Help, I don't know where to start, being made redundant and want to start up my own business.

adiecan

I have been told by my employer the company I work for, is shutting down, but this could take up to 18 months. 
But I want to start up my own business now so I have something to "walk into" when I finally lose my job. 
I have cleared this with my employer he's not particularly happy, but understands why.
We are a fairly isolated community in Scotland and the business I want to go into, someone has just retired from, and I am concerned that if I wait 18 months without doing anything someone else might seize the opportunity. 

How do I start, do I set up a business first or get work first?

Which would be best to set up Sole trader or Ltd company, bearing in mind I will still be employed for a year or so. ( I am currently just below the 40% tax bracket at work)

Do I need an accountant? 

Should I get a business account ? 

I don't know how much work I will be able to take on, as it will all have to be in the evenings and weekends to start with. 
The work I am fine with, it is just everything else. 

Pennywise

Yes, I'd suggest an accountant pretty sharpish really.  You need one to go through the pros and cons of the sole trader versus limited company decision with you.  My gut reaction would be to go for a limited company given you're already close to the HR band with your current job and presumably you won't need to draw any profits out of the company until after your redundancy.  But there could be other factors that mean sole trader could be best, i.e. such as any significant start up costs, equipment purchases, etc that would put you into a loss in the first year or two (you can set a sole trader loss against your employment income to claim a tax refund, which you can't do as a limited company).  There are also other factors to consider too, hence why getting an accountant before you make that decision would be a good idea so you don't make the wrong decision.

MalMonroe

There's some helpful advice here from our lovely government - https://www.gov.uk/set-up-business

I recently started my own small online business and all I did was register with HMRC so I could submit tax returns and pay tax. I haven't earned enough yet but remain hopeful! I'm too old to pay NI now but you can register for both with HMRC through your online HMRC account. Easy to do. I don't have an accountant yet as I keep meticulous financial records using Excel. I did want to get registered though because there's nothing worse than being hauled over the coals by HMRC (I imagine).

You say, "the business I want to go into, someone has just retired from". Do you mean that you are intending to take over from them? If so, couldn't you ask them a few pertinent questions? Or even if it isn't a takeover of their business, could you ask them for their advice anyway? Most people are happy to pass on information if they can. Especially if they've retired so you won't be in competition with them. 

Sandtree

For most Ltd -v- Sole Trader is about either tax avoidance or capping liability... how much either of these are important for you will depend on a number of factors such as personal circumstances, line of business, anticipated revenue etc.

An accountant for sole traders isnt automatically necessary, many do their own records and submissions but as revenues go up it may become more sensible to consider if their advice can save you more than it costs (though many take a non-advisory service). Ltds can still be done by yourself but their returns are less user friendly and so I'd say the point it becomes sensible to get an accountant is lower.

Any reason to stick it out with the employer rather than jumping ship to work on your new business? Do you have a large redundancy package coming, and can the company afford to pay it if its failing? 

For bank accounts, a Ltd has to have its own account really as it is a legal entity in its own right and so you cannot just mix your money and its money together. Legally there is no requirement for sole traders to but most banks prohibit the use of your personal account for business purposes however a large percentage of sole traders do without issue... again it somewhat depends what you do, if you'll be depositing £10k in cash each week it'll raise questions, similarly if you want to accept cheques in your trading name you'd have to have a business account. 

Grumpy_chap

adiecan said:

We are a fairly isolated community in Scotland and the business I want to go into, someone has just retired from, and I am concerned that if I wait 18 months without doing anything someone else might seize the opportunity. 

Then grab it now with open arms.  Sounds like great timing for you.  If the new venture really flies, you might even choose to leave current employment early (subject to what you might stand to lose by forfeiting redundancy).

adiecan said:

How do I start, do I set up a business first or get work first?

Which would be best to set up Sole trader or Ltd company, 

Set up the business first, whether sole-trader or Ltd Co.

The choice between the two is too large a topic for this type of forum. 

• Variations in taxation
• Limits (or not) on liablity
• Some insurances required are mandatory for Ltd Co.
• Different reporting requirements
• Different external visibility of profits / finances
• Some customers will only trade with Ltd Co.

adiecan said:

Do I need an accountant? 

Should I get a business account ? 

Yes.

Yes.

Sandtree

Grumpy_chap said:

• Some insurances required are mandatory for Ltd Co.

What insurance do you have in mind with the above comment @Grumpy_chap?

Grumpy_chap

Sandtree said:

Grumpy_chap said:

• Some insurances required are mandatory for Ltd Co.

What insurance do you have in mind with the above comment @Grumpy_chap?

Employer's Liability.  

A sole trader may not require this if no-one else working for them.

Even the owner-director is employed and working for the Ltd Co., so the insurance is required.

Sandtree

Grumpy_chap said:

Sandtree said:

Grumpy_chap said:

• Some insurances required are mandatory for Ltd Co.

What insurance do you have in mind with the above comment @Grumpy_chap?

Employer's Liability.  

A sole trader may not require this if no-one else working for them.

Even the owner-director is employed and working for the Ltd Co., so the insurance is required.

That used to be the case @grumpy_chap until The Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 2004 came along and made an exception for a  company that only has a single director and no other employees (remembering that interns, subcontractors etc can potentially be classed as employees) and the director also holds at least a 50% share holding.

Therefore EL isnt automatically required for all companies.

Grumpy_chap

Sandtree said:

Grumpy_chap said:

Sandtree said:

Grumpy_chap said:

• Some insurances required are mandatory for Ltd Co.

What insurance do you have in mind with the above comment @Grumpy_chap?

Employer's Liability.  

A sole trader may not require this if no-one else working for them.

Even the owner-director is employed and working for the Ltd Co., so the insurance is required.

That used to be the case @grumpy_chap until The Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 2004 came along and made an exception for a  company that only has a single director and no other employees (remembering that interns, subcontractors etc can potentially be classed as employees) and the director also holds at least a 50% share holding.

Therefore EL isnt automatically required for all companies.

Thanks @Sandtree - I am obviously a little out of date...

adiecan

Thanks for the advise so far. 
This is something I really need to think about, to get it right from the start.

martindow

Is the business you are thinking of taking over a one man band or are there employees as well.  If the latter there are other issues to consider such as TUPE (and another reason to talk to an accountant).

I note you are in Scotland.  Is employment law and taxation law UK wide?