Have you reached a point where the idea of running a business feels like more than just a pipe dream? Perhaps you have identified a gap in the market, you want greater independence or your side hustle is telling you that it has the potential to become a full-time income.
Whatever the motivation, taking some time at the outset to understand the practicalities can make starting a business smoother and help you to avoid costly surprises later.
Here we review some of the things you will want to consider.
Selecting an appropriate legal structure
A first decision for a new business is to choose the structure under which it will operate. Most new ventures start either as a sole trader (or a partnership if there is more than one of you) or as a limited company.
Each option has advantages and disadvantages, so it pays to consider what the business will be doing, the expected income, and how you want to manage risk and growth before deciding which is best for you.
Cleland & Co can support you right from the beginning. From helping you to assess whether to operate as a sole trader or form a limited company, through to managing the full incorporation process for you. We are here to guide you every step of the way.
Setting up accounting and bookkeeping systems
Accurate financial records are essential for monitoring the performance of your business and complying with its statutory and tax reporting requirements.
For new businesses, adopting cloud-based bookkeeping software from day one is often a good approach. We typically recommend Xero and can support you at every stage on your Xero journey, from providing a demonstration, to setting up your system and delivering tailored training to suit you and your businesses needs. Xero can also connect directly to many business bank accounts and automatically identify expenses from receipts stored electronically. This can streamline the process and save valuable time.
If you would prefer not to manage the bookkeeping yourself, we can take care of it for you.
Running payroll
If the business will employ staff, or if you set up as a limited company and want to draw a salary as a director, you will need to run a payroll.
This triggers ongoing and regular obligations, including calculating ETI and Social Security contributions and submitting quarterly reports to the Revenue Services, issuing payslips, and potentially managing the requirements for secondary pensions.
We can guide you through each of these responsibilities and, if needed, put you in touch with payroll providers who can assist with the daytoday processing.
Tax reporting obligations
Sole traders are taxed on their business profits and pay selfemployed Social Security contributions. We can help you estimate these liabilities and advise you on the amounts that need to be paid. Your sole trader accounts must also be submitted to the Revenue Service alongside your personal income tax return, and we can assist with that process too.
In contrast, limited companies do not pay tax on their trading profits. Instead, shareholders are taxed on the funds they withdraw from the company. We can support you with preparing and filing the company’s income tax return, as well as meeting the reporting requirements for any amounts withdrawn from the business by the shareholder, including guidance on the resulting tax and Social Security liabilities.
Cash flow planning and forecasting
A business can be profitable on paper but still struggle financially if cash is not available when it is needed. For example, suppliers might need to be paid straight away, but customers do not pay until the end of the month.
Cash flow forecasting can help you predict when money may be tight and allows you to plan on how to reduce pressure.
Accessing credit and finance
Many new businesses need some form of finance, perhaps to buy equipment or support working capital requirements. Options can include start-up loans, business overdrafts, hire purchase and leasing.
Lenders typically look for a clear business plan. Well-kept records and organised accounts are often a big help in getting approval.
How can we assist?
Clearly, there is a lot to think about when starting a new business, however, help is at hand!
Starting a business well can make a significant difference to long-term success, and we are available to help you navigate each step with confidence.
Get in touch with one of our team to discuss how we can support you on your business journey.