Legal and financial aspects

Legal status of your business

The legal status of your business can depend on the type and size that your business is going to be, you will also need to think about tax as the size will effect this.


Sole trader

Being a sole trader means that you can start trading quickly without having to spend to much money, plus you have complete control over your company and business so you can decide exactly what you want to do. There are some advantages to sole trade like the fact you can spend as much money as you want on the company whether that's a lot or a little. Another good thing about being a sole trader is that all of the money from the business goes towards you. The amount you pay towards national insurance is payable as a percentage of profits archived. There are some downsides to being a sole trader, like the fact that as the business grows it will become harder to access finance. Also the business has unlimited liability towards debts that occur, which could mean you can't afford to pay them off.

Partnership

Partnerships involve two or more people that run a business. They share everything from the profits they make, to the risks they take. With partnerships, the business is more likely to survive if one of them leaves, whereas with a business run by one person, the business would crash. When there is multiple people running a business the responsibilities get shared which can make everything a lot easier, especially if these people have different skill sets. But again just like the sole trader, the business will get unlimited liability for debts that are occurred. And if you and your partner have disagreements about something that could put the business at risk.

http://hwchamber.co.uk/support/advice/starting-a-business/legal-status-of-your-business

Legal aspects of a small business

Law

When setting up a small business there are a few laws that you will have to sort out. These laws include employment, consumer law and licences, health and safety, and insurance.

Health and safety

Every business that is out there will need to have health and safety regulations. They have to have risk assessments as employers have a legal duty to ensure that their employees work in a safe environment.

Tax

Tax and national insurance contributions vary on the legal status of your business, as mentioned before the rate of tax is different depending on if your a sole trader of in a partnership.

Tax liabilities 

Corporation tax is a tax on limited companies taxable income or profit. To find out how much they have to pay they will have to calculate their own tax liabilities, and once they have calculated how much profit they have made, they have to pay the calculated tax to the Inland Revenue.

National insurance is taken away from your earnings. The money goes towards things like the NHS, the state pension and other welfare related schemes.

VAT stands for value added tax. You see this a lot when buying certain goods that there is VAT added on top. Businesses should register for VAT if the predicted value of the products 1 year later is more than the current annual VAT threshold which is £83,000.

http://www.bytestart.co.uk/main-business-taxes.html

Source of finance

There are many different types of ways to get funding for a small business, but sometimes you have to fit into certain category to get theses types of funding's or loans. Getting a bank loan means that you have a longer term kind of finance if you are just starting, as the bank will stating the time over which the loan will be provided, this can be anywhere from 5 years but its really up to the bank. The easiest way of getting funding would be to borrow from family and friends, the only problem is that you might feel morally wrong taking money of people close to you, especially if you wont be able to pay it back. There are quite a grants you can have that will give you some funding towards starting your business, usually there is requirements for different grants.

http://www.tutor2u.net/business/reference/sources-of-finance-for-a-startup-or-small-business

Financial systems 

Having a small business means that you will have to have a way of managing money, if you dont manage and budget your money you will most likely go bankrupt. There are a few ways in which you can manage your money and one is to hire an accountant. They will be able to manage your money for you, although hiring someone would be quite costly and for a small business you might not be able to do that, the second option is to get software that lets you keep track on the spending you are doing. This would be an easy way to budget and spend.

Credit control 

Credit control is the method of making your costumers be able to pay on time rather than leaving them in debt, not doing this could result in late payments which is just more hassle that the company doesn't need, things like this can effect the cash flow. A credit control team can will be able to ensure that the business has up to dat terms and conditions.