Starting a business is an incredibly exciting and rewarding experience, but it’s also a lot of work. Before you take the plunge, make sure you’re aware of the following things, especially if you have fellow shareholders.
1. The importance of a business plan and why it’s essential to have one
A business plan is a critical tool for any business owner. It provides a roadmap for business success and can help to ensure that you are on track to meet your goals. A business plan can also be helpful when it comes to securing funding from investors or banks. Lenders will want to see a well-thought-out business plan before they provide any funding. In addition, a business plan can help you to track your progress and identify any potential problems early on. Without a business plan, it would be much harder to start and grow a successful business.
2. How to choose the right legal structure for your company
There are a number of different legal structures that a company can choose from in the UK. The most common structures are sole trader, partnership, limited liability partnership (LLP), and company. Each of these has different implications for taxation, legal liability, and company governance.
Sole traders are the simplest structure and provide the owner with full control and responsibility for the business. However, they are also personally liable for any debts incurred by the business. Partnerships have two or more owners who share responsibility for running the business, and each partner is personally liable for any debts incurred. LLPs have many of the same features as partnerships, but with the added benefit of limited liability for the partners. This means that they are not personally liable for any debts incurred by the business. lLimited companies are more complex than sole traders or partnerships and tend to be used by larger businesses. The company itself is legally responsible for any debts incurred, meaning that the shareholders are not personally liable. This can provide peace of mind to shareholders, but can also make it difficult to raise finance as investors may be reluctant to invest in a company with unlimited liability.
The right legal structure for your company will depend on a number of factors, including the size and nature of the business, the level of risk involved, and your personal circumstances. It is important to seek professional advice before choosing a legal structure, as there are a number of implications that you need to be aware of.
3. What tax implications you need to be aware of when starting a business
There are a number of tax implications to be aware of when starting a business in the UK. The first is corporation tax, which is levied on all limited companies at a rate of 19%. This tax is payable on all profits generated by the company, and must be paid within 9 months of the end of the financial year. In addition, businesses are also required to pay VAT (Value Added Tax) at a rate of 20% on all goods and services sold. This tax is payable quarterly, and businesses must register for VAT if their annual turnover exceeds £85,000. Finally, self-employed individuals are required to pay income tax and national insurance on their business profits. National insurance is charged at a rate of 12% for most self-employed individuals, and income tax is charged at either 20% or 40%, depending on the level of profit earned. As such, it is important to be aware of these tax implications when starting a business in the UK.
4. What kind of insurance you’ll need to protect your business
No two businesses are the same, so it’s important to get the right insurance for your business. The type of insurance you’ll need will depend on the size and type of business you have. For example, a small online business will have different insurance needs than a large manufacturing company. Some common types of business insurance include public liability insurance, employers’ liability insurance, product liability insurance, and professional indemnity insurance. You may also need specialist insurance, such as commercial vehicle insurance or property insurance. When choosing business insurance, it’s important to get advice from an experienced broker who can help you find the right cover for your business.
5. The rights of minority and majority shareholders
Drag and tag rights are shareholder rights that allow shareholders to keep their ownership stake in a company if the company is sold or merged. drag and tag rights give shareholders the ability to drag their shares with them into the new company, or to tag along and sell their shares to the buyer at the same price. These rights are important because they protect shareholders from being diluted or losing their investment if a company is sold. drag and tag rights are typically enshrined in a company’s articles of incorporation or by-laws. Find out more about drag and tag rights