As we take the first tiny steps out of lockdown, budding entrepreneurs who have used the extra time on their hands to work on their bright business ideas could be wondering about their own next step.
The financial crisis of 2007/2008 brought about a surge in registrations of new enterprises in 2009/10 – out of a combination of necessity and people rediscovering their entrepreneurial gene. The 2020 lockdown during the Covid-19 crisis is in line to produce another spike in fresh talent, creating a whole range of new businesses.
Graeme Price, Chief Executive of Jarrovian Wealth, says we typically see a plethora of new ventures taking off post times of crisis, and this pandemic will be no different. “Having time during lockdown to flesh out ideas means many budding businesses will be ready to go for it. But before taking that leap of faith there is some essential planning and solid foundation work entrepreneurs need to get right to help increase their chances of success,” says Graeme.
Graeme shares his top six things those about to take the plunge need to consider:
- Choose a name for your company and check at Companies House that the name is still available. But before pressing the button you need to decide how many directors and how the shares are going to be allocated. A single share class or different share classes with different rights? These decisions can have a massive impact on how you extract profits as you go along — and how you can exit the business in the most tax-efficient method possible.
- At the same time as buying your domain name, so that no one else can own it, you should also consider laying claim to all similar domains, .org, .net, .eu, etc. as this can help protect you and your future customers from potential fraud. A very cheap but effective insurance policy to protect your good name.
- Get your corporation tax and PAYE references from HMRC. If you know that you will quickly exceed the VAT threshold of £85,000 turnover, you should also register for VAT. It can pay to register for VAT voluntarily ahead of reaching this figure, as you can claim back any VAT you pay out – useful when buying expensive equipment in the early days.
- If you are setting up as more than just a sole director, it is sensible to establish a shareholders’ agreement. Your company is governed by its Articles of Association and your shareholder agreement is the set of rules that your company conducts business on a day-to-day basis. This will minimise potential disputes going forward. You will also need to check that your shareholder agreement does not conflict with your articles. If they do, you will need to amend the articles accordingly.
- Get yourself a good conductor. There are a lot of moving parts in a company and you will need to outsource at different times to cover the many diverse areas of expertise. No one can do everything well on their own. Know your strengths and skills around your business operation and bring in an adviser whom you can rely on to orchestrate everything else. After all a symphony sounds better with a conductor at the helm and your business will flourish with access to the right type of advice and expertise.
- It may be odd starting with the end in mind, but no one lives forever. Very few of us want to have to work forever and most businesses have a natural life span. So, think from outset about what you envisage your exit looking like: trade sale, your management buying you out, an external management team buying into your business, family succession plan, or handing over to your employees via an employee ownership trust. Unless you are a serial entrepreneur with a build and sell it aim, it is unlikely that you will know your eventual exit route. So, create flexibility to cover as many options as possible.
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