Are you thinking of setting up your own business? Here’s three questions that you might have when it comes to setting up in business for the first time.
- Do you have to register your business or be a Limited company?
- Do you need to be VAT registered?
- What if you have a business partner?
Well there are a number of options that you can take and it really depends on you.
Do you have to register your business or be a Limited company?
If you are a small business and it’s just you in the early stages then I would recommend just setting yourself up as a sole trader. This means you just need to contact HMRC to let them know that you are going self employed (You can have self employment income while still having a full time job).
Being a Limited company in my eyes doesn’t hold many benefits, though depending on the industry you are in some businesses will only work with Registered Limited companies. So you will need to do your research as being a limited company means that you have to pay a pricey accountant to do your books for you as a bookkeeper can’t file the end of year report without having it signed off by a fully qualified accountant.
Do you need to be VAT registered?
This is totally up to you, however, starting out early and being able to do business with smaller businesses not having to charge them VAT is a great benefit as it means you can be at least 20% cheaper than your competitor. With other VAT registered companies you can all claim VAT back. So that’s the benefit for being VAT registered is that you can claim VAT back on all your purchases. So if you are dealing with larger companies that are also VAT registered then I would recommend going that way to claim back on your purchases.
Sadly if you are dealing with small businesses and your Turnover (not profit) goes over I think £77,000 for the year then you will have to become VAT registered and hit your customers with another 20% charge.
What if you have a business partner?
Well you don’t have to be a limited company to have a partnership you can just do a joint business venture referred to as a business partnership and share the % of the company as you agree with each other.
The most common way to set yourself up would be a sole trader. I would advise where possible you do this.