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There are quite a few things to do once you’ve decided to become self-employed. Here are just a few:
Telling the Taxman
If you are going into business as a sole trader or partnership you must inform the Revenue within 3 months or you will incur a £100 penalty. You can do this by calling their helpline for the newly self-employed (0845 915 4515) or complete Form CWF1. If you have set up your own limited company the Revenue will already know about you and send Form CT41G, which must be returned within 3 months once the company has started trading.
Obtaining Finance
However much you keep your costs down you will still need finance, and it is vital to know how much you will need and where the money is going to come from. Maybe you can afford to fund the business from your private finances or perhaps friends and family will be willing to help you out. If not, then you will be looking for external finance. Banks have always been the traditional source but are more willing to lend to businesses that are already established. You will probably need to put your house up as security or give them a floating charge over the business. An overdraft may be a possibility but can be called in at any time so is not suitable for long term funding. Venture capitalists are another possibility but they will demand a stake in your business and may impose certain conditions. Government grants are available for new start-ups and are definitely worth applying for but there is a lot of competition for these and you will need to show that your business is worthy. Whichever funding route you go down, a proper business plan is essential and you need to put a lot of thought into how you present this.
Recruiting Staff
There are several ways of recruiting staff, some more expensive than others. The expensive ways are to go to an agency or advertise in trade journals or mass-circulation newspapers. If you want to keep the costs down, you could always advertise in your local press or on-line. For as little as £25 you can advertise on the Gumtree website and probably be inundated with job applications. However, for many employers the quickest and easiest route is advertising in your local Job Centre. Most business people know someone who is looking for a job and may be able to give you inside knowledge of that person. Whichever route you go down, you must give employees a written statement detailing their Term and Conditions of Employment along with a Contract of Employment as soon as they start work for you. You must also be aware of your responsibilities as an employer with regard to things like statutory holiday, minimum wage, unfair dismissal, discrimination, maternity/paternity pay, TUPE (Transfer of Undertakings Protection of Employment), the working time rules and the new agency worker regulations. There are several places you can get this information, you could go through the HMRC website or you could go through a company that specialises in employment, we would recommend Acas please visit www.acas.org.uk.
Health and Safety
If taking on employees sounds like a legal minefield, just wait until you see the health and safety regulations! Like any organisation, you must provide a safe working environment for both your staff and any visitors you may have, even if you are working from home. If you employ 5 or more people (including yourself) you must have a written health and safety policy and carry out a risk assessment. Obviously your health and safety responsibilities will be dictated to a large extent by the type of business you run. We strongly suggest you look up your responsibilities on the Health and Safety Executive or Business Link websites.
Insuring the Business
If you are trading from business premises you will need insurance for all the usual risks such as fire, theft, flood and malicious damage. If you are renting then your landlord should have already arranged insurance (and will include it in your service charges) but it is always best to check. You may also need insurance for commercial risks such as product liability or business interruption. If your business is not a limited company and you only employ close family members, you do not need compulsory employers’ liability insurance. Otherwise, if you employ anyone other than yourself (assuming you own at least 50% of the shares) you must have an EL policy worth at least £5 million and display the certificate on your premises. Most insurers include EL cover of at least £10 million in their standard office polices. You also need to arrange motor insurance for any vehicles you use in your business. Even if you only use your own car, you cannot rely on the current policy covering social, domestic and pleasure use only if you start using it to transport goods and employees around. You will need to tell your insurer that you require business use too. Finally, think about key man insurance in case you or your employees are sick for any length of time.
Finding an Accountant
This is where we come in! Getting your accounting records in order and taking proper tax advice right from the start will save you a headache later. You need to decide what kind of accountancy service you require. This can range from a year end service only with a bit of hand-holding at the start and move on to a monthly or quarterly service providing management accounts and cash flow forecasts once the business gets off the ground. At the top end of the range, your accountant can give you a day-to-day book-keeping service with continuous review of your debtors and creditors. He/she may also act as a part-time Finance Director advising on business strategy and going to meetings with you to discuss financial matters. The choice is yours and will depend on the requirements of the business and how much you are willing to pay in accountancy fees. Whoever you appoint as your accountant, we would always recommend someone who is professionally qualified and belongs to one of the UK accountancy bodies, such as the AAT. A qualified accountant will have professional indemnity insurance and a continuity agreement with another qualified accountant who can take over if anything ever happens to them. They must also abide by the rules of their accountancy body such as keeping their technical knowledge up-to-date (all AAT members must undertake at least 40 hours of continuing professional development each year).