How to start a business – know your legal obligations
Posted on 8th January 2021 at 18:41
You've done your research and finalised your business plan. You can't wait to get going, but before you set your plans in motion properly it's important that you take time to consider your legal obligations . Failure to do so could put your company on the wrong side of the law and expose your business to financial risk.
Decide on a Business Structure
Whatever the nature of your business, you must decide on your legal status. There are a number of different legal structures you could choose from including but not limited to the following:
Not for Profit
Once you have decided your legal status, this will be the basis for all your monetary and legal obligations going forward.
Register Your Business
When you start to operate your business under a name other than your own, you will need to register that name with Companies House. Your registered name will also be useful when opening bank accounts and other business actives going forward. You will not need to register your business name with Companies House if you are a sole-trader.
Depending on the nature of your business ensure you have the appropriate insurances and licences in place to cover your business. There are different types of insurances to consider from Professional Indemnity to Public Liability. You need to ensure that your business is covered should a claim be made against you.
This can vary depending on your business entity, but no matter what the structure you will need to pay taxes and in most cases, you need to complete a payroll. Businesses must operate PAYE even if you employ only one. You must also tell HMRC when you start to operate and take money.
If you are self-employed, you do not need to register for PAYE, but you must complete a self-assessment. If your turnover surpasses the £81,000 revenue threshold, you will need to register for VAT which again requires a further return and is a further cost. If you’re planning on running a limited company, get all the information you can on corporation tax and the current rates that apply to small business.
Choose an accountant
Choosing an accountant from the beginning can really help you and your business. They can advise you on the best way to manage your accounts and payroll and help you with tax advice. If you plan to operate your business from home, some accountants can even provide you with a business address, so that all your business correspondents remain separate to your home.
There are also many returns you may need to consider such as VAT, which you may or may not need to register for. There are also additional costs to consider such as filing accounts with Companies House, again this depends on your business status and your accountant will be able to guide you on this.
This may not be high on your priority list, but as soon as you make your first sale or get your first client, you need to have a separate bank account from your personal account for these payments to be paid into.
This is more important for Limited companies, however, it is something that a self-employed business should really adopt too. When completing any returns to HMRC, it makes things clear and transparent, and it also ensure you don’t accidentally spend money that belongs to the business.
If you plan to take on staff, it is vital that you have knowledge of employment law. There are key points that you must ensure you are aware of such as discrimination, parental leave, disciplinary procedures and minimum wage regulations.
You are also legally obliged to offer a workplace pension depending on the hours the employee works for you. You also must consider the employee's health and safety whilst they are under your employment.
Employment law can be a minefield and if you are not confident on this you can consult a HR Consultant or an Employment Law specialist such as Solicitor. You are obliged to carry employer’s liability insurance by law.
Setting up a business is not all about logos and branding and whilst these things are important to the business it is often the things you don’t see that can make or break a company. Don’t get caught out!
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