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Blog posts tagged family business
The importance of family and friends when starting a business
June 18, 2010
I would like to look at an aspect of starting a business that isn’t often considered. Mostly discussions are about finance, marketing, recruiting a great team, VAT, legals and all of the other stuff of start ups. But most people need the support of family, friends, and partners. Start ups are hard, and you must be sure that everyone is with you, everyone is supporting you, and everyone understands what you are doing.
My decision to start a new business was made jointly with my wife. Although she’s had limited involvement in the management, she was a full participant in the original decision. And as a result, she has supported me in every up and down since then, which has been a real help. Similarly, my sister and a friend both lent me money when we had an early cash flow crisis. They wouldn’t have done this if they hadn’t been taken on the journey beforehand.
And that’s the rub. If people close to you aren’t with you, they may be a source of discouragement. In the extreme, broken relationships can greatly increase the chance of business failure. I’ve actually seen this with a friend, where they ultimately ended up with nothing. On the other hand, constant encouragement and reassurance can be a real help – as can financial support.
If you start a business, it won’t only affect you, it will impact those close to you as well. They deserve to be told what that will involve and to be consulted for their opinions. Do this, and you will increase your chances of success significantly.
Chris Barling is CEO of ecommerce software supplier Actinic
Tax tips for business mums
March 12, 2010
If you're a mum in business, there are a number of areas that could be of benefit to you. As well as making sure you are claiming Child Tax Credits, you could try the following:
Not paying Class 2 National Insurance Contributions
Currently £2.40 a week, Class 2 National Insurance Contributions don’t have to be paid if you earn below £5,075 in 09/10, but make sure you understand that you will be giving up rights to incapacity allowance, basic state pension and maternity allowance. Claim a deferment and you can save £2.40 a week (09/10 rate). You are eligible for state pension anyway if you have children under 12. Make a claim on http://www.hmrc.gov.uk/forms/cf411.pdf.
Investing in The Child Trust Fund
The Child Trust Fund is available to all children born on or after 1 September 2002. The government will give you a voucher for £250 which you can invest in a Child Trust Fund savings account of your choice, and they will give you another £250 when your child is seven. If you have a relatively low household income, you may also receive another payment. You, your friends or family, can top up the fund by up to £1,200 annually and there are no taxation impacts. The fund will be available to your child when they reach 18.
Setting up a pension for your children
An even better place to invest for your child’s future could be in a pension. Obviously this is a long term investment and would not be available from age 18, but many parents may consider that an advantage. Stakeholder pensions are available to non earners and children, and you can invest £2,880 a year, which is then topped up to £3,600 by HMRC.
Making sure interest on savings accounts is tax free
In most cases, your children should be receiving interest on their savings tax free. If this is not the case, complete form R85 and take it to the bank to make sure interest is paid tax free.
Involving children in your business
- Give them shares in your company.
If you are incorporating your business, it could be worth giving your children some shares whilst they are not worth very much. If you decide to give them some shares later when they are worth more, the transfer could be subject to capital gains tax. However, you should bear in mind the voting rights of the shares, and the proportions gifted to make sure you are not at risk of undue influence from your children at a later date. You should also be aware that any income derived from a parental gift is taxed over £100, so any dividends you made would be taxable in your hands. - Employ them.
When your children are old enough (current legal guidance indicates age 13), there is nothing to stop you employing them in your business. There is no requirement to pay your family national minimum wage in a family owned business and their salary will be tax deductible. Not only that, but they will have their own personal allowance of £6,475 (09/10) and hence if you pay them at that level, they will pay no tax on it. From web sites, to book-keeping, to filing and despatching goods, there are many ways that your children could help you grow your business and learn valuable skills at the same time.
Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date. However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy.
Amy Taylor, Amy Taylor Accountancy
Keep it in the family?
September 08, 2009
So that’s it then, Manchester Brit Pop icons Oasis have finally called it a day, following an alleged violent “altercation” back stage between singer Liam and guitarist Noel, only moments before they were due to play at a show in Paris recently.
Noel has said he can no longer work another day with Liam (AKA “our kid”) and as a result the rest of the band’s sell-out tour was cancelled, leaving fans with tickets for shows at V and elsewhere none too happy.
Whether Oasis will record or play together again is anyone’s guess, but the fracas between the brothers Gallagher (and their numerous, widely reported previous bust-ups) highlights the dangers of working with your “nearest and dearest”. This is an important consideration for many new and existing small businesses, of course, where enterprises are often jointly formed by married couples, siblings, parents and children, work colleagues or just good friends.
Having worked for quite a few husband-and-wife management teams, I’ve seen both sides of the coin at close quarters. I’ve experienced how it can work perfectly well, where couples are able to successfully leave “domestic stuff” at home once the world of business has been entered. Being able to share responsibility and workload with someone close to you can be a good thing. It can certainly make running a business a less lonely pursuit.
Family businesses or those run by friends can and do succeed. According to the Federation of Small Businesses, about 65 per cent of the UK’s 4.6m small firms are family-run enterprises. They generate about 30 per cent of UK GDP and employ some 3m people. Interestingly, about 56 per cent of family businesses are sole traders with no employees. By the way, on the Start Up Donut, you’ll find an excellent Q&A interview with a legal expert about drawing up contracts with family members who invest in your business.
However much of a challenge, if your family-run business is to succeed, you also must be adept at not taking “work stuff” home, of course. You’ve got to be able to separate the domestic and business spheres, while (in the case of spouses) perhaps accept that the distribution of power in the workplace might need to be wholly different to the home, where the other person might indeed “wear the trousers”.
Not everyone is up to the challenge and the dream of running a successful business with a spouse, relation or mate can quickly go wrong, however much you believed you could trust and rely on them. The pressure of work and money often brings out the worst in people.
I also recall being able to judge how “good” a night or weekend one young husband and wife management team had had at home by their relations in the workplace, which ranged from sickeningly lovey-dovey to barely concealed hostility – both of which often left others around them feeling very uncomfortable. If, as suspected, they’d had a spectacular row at home, then often the wife would be too “unwell” to come into work, but make a Lazarus-like recovery to full health the next day, presumably after they’d kissed and made up.
Often (well-founded) resentment can also be felt by employees, especially when a family member is given preferential treatment (eg extra time off) or responsibility way out of line with their skills, knowledge and ability.
Financial rewards and issues around commitment to the business can also quickly and permanently sour relations, which is why it’s wise to establish expectations (and document them, especially when it comes to financial investment) before starting a business with your spouse, family member or friend, then everyone at least knows where they stand and what’s expected.
Open and honest communication is a crucial, too. If one of the parties isn’t pulling their weight, for example, not feeling able to tell them will lead to severe problems sooner or later. It will probably even spell the end for the business and the relationship – something else I’ve witnessed close up and personal as an employee in family-run businesses.
As the old saying goes, better to build a friendship on business rather than a business on friendship. I’m sure Noel would agree.
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