Starting a business from a hobby - advice

hivoodoodoll

Hi everyone, I’m hoping you can help me and I’m sorry if these questions have been asked before. 

Last year I went on a career break which turned into me taking voluntary severance from my full-time job. While I was off work I began making Christmas decorations and trying to sell them on Facebook and Etsy. It was a very much hobby thing but since Christmas I have been making paper flowers and have sold a few. People have told me I should really try and develop this so it makes more money for me and there is a shop where I live that sells local small business craft stuff. To be able to sell here I would need a business account and public liability insurance.

I guess what I need to know is should I become a sole trader but also how do I work out what my annual turnover will be (this is something that is being asked when looking at public liability insurance). Also what are the tax implications, I’m assuming that I can earn a certain amount before I have to fill in a tax form.

Is there anywhere that lays out all the info? I know I can Google it but was wondering if there is a particularly good site.  What else do I need to take into consideration?

Any help/advice would be gratefully received.

Jeremy535897

Rather than search everything separately, start with a site like this:
https://entrepreneurhandbook.co.uk/starting-a-business/

Sandtree

hivoodoodoll said:
I began making Christmas decorations and trying to sell them on Facebook and Etsy. It was a very much hobby thing 

You are trying to sell, its a business and not a hobby and you are already a sole trader.

Once you hit £1,000 revenue (not profit) per tax year you must register as a sole trader and complete a tax return. 

For the insurance, you will simply need to try and predict how much you think you will sell, keep a record of your revenue and periodically review. If it looks like the number you used for the insurance is wrong then contact them to adjust... or better speak to the broker/insurer and find out what the banding is so you know if you need to contact them or not if its over/under. For example I declare £200k turnover but that means we can earn up to £275k without having to make an amendment. 

martindow

A lot of businesses start from hobbies or interests where you have knowledge and expertise. 

I imagine you are going to have to make, and sell, a lot of paper flowers to create a business with any real level of income.

You need to be sure that what is currently a pleasant hobby making a few paper flowers would not become a chore if business built up.  How would you feel if you were manufacturing on a full time basis? 

tacpot12

You also need to consider whether you need product liability insurance. If one of your flowers was eaten by a child, you might be sued if the child choked on a small component, or stabbed themselve with a wire. Similarly if a flower stained an expensive dress, or even a leather car seat, you might be found liabble.

You might find product liability insurance would stop you loosing your home if you were sued (there is no distinction between a sole trader's business and personal assets. Operating the bsuiness as a company, with limited liability, is another way that you might protect yourself.  

Sandtree

tacpot12 said:

You also need to consider whether you need product liability insurance. If one of your flowers was eaten by a child, you might be sued if the child choked on a small component, or stabbed themselve with a wire. Similarly if a flower stained an expensive dress, or even a leather car seat, you might be found liabble.

A good call, though in most cases SME level Public Liability is actually both Public and Product but worth checking.

hivoodoodoll

tacpot12 said:

You also need to consider whether you need product liability insurance. If one of your flowers was eaten by a child, you might be sued if the child choked on a small component, or stabbed themselve with a wire. Similarly if a flower stained an expensive dress, or even a leather car seat, you might be found liabble.

You might find product liability insurance would stop you loosing your home if you were sued (there is no distinction between a sole trader's business and personal assets. Operating the bsuiness as a company, with limited liability, is another way that you might protect yourself.  

There is actually a shop where I can sell my items and one of the stipulations is that you have public and product liability insurance to 5 million.