Striking out on your own and not working for somebody is an exciting thought for many. The sense of adventure and the prospect of making more money drive many entrepreneurs. But before you take the high road to success as a self-employed businessperson, you need to ensure that you have done the small and mundane things right. You need to fulfil legal and tax responsibilities so that your fledgling Business can function smoothly.
- Choose an appropriate business type – It could be an LLC or a limited company. Once you have decided on the business type most suitable for your work, you need to acquire a suitable name for your business. You may only use words that are allowed by Companies House.
- File a self-assessment tax return – In order to do this, you need to register with the HMRC. Fortunately, this is easily done via phone or online. You must provide your National Insurance Number and business information. You can register with the HMRC by the first week of October that arrives after the first year of filing returns. Get a Government Gateway account for the tax returns filing process. Set up direct debits for payments such as Class 2 or Class 4 National Insurance contributions. With respect to HMRC payments, you need to keep in mind the two payment deadlines – January 31 and July 31.
- Do you need to have a VAT ID? – You need to register for VAT if your annual turnover touches £85,000. Any time you feel that your business is approaching this value or it may do so over the coming 12 months, you must register for VAT. Not doing so may result in a stiff fine that a new business can ill afford. VAT gives your business credibility. You can choose between a flat rate VAT scheme and the regular VAT rates.
- Get insurance – Get insurance cover. Factor insurance costs as a necessary expense. Self-employed businesses must definitely have public liability insurance that provides cover against injuries to third parties. If you intend to hire personnel then you are legally required by law to have employer’s liability insurance. Besides these, you can choose cover that protects you from risks in your line of work. Architects and accountants who run consultancies need professional indemnity insurance. All of these insurance types are covered under self-employed insurance which you can get quotes for here.
- Keep business accounts separate from personal accounts – Open a business account with a bank. A little research might get you a good deal with a bank offering free account management and an attractive interest rate. A business name on bank documents and invoices gives your setup a professional look. The interest accrued will help you with operational expenses.
- Maintain financial records – You need to get this aspect right from the very beginning. You will need to inculcate the habit of maintaining files of invoices, receipts, bank statements, tax documents, and everything else that is connected with the exchange of money or goods. Updated paperwork will ensure smooth business. Use online accounting software that is right for a small business of the type you are running.
- Learn the rules related to your business – Before you commence operations, you will need to learn the rules and laws that govern your industry and self-employed businesses. You don’t have to go into minute details, but you must make it a point to know enough so that you can do things right the first time. For example, before you hire the first employee, you must be aware of the rules that apply.
- Educate yourself on the support available – Find out about financing options that you can use. You may need financial help to take care of operational expenses. There are many sources of funding that you can look up. A simple online search will throw up relevant results. What are the tax breaks available to you?
This post is in association with Tradesmansaver