Making the decision to start your own business is exciting and rightly so. However, it can also be a daunting time as you realise the enormity of the task at hand. Hopefully you have expertise and a wealth of first hand experience to assist you with regards to providing the products/services that your new business will be offering and getting everything in place to get this off to the best start possible.
However, there are a whole host of options, compliance and paperwork that you also need to get to grips with in regards to the “administration” of the business. If you’ve had little involvement in these areas previously, this can seem daunting. Particularly given the amount of work required already to actually start offering services or make your products available for sale. That’s where we at Reach Accounting Solutions can help!
What you need to consider when starting a new business
Limited company, sole trader or partnership?
The legal form you choose for your new business is important. This governs the way in which your business operates in part. For example, a limited company is a separate legal entity from you as an individual. It’s therefore important that it has its own bank account, as its money isn’t automatically your money.
There are pros and cons to each of the business structures available to you. For example differing tax rates, differing reporting requirements and deadlines, differing personal exposure for you, etc. We would be happy to sit down with you to discuss the options available to you and explain the advantages and disadvantages of each. You’ll then be able to make an informed decision on which is best for you and your business at this time. We can guide you through making this decision.
Registering with HMRC
To ensure that you don’t miss any deadlines, we can register you and your businesses where appropriate with HMRC. Registrations may be required for income tax, corporation tax, VAT, etc and you may need to register as an employer. There are specific rules for when registration is required and we can monitor your business and apply for the registrations where appropriate. People often misunderstand for example the rules regarding when compulsory registration of VAT applies. Having a trusted advisor looking after your affairs means that you can be confident that you will be compliant, avoid any unnecessary fines and ensure that all available tax relief is claimed on your behalf.
How to keep your accounting records
It is vital that you keep complete accounting records and that these are of good quality. This is the case regardless of the legal form you choose for your business. Using a digital accounting package, helps to improve the accuracy of your records and provides useful reporting functionality. It will also ensure that you are ready for the pending Making Tax Digital changes to the requirements for record keeping and reporting to HMRC .
However, cloud accounting has so much more to offer and is therefore an attractive and affordable option. Such packages are accessed via the internet and can be used with tablets and smart phones in addition to your computer. As a result you gain access to your records anytime, anywhere you’re online. You also don’t need to worry about backing up your data, as it is continually backed up and securely stored.
Our recommended cloud based software is Xero, as it is intuitive to use and offers great functionality. It also allows an unlimited number of users which is refreshing and you are automatically provided with the prodeuct improvements. We also love the fact that it seamlessly links with hundreds of time saving third party apps to further boost your productivity.
As your accountant we are able to login to the software online, which enables us to:
- assist you with queries much more easily;
- keep in touch with how the business is performing throughout the year ,so that we are best placed to provide you with advice;
- directly obtain information for preparation of your accounts and tax returns;
- and so on.
As we are a Xero Certified Practice we are able to advise you on the software’s features and benefits and assist you in selecting and implementing the version that best suits your needs. An important factor in deciding which version to use, is the level of involvement that you wish to have in maintaining the accounting records. For example, you may decide that bookkeeping simply isn’t the best use of your time and that you would like us to take care of that for you completely, which we will gladly do.
Please speak with a member of our team to discuss your needs and we can provide a fully tailored package.
How to pay yourself
As you are investing so much time, energy and resources into your new business, you will rightly want to maximise the financial reward that you receive. There are numerous options available to you when it comes to extracting money from your business to reward yourself. For example salary, dividends, drawings, pension contributions, benefits, etc. The tax and National Insurance due can vary greatly in each scenario.
It is also important that you understand the limitations imposed on you withdrawing money from the business. This will help you to avoid unnecessary tax charges and negative consequences for you and your business.
We therefore recommend that you sit down with a member of the team to discuss your options. We can help you to decide which options best suits your needs.