Starting a small business is an exhilarating venture for any budding entrepreneur, but also a hugely stressful venture. One need only look at the febrile nature of disruptive industry to understand how difficult it can be to find one’s own place in it. But that entrepreneurial streak is a hard one to ignore – and one that pays off with the right approach.
Realistically, and unless you already have a line into some serious angel-investment money, the wisest approach is to start your new business as a branch of self-employment. This guide will tell you exactly how to go about this, from furtive first steps to establishing yourself in a difficult market atmosphere. Here, you will find all the information you need to get started without falling flat of your ambitions, or foul of the law.
Start with a Personal and Business Budget
First and foremost, you need to get a grip of your money. Starting any venture from the ground up will preternaturally mean spending some of your own money getting off the ground – and starting as a self-employed sole trader means your business’ income is treated precisely as personal income (and taxed accordingly).
In order to make sense of your money, you need to establish a bifurcation of finances early on; that is, you need to keep your business income and personal finances separate from the jump. This enables you to properly track early expenses, which are crucial to track if only to reduce your income tax obligations when your first tax return is due. Doing this also enables you to set a personal budget, so you can self-fund business activities without impacting your cost of living.
Funding and Borrowing Options
Of course, self-funding will only get you so far with respect to growing your business. Unless you’re content staying small and playing the long game, you will need some serious investment capital to build your business infrastructure – and there are a few ways to develop this.
Borrowing from friends and family is a common consideration for self-employed business-folk trying to keep their spend obligations low. For bigger business investments, though, it is prudent to consider financial products from banks and lending institutions. Self-employed loans can be used to make larger investments, and to spread the cost of said investments over a period of the business’ future.
Tax Compliance and Changing Economic Conditions
Tax compliance is simple as can be when it comes to operating a business as a self-employed sole trader, though the government’s new Making Tax Digital scheme requires quarterly upkeep of records as opposed to just an annual return. In any case, solid records need to be kept from day one – not just for tax, but also for futureproofing your business against known risks. The current UK economic climate is, as touched upon, a febrile one, with changing interest rates and rising business costs naturally affecting future financial decisions.
