Starting a business can come as bit of a surprise to the owner and their family.  It usually starts from someone showing a talent, maybe they’re very good at gardening or decorating for example.  Neighbours and friends ask for help and then word gets round.  The only way to get paid legally for these tasks is to start a business and do everything by the book.

There are various ways of starting a business.  Setting up as a sole trader you are self employed and will be required to register this fact with the Inland Revenue and Customs, known by the initials HMRC.  A sole trader is required to keep all the companies profits once tax has been paid on them.  Unfortunately, sole traders are also responsible for all and any losses the business incurs.  An annual tax return will have to be filed.   Income taxes and national insurance contributions will be payable.

For a limited company, the first jobs are to register with Companies House and HMRC.  The company name must be legally available to use and not one that is already registered.  There must be a registerd office address;  limited companies have to file annual accounts and confirmation statements;  corporation tax will probably be payable so tax returns are legally required.  However, in some cases, it is possible to save more tax payments than as a sole trader.

A small business federation advisor will be able to show the benefits of the one system over the other.