A new venture

Starting your own business can be exciting and challenging, but also carries with it a number of potential risks. You’ll need to make important decisions having factored in some key issues. Consider: the type of business and its attributes; your target market and competition; profit potential and how you will extract those profits; the rate of business growth; and the impact on your life. You should also think about how you plan to exit the business when the time comes.

Effective planning

A comprehensive business plan is paramount to ensuring that you make the best decisions. Your business plan should include: the business structure that best meets your needs (be it sole owner, partnership, limited liability partnership or limited company); your intended funding sources; tax-efficient borrowings; whether a PAYE scheme is necessary; and whether the business should be VAT registered. We can guide you through these important decision making processes and help you to make the appropriate registrations. We can assist with cash flow forecasts, helping you to spot potential cash shortfalls, and offering regular updates to enable you to monitor your business’s performance.

Your business structure

Deciding on the business structure that best suits your needs can be difficult. There are both advantages and disadvantages for each trading structure, and each has implications for control, perception, support and costs. For example, careful consideration is needed regarding whether or not to retain personal ownership of any freehold property on incorporation. We can help you to decide on the best structure for your business.

A year end strategy

It is also important to choose a year end that suits your business. Is there a time of year when it will be more convenient to close off your accounting records, ready for us? What time of year would be best for stock-taking? How seasonal is your business? From a tax perspective, choosing a year end early in the tax year for an unincorporated business usually means that an increase in profits is more slowly reflected in an increased tax bill, and over time the delay between earning profits and paying the tax can create a source of working capital for the business. On the other hand, a decrease in profits will more slowly result in a lower tax bill. Speak to us for advice on your year end.

Preparing for the year end

Taking action before the year end is essential. Tax and financial planning should not be left until the end of the tax or financial year, but undertaken before the end of YOUR business year. Some of the issues to consider include:
  • the impact that accelerating expenditure into the current financial year, or deferring it into the next, might have on your tax position and financial results
  • making additional pension contributions or reviewing your pension arrangements
  • how you might take profits from your business at the smallest tax cost, and how the timing of payment of dividends and bonuses can reduce or defer tax
  • strategies to avoid overvaluing stock and work in progress
  • improvements to your billing systems and record keeping system, or a general review of your current systems to improve profitability and cash flow
  • national insurance efficiency and employee remuneration.

Reducing payments on account

Payments on account are normally equal to 50% of the previous year’s net liability. A claim can be made to reduce your payments on account, if appropriate, although interest will be charged if your actual liability is more than the reduced amount paid on account. Note that there is no equivalent mechanism to make increased payments on account when the year’s tax will be higher, so you will need to ensure that you build a reserve of money to pay the balance of tax due. Don’t wait until it’s too late – keep us informed of any factors which might affect you! If you tell us in good time about any issues facing your business, we can offer solutions.