Business FAQ
Below are some of the frequently asked questions from our clients. For more queries send your email to our business advisers. Click on a link to go straight to the answer, or scroll down through the questions to read them all.
1. What does it mean to be a Sole Trader and how do I become one?
2. What is a Private Limited Company and how do I set one up?
3. What is a Partnership and how do I set one up?
4. What is a Limited Liability Partnership and how do I set one up?
5. Where can I obtain finance to start my business?
6. I have an innovative business product or idea, how do I protect it?
7. Where do I find information about my type of business?
8. How can I effectively market my product/service?
9. How do I write a business plan?
10. How can I be sure my business will succeed?
11. Do I need an accountant? How do I get one?
12. Do I need a legal adviser (solicitor)? How do I find one?
15. I am on benefits, what happens when I start my business? 16. Can I work from home?
1. What does it mean to be a Sole Trader and how do I become one?
A Sole Trader/Sole Proprietor is someone who sets up a business but that is not a separate legal entity from the owner. Its one of the most common and quickest way of starting up in business because it involves little form-filling. All the owner needs to do is start trading; but he/she MUST notify the Inland Revenue within three months of commencing trading- for more information please visit: http://www.hmrc.gov.uk/newbusinesses/ or call 08459 15 45 15 Also, the owner is advised to open a Sole Trade business Account at his/her local branch. This ensures that all other personal income is separated from the business income and properly accounted for. The disadvantage of being a Sole Trader is that the owner’s does not have limited liability-meaning all personal assets include the home, car etc could be at risk if debts cannot be paid. Also, it can sometimes be difficult to get finance to fund the business. Once operational, records must be kept of business’s income and outgoings. Back to top
2. What is a Private Limited Company and how do I set one up?
This is a business/company set up by at least two people, one as the Director and the other could be a Director and the Company Secretary. The main attractions of this type of legal structure are: Limited Liability Reduced personal risk Better business credibility To set up a limited company, you should contact Companies House (www.companieshouse.co.uk or on 0870 333 3636 or a local accountant. It cost £20 to set with Companies House and more for same-day service. There are also many Formation Companies that will offer you a good package which will include Memorandum and Articles of Association, Company Seal etc. Run a search on www.google.co.uk for “company formation” and it will bring up a comprehensive list of companies for you to choose from. Back to top
3. What is a Partnership and how do I set one up?
This involves setting up a business/company whereby two or more people set up in business together, sharing profits, management burdens and risks. They at the same time share personal responsibility for business debts. They put their own possessions on the line-including their home if anything goes wrong. In the event of one partner unable to pay their share of any debts, the other partners become responsible for it. To set up a Partnership, it is recommended to draw up a partnership agreement, setting out how the partnership will be run and how the proceeds will be split using a Solicitor. This will help to reduce and deal with disputes. Partners are often taxed as self-employed even though this is not always the case, once again, you are advised to check with the Inland Revenue on 08459 15 45 15. Back to top
4. What is a Limited Liability Partnership and how do I set one up?
This is similar to a normal Partnership, but offers reduced personal responsibility for business debts. Its members are protected from personal responsibility for business debts; their liability is limited to the amount of money they have invested in the business. However, forming a Limited Liability Partnership (LLP) is more expensive and complicated than setting up a normal Partnership. To form an LLP, you need to request for Form LLP 2 from companies house and return the completed form with £95. A solicitor or company formation agent can help you set up an LLP. Also, an LLP has to make its financial information public by sending a copy of its annual return to Companies House. Note that you cannot form an LLP if your business will be a charity or not-for-profit organisation. Back to top
5. Where can I obtain finance to start my business?
Finance available to start your business comes in form of grants and loans. Grants are usually from government-funded agencies, and loans are mainly from banks. Your local high street bank will be your first port of call. Contact the manager to book an appointment; you would most definitely need a business plan to show the viability of the business. If rejected, do not be despondent; ensure you get the rejection in writing, reason being there are govt funders such as Phoenix, Credit Union, One London etc that will fund you only after you have been rejected by the banks. However, note that you cannot approach these organisations direct; it can only be done through an Enterprise Agency like TGEC. These agencies will identify the possible sources of funding and refer you to them.Back to top
6. I have an innovative business product or idea, how do I protect it?
Trade Marks are symbols, signs or even words, sounds or jingles which distinguish the goods and services of one trader from those of others. Trademarks help customers and other businesses recognise a business and identify it with the quality of product or service for which it is know. The Patent Office produces a free trademark information pack- you can contact them on 0845 9500 505 or www.patent.gov.uk .
Patent protects your inventions and prohibits others from making, using or selling an invention without the inventor’s permission. Patents which you can register at the Patent office are concerned with the functional and technical aspects of products and processes. The invention could be a new product, a new process, a new apparatus for performing a process or possibly a new use for a known product. You are not obliged to apply for a patent to protect your product or processes- you can rely on keeping the information confidential, but without the patent, you lack the right to stop others from selling, making or importing the product you have developed. The Patent Office produces a free Patent information pack- you can contact them on 0845 9500 505 or www.patent.gov.uk.
Copyright gives the rights to the creators of original literary, dramatic, musical and artistic works and published editions of works, sound recordings, films, videos, broadcasts, cable programmes and computer programs. There is no registration system for copyright in the UK. It comes into operation automatically when its fixed in some manner- it physically exists as a manuscript or a software program. The owner has the legal responsibility to prove their own copyright. Back to top
7. Where do I find information about my type of business?
There is to a tremendous amount of information available on Pre-Starts, newly started and existing businesses. First of all you have the Internet which allows you to use search engines such as Google, Yahoo to search using keywords relating to your product, sector and industry. Secondly, you have research reports available to you at business libraries such as City Business Library, tel: 0207 638 8215, British Reference Library-Chancery Lane, tel. 0207 636 1544. Thirdly, there are research companies such as Keynote and Mintel, these sell their reports, but they can be viewed at any good business library. Back to top
8. How can I effectively market my product/service?
Marketing simply is the art of communicating and getting out the message about your product/service. Marketing is very crucial to the sale of your product and service. In order to be effective in marketing, you must understand your target market, their needs, likes & dislikes, complimentary and competitive products and where they congregate. Secondly, write your marketing material ensuring you sell your business, products/services and professionally and efficient as possible. Preferably, enlist the services of a business adviser and a good printer, using quality print material to produce a leaflet, post card or brochure. Having done these, using direct mail, leafleting, advertising, e-mail marketing, send your marketing materials to your target market and if you have the resources, follow it up with phone calls. Remember that effective marketing is not a one-off and does not always happen by chance, it needs planning and drawing up a marketing schedule of the different types of marketing strategies available to get your message across to your target market. Back to top
9. How do I write a business plan?
Writing a business plan is not as difficult as it seems, all you need is a guideline and support from a business adviser in putting one together, and this is one of the services offered by TGEC. Knowing the information that needs to go into your business plan will go a long way in filling the pages up. Areas your plan needs to cover include:
Executive Summary: here you state your objectives and how you intend to achieve them.
Background Information: What qualifications and experience do you have that relates to the business you are starting?
Product/Service Description: describe your product/service, its benefits, price and why customers will buy them
The Market: describe your target market, age, location and where you intend to run your business Financial Forecasts: to include a Sales forecast, Cashflow and Profit forecast
These are just some of the information required, for a comprehensive content list, contact the Business Support Services Manager at TGEC on 020 8375 3400,email: Back to top
10. How can I be sure my business will succeed?
There are no guarantees in business. By starting your own business, you are taking a risk (hopefully a calculated one). The statistics for business failures stands at about 65% (2001), but there are definite reasons why many start-ups fail, and in order to safeguard against failure, one should ensure the following: Have a well-tested idea Carry out as much research into your target market and industry as possible Write your business plan preferably with the help of a business adviser. Back to top
11. Do I need an accountant? How do I get one?
A limited company must have its accounts audited or approved by a qualified accountant. If your business is not a limited company then it is up to you whether you want an accountant to help you prepare accounts for tax and management purposes. Some local accountants provide a free consultation for potential new clients. The London Society of Chartered Accountants can provide the names of local accountants providing services relevant to your needs-Tel: 02075567053; email: isca@icaew.co.uk The Institute of Chartered Accountants and Accounting website also contains accountant search facilities - Tel: 02079208100.
12. Do I need a legal adviser (solicitor)? How do I find one?
You don't need to consult a solicitor just to start a business, but it may be a good idea to get legal advice from a solicitor in certain cases. These include drawing up a partnership agreement, buying or leasing premises, drafting a commercial contract. Under the Lawyers for Your Business Scheme a free legal 30 minutes consultation is available from a local solicitor for anyone about to set up a new business. Contact them on 020-74059075, www.lfyb.lawsociety.org.uk. Back to top
13. What do I do about VAT?
You don't have to register for VAT unless your business is likely to have sales of over £54,000 a year. If your sales are lower then it may still be worth registering in order to claim back the VAT you pay on your purchases. Seek specialist advice on this from a business adviser, accountant or direct from the VAT office Back to top
14. What do I do about TAX?
Call the Inland Revenue New Employers Helpline. An adviser will ask you a few basic questions about your business; arrange for your payroll to be registered with the Inland Revenue and send you a New Employers Starter Pack containing all the instructions, tables and forms needed to get started. Once you are an established employer, the Employers Helpline will give help and advice on issues related to PAYE, NICs, tax credits and student loan deductions. Back to top
15. I am on benefits, what happens when I start my business?
It all depends on your personal circumstances and you should talk to your Benefits Officer because there may be a period allowed when you can get started before giving up Benefits. You will also make allowances for drawing enough money from the business to pay yourself by including a Personal Survival Budget in your Business Plan. Contact TGEC to get training for doing a Business Plan to make sure you cover this potential problem. It is worth enquiring about local schemes designed to help people start up a business together with New Deal, to see whether you are eligible to apply. Business start up support varies and depends where you are. New Deal offers help for people who want to set up and run businesses if they are claiming the Jobseekers Allowance. Contact your Jobcentre Plus about any local schemes helping business start-ups. For information about New Deal speak to your nearest New Deal Unit. Back to top
16. Can I work from home?
Running your business from home can be cheap and effective, but if you live in rented accommodation there may be restrictions about this. Check your lease or talk to your landlord, or - in the case of council accommodation - check with your local housing officer. If you use part of your home exclusively for business purposes, you may in some cases be liable to pay business rates. Back to top
