Time to Start that Business?
We all dream from time to time of starting our own business, especially when you read about those who have taken the leap and become famous, or wealthy, or both. Just look at the popularity of the Dragon’s Den. Even the Government wants you to join in – remember David Cameron saying that talking to entrepreneurs gets him “pumped up”? But we all also know that for every success story there are at least a dozen different stories
How do you be one of the successful ones? The first thing of course is to have your big idea. For everyone it’s different, but once you’ve got it, you need to test it, think about how you are going to start it, then grow it and run it. Where is your market, and what is the Business Plan? How will you finance it? Do you need premises? Employees? What is the tax position?
Spending some time on these things before you get started may seem a distraction in the middle of your creative frenzy, but will save you money and problems later, whether your business is run from home, or has ambitions to be an internet multi-national. Everyone has to start somewhere.
Nowadays there is no shortage of advice and help out there, and just a Google away. To begin with though it’s best to stick to the free sites offered by reputable organisations such as the Government and HMRC websites before subscribing to the paying sites – after all that’s their business plan and you are their customer!
On the legal front think about how you are setting yourself up. Will you be self-employed as a sole trader, or operate through a company or partnership?
If there is more than one of you starting up, partnerships can be easier. A partnership exists where “two or more persons carry on business in common with a view to profit”. So if you and your friend carry on a business activity, and hope to make some money from it, you may well find that you have started a partnership. It really is as simple as that.
Whilst there is no legal need for a written partnership agreement, it is an outstandingly good idea to have one. If you don’t have one, then your partnership will be fully governed by the Partnership Act 1890. It is unlikely that the terms of an 1890 Act of Parliament will completely suit your needs today.
One big risk is your personal liability. In law, and unlike a limited company, or a “limited liability partnership”, an ordinary partnership is not a separate legal entity. It consists only of the individual partners in the business. One of the consequences of this is that partners generally have unlimited liability, not only for what they do, but for what the other partners do as well.
A limited company, as its name suggests, can reduce your personal risk. Unlike a traditional partnership, a limited company exists as a separate legal entity. The company can do things in its own name, and its liability is limited to the assets it holds. The most common company is limited by shares. For example, it may have 1,000 shares each of £1 (its “share capital”), and that, and any assets it owns in its own name, will be the limit of its liability.Business, General, George Ide, News