To setup your own business is as fun as challenging too, it sets you free from many undesirable stuffs you want to be free from them, for the many, such as; the stress of getting order from someone else, the family commitments, holiday timing, doing things you don’t like doing them, not getting paid enough to cover your expenses and your lifestyle, not getting the opportunity you want to get it, and many more. All these things lead people to choose their own ways and seeking to be self-employed is the first forms of working for yourself to start with something you are good at it and have the desire to succeed you are to build it up.
Here’s a brief insight of some common forms of business set up in the UK.
Self-employed people and sole trading businesses:
• Who are self-employed?
Self-employed are those individuals or sole trading businesses are the ones who start up their own businesses and run through unincorporated bodies. These businesses are normally small, easy, and straightforward and do not have a separate legal entity or legal framework from their owners such as barbers, photographers, newsagents, interpreters, some plumbers, etc.
As a result, bills, liabilities, and debts of these sorts of businesses are all down to their owners’ responsibilities i.e. owners are personally liable for all their firms’ liabilities and it’s normally called as unlimited liability.
• Registration and Taxation Rules
They must register themselves for taxes with HMRC to declare their earnings during the reported tax periods. And to do so they will have to tell HMRC the following details to consult an accountant or a business adviser to assist them getting started with correct form of legal business entity to set it up for them and register them with HMRC for taxes.
• Personal and business details
Your will need to the following details to register yourself as self-employed for taxes with HMRC.
Your title, full names, date of birth, previous names if changed, reason of change of names, national insurance number, date to start or started self-employment, home address, previous home address if the first one is less than three years, telephone, mobile, email, business name, business nature, paye contact names, normally it’s the business owner if the business owner is small or the manager if the business proprietor authorises someone else.
Your business address, business telephone, business mobile, business email, numbers of staffs working for your business, then, and business correspondent address.
And once registered yourself, you will get a few letters from HMRC and you need to take clear pictures of each one of them and pass them over to us through our numbers via WhatsApp, and Viber Application (0775202601 or 07752002602). After the registration, we will send you our service term agreement with the letter of engagement to explain everything in details for you need to know, our responsibilities for you, your responsibilities and liabilities.
Subsequently, you will get some authorisation codes and we need them to put them into system for you to do your returns online as it easier, quicker, safer, and more convenient. We will set you up for online services and we will also set you up as organisation to give your codes so that you can check business accounts made of your self-assessment for personal taxes, you as an employer for PAYE to see how much NICs are due to pay to HMRC, for your or your business VAT accounts.
Sole traders can still employ people and individuals and they can also pay to members of their own families to be on their payrolls. Sole traders can sometimes work harder than others and normally get less earnings whilst their wages or payouts are made up of their net profit that is left over after all the costs to run their business activities at the end of their financial accounting. And when it come credit obtaining they normally find it harder to get credits from banks due to their owners’ low credits ratings, or many other reasons related to the legality nature of these firms.
They also must register for PAYE or called payroll taxes should anyone of their employees is getting paid above the threshold of paying national insurance contribution where they as employers will also have to pay national insurance contribution class A1 on their employees’ pays after the thresholds. Where this threshold and contribution rates get changed every tax year is to start in line with the UK’s government budget year.
Whilst taxation rules for sole traders are slightly different, simpler, easier and more straightforward from other business entities. And in the UK, their owners are responsible to register themselves before the tax year is about to come to an end if they have started and have been trading after 6 April in a tax year, their owners should register themselves with HMRC for taxes before 5, October next year as the latest registration date for self-assessment and taxes with HMRC.
Since a sole trading business is normally owned and controlled by one individual therefore if a percentage of the business is sold out to another individual or rather other individuals are called in or requested to join it as partners albeit -not necessarily employees- this will become a sort of partnership i.e. partnership is normally made up of two or more of individuals whether based on equal or unequal percentages of shareholding where it will become a more complex than sole trading business.
And some of them are not as good as others in doing their accounts and returns, therefore, it would be of advantageous to consult and hire a professional accountant and a business adviser to advise, assist, and guide them through some necessary staffs on their accounts, business costs and business plans.
Whilst many of the self-starters choose to become incorporated companies.
• Limited companies by private capital shares or by guarantees
Companies are better sole trading business when it comes to business liabilities, as they are separate entities from their owners and managers or directors. However, there are some defined and strict rules by law, guides and ethics set by Companies House too for directors as to how run responsibly their companies on behalf of their owners and normally are shareholders whether they are individuals i.e. real people or corporate, charities or others business entities in rarer cases. Here is some benefits of being going to be a limited company.
- it is good as it will give you a more professional status as this is defined by law to be more professional than sole traders that also gives you more trust and credibility that also leads to attracting more investment opportunities by others to raise funds if it needs cash injections to expand and provide more opportunities, for employment, training, income and pensions providing.
- it also helps to reduce personal liabilities as it’s a legally spate entity than its owners.
- and it gives an opportunity to be more tax efficient than sole traders and even with higher payment incendivities and remunerations in benefits and dividends payouts.
- it gives you more opportunity to be protected by law to have your coy rights reserved and prevent others to copy your business names.
• Business records and penalties
It is normally better for you to get some professional guides from your accountant or your business adviser should you be interested to become self-employed.
You should follow your accountant’s advice closely and especially when it comes to business records, registrations, business costs, and pays to employees. You also to need to be in a regular contact with your accountant’s office for doing your RTI’s and VAT’s returns should your business sales and or earnings figure is to surpass the VAT’s threshold to be compulsorily registered that is also getting changed every tax year.
And most importantly, to prepare your business books, accounts, and returns for your accountants to check them, reviewing your business figures, verifying them, put them into the right orders, and getting your net profit out of it after having deducted all the allowable business figures from the total year earning or sales figure made by your business during a reported tax year.
It’s better to buy a book or use your computer to record all your business transactions whilst keeping all the invoices, invoices, and proofs and put them in order by dates.
Your accounts and returns must not be filed to HMRC based on assumptive or estimated figures, the figures must be accurate and complete to the best of your knowledge you have had from having recorded your business figures correctly evidently with proofs of purchases and expenditures.
You will have to be prepared and expected to be asked by HMRC to check yours and or your business accounts and returns. Once they have finished from their checks they will apply appropriate and relevant sums of penalties set for missing required information and missing or poorly records keeping of your business figures whether they are aimed to avoid paying the right amount of taxes where you might well be subject and be regarded as of tax evaders. Or intended poor records of your business figures, where there is a time scale for you to provide them with what they are after until they close their checks as regards of your business.
Whilst their check case files for your business remained opened until you provide them with what they are asking for or they will probably still apply penalties continually and getting accumulated on you to be a heavy burden. Therefore, it’s very important for you to use a bank account normally a business account opened for your business financial activities to pay in all the earned income into it regularly and spend your business cost out of it where this will enormously help you to come up with a better bank reconciliation. Opening a business generally is not as fun as you might think of it, it is serious game with some well-illustrated legal, procedural, and moral (ethical) rules to follow them properly and obligatorily with a few stakeholders are around to object if they or their interests are affected.
A business to my understanding is some of a sacred thing, it is actually the most scared thing in a society. It has to properly managed, and handled to be something of success stories to be regarded as an achiever for your own family, partners, shareholders, employees and stakeholders. Therefore, it is very important for you to open up something that you are good at it, because you will do better and you will succeed more easily. Always do your checks, pros and cons, your strengths, your weaknesses, your potentiality, consider your personality, your character, your positions, appropriate licensing, your operating space, your clients or customers, your competitors or rivals, and legal framework.
Many businesses when they operate after a period of timing they will be liable or they may go to register their businesses for vat. And here is brief insight of what it’s vat.
What is VAT?
• What you can and can’t reclaim.
Here’s a few examples:
• What you can’t reclaim.
• Purchases before registration.
• Partly exempt businesses.
• There are special rules for reclaiming VAT for:
• How your VAT refund is repaid.
• Claiming by submitting your business VAT Returns.