Mind your own business! A guide for budding entrepreneurs.
If you're navigating the choppy waters of running a new business, fear not! We've got the lowdown on everything you need to get right in order to make entrepreneurial life a total breeze.
New business owner in the first flushes of indie love? Maybe this is the year you’re planning to set up your world dominating global corporation. Either way, how much thought have you really put into all this? There’s all sorts of annoying admin you need to know about to help it all run smoothly, but get it right from the get go and Elon Musk won’t see you for dust. Our friends at Tollers Solicitors are here to help with their advice on how to get your ducks in a row.
WHO ARE YOU?
Sole trader, Partnership, Limited Liability Company (LLC) or not quite sure? It’s important to get this one right as this defines your business as a legal entity. If you’re a self-employed freelancer, you might be happy to operate as a Sole Trader. It’s the simplest type of business to set up and manage, but there are risks, such as unlimited personal liability (ie. it’s all down to you if something goes wrong). You can lessen the risk by running your business as an LLC, which differentiates between the owners (shareholders) and managers (directors). Somewhere in between? A partnership can be a good way of setting up your business if there’s a group of you working together to bring various elements to the company, though it’s recommended to set up a Partnership Deed to regulate the relationship between partners so everyone is clear on where they stand.
TICKING THE RIGHT BOXES
Speaking of which, paperwork is your friend (no yawning at the back). Make sure you have a few key contracts in place from the start to help you avoid unexpected problems. These may include a standard terms of business, employment contracts, a staff handbook, shareholders agreement, lease of premises, tailored contracts (eg. distribution, sales, supply contracts) and, if you have a website, a Privacy Notice.
If you’re planning to operate in a regulated activity or industry (maybe you’re planning on selling your own gin or teaching people to skydive), you’ll also need to have the relevant approval or consent before you start.
Document all your transactions, management decisions and business admin. For example, if you put capital into the business, make sure there’s a loan agreement in place setting out the full terms and conditions.
Who’s on your side? Whether you’re setting up a business with friends, family or someone you met in the pub last week, you need to consider a few key things. This can be awkward if you’re working with people you’re close to, but it’s vital to get it right. Who will the directors, company secretary, accountants and lawyers be? Make sure you’ve considered what’s set out in the company’s Articles, which outline how the company will be managed and administered. If you become a director, make sure you’re clued up on your duties. In other words, everyone needs to know exactly what their responsibilities are, don’t just assume.
Money, money, money! That’s the main reason we’re here, right? But how on earth do you get enough of it to set up the business in the first place, or even expand? Well, you could borrow from the bank, from a third party, or maybe you’ve got some cash down the back of the sofa? As a company you can acquire a directors or shareholders loan, or you could opt for equity funding by issuing shares (though this can mean giving up influence or control in the company).
It’s essential with any new business that you get good tax advice from the start, as it can be difficult to unravel things once the business has already started trading. make sure you know what taxes will be applicable such as whether you’ll need to pay VAT.
Once you’ve done all of the above and the business is running like clockwork, it’s possible you’ll take on new employees or a bigger premises. A good employment and commercial property lawyer can make this process a doddle, so finding the right one for you is a huge help.
Similarly, as the business moves forward, you’ll need to think about succession. No, silly, not the TV show. We’re talking about who will take over after you retire to that villa in Ibiza. If your family is involved then your children might be the obvious successors, otherwise you might look at a management buyout, or sale to a company in the same sector looking to expand.
Do you want to exit with no further involvement or retire but retain an income from the business? There are a variety of ways to structure your exit from the company, so make sure you consider this as part and parcel of the life cycle of your business and ensure that, when you set up, you also prepare a will to provide some certainty in the event that you aren’t always around to run things.
Consider life insurance too, in particular a policy that allows for the company to buyback your shares should you no longer be here. Think about who should have power of attorney, should it ever be needed and ensure you plan ahead for inheritance tax and, somewhat more cheerfully, investing for your pension. Now put that fizz on ice and give yourself a big pat on the back, you’ll be nabbing a Muddy Award before you know it.