By Richard Grainger
VV talks to Peter Bevan of Bevan & Co Accountants and looks at some of the options and pitfalls for new entrepreneurs.
If you’re reading this, the chances are that you have already have started your own vintage business. However, you may be an employee considering starting up on your own and wondering how to go about it.
Dipping your entrepreneural toe in the water is one of the most exciting adventures that you will embark upon and like all adventures it needs to be planned carefully.
Peter Bevan of Bevan & Co AccountantsPeter Bevan is an accountant with thirty years’ experience of working with small businesses. One of the first questions potential business owners need to ask, Bevan advises, is whether you have got what it takes to be your own boss or whether you are simply fed up with being controlled by someone else?Are you disciplined enough to put in the hours whilst facing the everyday pressures, perhaps single-handedly? “Many people start a retail business, such as a vintage shop, because they love what they’re selling,” says Bevan. “You need to have a desire to make money coupled with a well-researched and carefully considered business plan in place first. This is absolutely essential, particularly if you’re going to approach a bank to borrow money.”Lorraine Lane of HSBC Business Banking agrees, “We offer free consultations and advise potential clients about our range of services for start-up businesses. The retail sector is experiencing especially difficult times but the vintage industry is a niche market which is experiencing sustained growth at present”.However, Lane advises anyone considering starting their own entity to do their homework first. “Running your own business is extremely rewarding but can also be very demanding. There’s also a risk that the great idea that caused you to start a business may drive you mad as you immerse yourself in it.”Bevan advises anyone with the urge to go it on their own to book a consultation with an accountant. Many, including Bevan, offer an initial consultation free of charge. “A business requires a structure and an accountant will be able to advise as to the best entity for you to administer your business.”The main choice is between being a sole trader, entering into a partnership or even forming a private limited company. “The accountant will explore your business plan with you,” says Bevan, “and the scale of your intended business and potential profitability will be an indicator of which is most appropriate for your business.”Sole trading is the simplest form. There are no registration fees and you simply register yourself as self-employed with HM Revenue and Customs. The profits of the business are yours and will be recorded in your annual self-assessment tax return.Being a sole trader is simple but it carries the risk that your are liable for every aspect of your business. If it fails, then any creditors will persue you personally.A partnership might be a good option if there are two or more people who wish to go into business together. Bevan advises that there are different forms of partnership but each partner will pay tax based upon their individual share of the partnership’s profits. Each person’s share is usually defined by a partnership agreement. As with sole traders, the partners are each personally liable for the debts of the partnership and therefore there is a high risk if the business is likely to have a high level of creditors at any one time.A private limited company is a legal entity in its own right and carries less personal risk to the new entrepreneur. It must be registered at Companies House and file accounts plus an Annual Return each year. The ownership of the limited company is determined by who the shareholders are, and the company is controlled by a board of directors.Normal risks of trading fall on the shoulders of the company, not the directors or shareholders. However, these days banks and landlords are likely to require personal guarantees before they will lend money or rent property to a limited company. Private limited companies are liable for corporation tax each year, which is assessed against profits. Bevan explains that this is a complex area, and will require an accountant to extract profit from the business due to some of the complexities and possibilities.Captain Kirk - boldly going somewhere
Both Bevan and Lane advise to seek advice and to tread carefully. But as Goethe once said: “If you have a dream – begin it,” or as Captain Kirk might have put it: “…boldly go where man hasn’t screwed up before.”