How to form a business
- 1 Involve professional advisers (eg an accountant) from the outset.
- 2 Consider whether you will be in sole control of the business or will share ownership or involve external investors.
- 3 Consider whether a company or limited liability partnership (LLP) will offer worthwhile financial flexibility, protection of personal assets and credibility with customers, suppliers and lenders.
- 4 Consider whether the administrative burden and costs, and the disclosure requirements, of a company or limited liability partnership will be justified.
- 5 Investigate the likely effect of different business forms on your tax and National Insurance position.
- 6 Choose the most appropriate business form: sole trader, partnership, LLP or limited company.
- 7 Draw up an agreement with the key individuals involved covering, for example, strategy, remuneration, responsibilities and 'what if' scenarios.
- 8 Choose a trading name; check that it is permitted, and is not already being used by another, similar business.
- 9 Use a company formation agent (or your accountant or solicitor) for the legal formation of a company or limited liability partnership.
- 10 Check any legal requirements (eg licences) with your local authority and organise insurance.
- 11 Contact HM Revenue and Customs to organise tax and National Insurance (and PAYE if you will be an employer); if necessary, register for VAT with your VAT office.
- 12 Organise systems to keep records and ensure that you can comply with statutory requirements (eg filing annual returns).
- take advice on the most appropriate business form
- use a professional to form a company or limited liability partnership
- check any legal requirements
- keep records to comply with statutory requirements
- form a company unnecessarily without considering other options
- enter into business with partners without a clear agreement
- forget to inform the tax and local authorities