Follow these steps to find out if your light-bulb moment has the potential to become a viable business idea:
The first question you need to ask when thinking of setting up a business is “is it a viable business?” A business plan can help you in determining this. When producing a business plan it is important to consider the following:
- Business description
- Market analysis
- Management structure
- Sales strategies
- Funding requirements
- Financial forecasting
How do you need to be set up?
Choosing the best legal framework; sole trader, partnership, a limited company is an important decision when setting up a new business.
A sole trader or partnership is easier to set up, has less paperwork and provides greater privacy than an incorporated business, whose details can be found via Companies House. However, sole traders have unlimited liability, meaning if the business gets into debt, the owner is personally liable. Also, tax rates on sole traders aren’t always as kind as they can be for limited companies.
Unlike a sole trader, a limited company has the benefit of limited liability. This means that personal assets aren’t exposed – you only stand to lose what you put into the company. Limited companies tend to be more tax-efficient than sole traders. However, there are more responsibilities to being a limited company, as such, there will be extra paperwork to complete yourself or your accountancy fees will be higher.
If you are unsure on which is the best option for you, you should always seek advice.
Once you’ve chosen how you wish to set up, you need to dot the i’s and cross the t’s with the various registrations that are legally required.
If you chose to be a limited company you need to register your company with Companies House and for Corporation Tax with HMRC. As a sole trader you need to register with HMRC. You may also need to register for VAT depending on your business turnover and PAYE if you intend to employ staff.