local business link out (free government help for small businesses - check telephone book for details) and ring around a few accountants. You'll need one anyway if you do well. Most will give you a free 1 hour consultation on the best way to set up and vat etc. You only pay them if you make any money. Better getting it right at this stage as there is massive implications if you get it wrong particularly tax wise and vat wise..you don't want a sudden massive bill cos you've screwed up. Hope that helps.

windswept

Don't just go to one accountant for your free hour, see several.
The first one we saw gave us completely the wrong advice, he advised us to set up a limited company, to register for vat - all sorts of unecessary nonsense that would have cost us a fortune and given him lots of nice fees.
While your turnover is under £15k, you really don't need an accountant anyway - you can do a free self assessment course with your local hmrc office, they invite you when you register as self employed.
I've done our first lot of tax returns, very simple , even though we have a partnership and are both employed too (as well as both changing jobs last year!).
If our t/o exceeds £15k this year (looks likely), then I might see an accountant - if only to see any tricks of reducing the tax bill.;)
The tax return when you go over £15k is a lot more involved than for t/o under that amount - you only give turnover - expenses-profit, you don't go into any details.