You’ve decided to embark on a new adventure and start-up a new company that is going to make it's place in the industry.
There are a few crucial things you need to consider and be aware of at the outset of starting up your new business.
- Business structure – most businesses in the industry operate as private limited companies (limited by shares), which is the generally accepted way to trade in the industry. Shareholders of a limited company cannot be personally liable for the debts of the company unlike the owners of unincorporated companies, hence its attractiveness. Tax advice on the most suitable structure for the business is recommended.
- Choosing a company name – not only does it need to sound good, but it needs to comply with certain limited restrictions (check out Companies House website - https://www.gov.uk/government/organisations/companies-house).
- Register your company with Companies House (in the UK). Consider whether to register your company in England & Wales or Scotland as you will need to have your registered office there.
- Appoint an accountant to prepare your annual accounts.
- Decide whether you will (or will need to) register for VAT. If your annual income exceeds £85,000 you are required to. (Check out here: https://www.gov.uk/vat-registration).
- Set up a company bank account. This can only be done once your Company is registered. The process can be slow, so if you need to invoice clients get started asap.
- Shareholders Agreement – if you are entering into business with business partners, it is advisable to enter into an appropriate Shareholders Agreement. Too many times I have seen businesses operating happily without a Shareholders Agreement, until something goes wrong. Once the business owners are in the world of dispute, it can be too late. Agree on the terms whilst you are all getting along!
- Business premises – you will likely be required to sign up to a commercial property lease or serviced office agreement at some point if not immediately. The terms should be carefully considered before signing.
- Patents and Intellectual Property protection – if you are in the field of designing new products / software, it is imperative that you ensure you protect yourselves via the appropriate channels, be it in your contracts or by registering patents, or both. You might consider ringfencing your patents and IP by holding in a separate company which is not used for trading.
These are some basic but important matters you should consider at the outset of your new venture.
Stay tuned for Part 2 – "You always have leverage with clients even though you are a small company"