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Is 2022 going to be your year?  Have you decided to stop working for someone else and to set up on your own?  Or are you still researching into setting up your new business?  I have answered some of the most commonly asked questions that we receive from new start-ups or people looking to set up their own business.

What are the different types of business structures?

There are several structures to choose from and it is important to understand which structure best suits you.  The most common are sole traders, partnerships, and limited companies.

To be classed as a sole trader, you are self-employed, and you individually run your own business.  This means that you as an individual reap the risks and rewards of the business.

A partnership is very similar to a sole trader, but instead of the business being run by an individual, it is run by 2 or more people who share the profits and liabilities.

A limited company is a separate legal entity to the people who run it.  This means that the finances of the limited company are separate to your own personal finances.

There are many different reasons to why you may or may not decide to set up a limited company, in a lot of cases there is no straightforward answer to this and it is, therefore, something to discuss with your accountant.  We have summarised what to consider in our article ‘Should you trade as a sole trader or limited company?’.

What dates do I need to be aware of?

There are several important dates to be aware of and these depend on what type of business structure you decide to set up.

The tax year runs from 6 April to the following 5 April.  All Self Assessment tax returns and partnership returns will cover this period, even if your accounting period differs to these dates.

The deadline for filing these returns electronically is usually the 31 January in the year following the 5 April (for example, the filing deadline for the tax year ended 5 April 2021 is the 31 January 2022), but in the last couple of years this has been extended due to the pandemic.

Limited companies have deadlines for filing accounts with Companies House and HMRC.  The deadline for filing the accounts at Companies House is nine months after the end of the accounting period.  The deadline for filing accounts with HMRC is twelve months after the end of the chargeable tax period, but the payment of corporation tax is due within nine months and one day of the end of the chargeable tax period.

Should I be VAT registered?

There is no straightforward answer to this question, and it very much differs from business to business.  For some businesses, it can be beneficial to register for VAT straight away whereas for other businesses it would be detrimental.  We highly recommend that you seek advice on this, we have a team of experts who can help.

Do I need a business bank account?

Not all businesses are required to set up business bank accounts.  If you have set up a limited company, you will be legally required to have a business bank account.

If you are self-employed or a partner in a partnership, it can be a good idea to set up a business bank account so that you can track the business income and expenses more easily.  It can also benefit the business by giving the business a credit rating which will improve the ability of the business to get credit cards and borrowings in the future.  The main downside to setting up a business bank account is that banks will normally charge a bank fee.

Should I take on an employee or should they be self-employed?

There are several rules regarding the status of a person working within a business and whether HMRC would deem them to be employed or self-employed.  There is no quick answer to this as everyone’s circumstances are different, our advisers can specifically guide you through this decision.

I would highly recommend getting in touch and speaking to an expert adviser in one of our local offices at either Dalston, Dumfries, Penrith and Workington.  With so many different things to consider we are more than happy to answer your questions and get you on your way to creating your new business.