Business Start-up Service

In other words, you can be a sole trader, a partnership, a limited partnership, Limited Liability Partnership (LLP), a limited company or a co-operative - you can decide which legal form of business will suit you the best. Your decision will affect the way you are taxed and the accounting records you will have to keep. Even if you are going to work on your own from home, it is worth considering the various options available to you.

POINTS TO CONSIDER WHEN STARTING YOUR OWN BUSINESS

Business Name:
At the outset, you should decide what to call your business. It may be your own name, particularly if you are a sole trader, such as 'James Doe, Advertising Consultant'. You can decide to give it another name if you prefer. If it's a limited company, it must have a name of its own.

Business Premises:
Organisations (sometimes called enterprise agencies) rent out space to small businesses. Some offer a range of services, including a receptionist, word processing facilities and access to office equipment, such as a photocopier.

Routes into Self-Employment:
Often the best way to start your own business is to try to set it up in your spare time while still working in another job (ideally part-time). This will allow you to test the water and establish networks of suppliers and customers while still having money coming in to support yourself. If you can work from home initially, this will avoid the costs of leasing premises until you have something established.

It's important that you find out quickly whether or not you're self-employed. You may have to pay a penalty if you don't tell the HM Revenue & Customs within three calendar months of starting work. Remember, if you have a salaried job you are employed in that job, but legally you can be self-employed at the same time. For instance, you might earn an extra income through part-time work at evenings and weekends that would count as self-employment.

What is Self Assessment?

The key features of Self Assessment include:
-A current year basis of assessment
-One set of payment dates for tax not paid at source
-One main point of contact for your tax affairs
-Fixed, automatic penalties for late returns, and interest and surcharges for late payments
-Clear obligations for keeping records.

An important feature for self-employed taxpayers is the introduction of the current year basis of assessment. The starting date for this depends on when you started your business. Under the old system, your tax assessment was based upon your trading profits for the 12 month period ending in the tax year before the year covered by the return. There were complicated rules at the start and finish of the business.

How Does Self Assessment Affect Me?
You are self-employed if you are in business on your own and do not operate through a limited company. This might involve supplying goods or services through a one-person business or a business employing others. You will also be self-employed if you are a partner, either in a large partnership or with only one partner. If you are self-employed, you have always needed to fill in a tax return. This has not changed and if you work for yourself - that is, you are self-employed or in partnership you will need to complete a Self Assessment tax return. The general principles for Self Assessment are the same for everybody. But the different sorts of income and gains you have affect which supplementary pages of the tax return you need to fill in.

The key features of Self Assessment include:
-A current year basis of assessment
-One set of payment dates for tax not paid at source
-One main point of contact for your tax affairs
-Fixed, automatic penalties for late returns, and interest and surcharges for late payments
-Clear obligations for keeping records.

What Records Should I Keep?
HM Revenue and Customs have always advised businesses that it was in their own interests to keep all the records needed to help prepare accounts and tax returns. Rules introduced in the 1994 Finance Act mean that you now need to keep all appropriate records.

HM Revenue and Customs will normally expect you to:
-Record all sales and other business receipts as they come in, and retain the record
-Keep back-up records, for example, invoices, bank statements and paying-in slips to show where the income came from
-Record all purchases and other expenses as they arise, and ensure that you have, and retain, invoices for them
-Keep a record of all purchases and sales of assets used in your business Record all amounts taken out of the business bank account, or in cash, for you or your family's personal use
-Record all amounts paid into the business from personal funds, for example, the proceeds of a life assurance policy.

You will have to retain your records for five years from the latest date by which your tax return is to be filed.

To read more about each type of a legal form a company can take please click below:

Sole Trader »
Partnerships »
Limited Companies »