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Company formation and marketing basics 18.02.2014
- 1. ROYAL HOLLOWAY ENTERPRISE ACADEMY Company Formation and Marketing Basics 18.02.2014
- 2. ROYAL HOLLOWAY ENTERPRISE ACADEMY What kind of business form should I take?
- 3. ROYAL HOLLOWAY ENTERPRISE ACADEMY Overview • Have to chose a structure • Structure defines your legal responsibilities – – – – Paperwork Taxes How you get paid Personal responsibilities
- 4. ROYAL HOLLOWAY ENTERPRISE ACADEMY Types of business • Most UK businesses are – Sole traders – Business partnerships – Limited companies • Other legal structures exist for social enterprises – Charity – Community Interest Companies (or CICs)
- 5. ROYAL HOLLOWAY ENTERPRISE ACADEMY Sole Trader • Individuals running their own business • Keep all profits after tax • Can take on staff
- 6. ROYAL HOLLOWAY ENTERPRISE ACADEMY Sole Trader Responsibilities • Personal responsibility for: – any losses your business makes – bills for things you buy for your business, like stock or equipment – keeping records of your business’ sales and spending
- 7. ROYAL HOLLOWAY ENTERPRISE ACADEMY Registering as a sole trader • Must register with HMRC as soon as you can after starting your business • Legal stuff: – Make a Self-Assessment tax return each year – Income Tax on profits and pay National Insurance – Register for VAT if you expect your business’ revenue to be more than £79,000 a year
- 8. ROYAL HOLLOWAY ENTERPRISE ACADEMY 'Ordinary' business partnerships • You and your partners ‘share’ responsibility • You get a share of the profits • Personally responsible for bills and losses • A ‘partner’ can be another business
- 9. ROYAL HOLLOWAY ENTERPRISE ACADEMY Setting up a partnership • Choose a ‘nominated partner’ • Register partnership with HMRC • Each partner must register as an individual with HMRC – Personal tax return – Pay income tax on partnership’s profits and individual National Insurance
- 10. ROYAL HOLLOWAY ENTERPRISE ACADEMY Advantages of non-incorporation • Simpler for taxation purposes – no legal need to keep accounts (though advised) • Don’t have to publically issue your accounts • Can withdraw cash from the business without any tax effect • Claim capital allowances, e.g. mobile phone bill, running a car, etc.
- 11. ROYAL HOLLOWAY ENTERPRISE ACADEMY Private Limited Companies • Appoint directors and register with Companies House – Certificate of Incorporation – Legal entity in its own right – Liability is limited to its members • Limited by shares • Limited by guarantee
- 12. ROYAL HOLLOWAY ENTERPRISE ACADEMY Limited by shares The liability of each member is limited to the original value of the shares issued to them •A shareholder has 500 shares originally valued at £1 each. •They have previously paid for 100 shares, ie £100. •At the time the company fails, they’re liable up to the original value of shares they haven’t paid for, i.e. £400.
- 13. ROYAL HOLLOWAY ENTERPRISE ACADEMY Limited by guarantee • Members of the company financially back it up to an amount agreed previously, if things go wrong.
- 14. ROYAL HOLLOWAY ENTERPRISE ACADEMY Before you register • the company’s name and registered address • at least one director • at least one shareholder • details of the company’s shares - known as ‘memorandum of association’ • rules about how the company is run known as ‘articles of association’
- 15. ROYAL HOLLOWAY ENTERPRISE ACADEMY How to register • online - but only if the company is limited by shares and uses model articles of association – £15 • by post - you must do this if you change the model articles or use your own – £40 • using an agent
- 16. ROYAL HOLLOWAY ENTERPRISE ACADEMY Company name • Must end in either ‘Limited’ or ‘Ltd’ • The name can’t: – be the same as any other name on the Companies House index of names – contain a ‘sensitive’ word or expression unless you get permission – suggest a connection with government or local authorities – be offensive • You may have a trading name which is not the same as your company name
- 17. ROYAL HOLLOWAY ENTERPRISE ACADEMY Shareholders • Statement of capital – the number of shares the company has and their total value – names and addresses of all shareholders • Every limited company must have at least one shareholder • Shareholders are owners of the company and they have certain rights
- 18. ROYAL HOLLOWAY ENTERPRISE ACADEMY Corporation Tax • Within 3 months you must tell HMRC about your new business • You will need to set a filing date, and will be given a date when your company must pay Corporation Tax.
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- You must choose a business structure when you start a business. The structure you choose will define your legal responsibilities, like: the paperwork you must fill in to get started the taxes you’ll have to manage and pay how you can personally take the profit your business makes your personal responsibilities if your business makes a loss
- A CIC is a special type of limited company which exists to benefit the community rather than private shareholders. To set up a CIC, you need to apply to Companies House, and: include a ‘community interest statement’, explaining what your business plans to do create an ‘asset lock’- a legal promise stating that the company’s assets will only be used for its social objectives, and setting limits to the money it can pay to shareholders get your company approved by the community interest company regulator - your application will automatically be sent to them The CIC regulator has guidance on CICs, including the forms you need to set one up. Good website is http://www.socialenterprise.org.uk/ Social Enterprise is really popular amongst Big Companies who want to be seen as Socially and Ethically Reponsible (‘CSR’)
- What ‘sole trader’ means You’re a sole trader if you’re running your own business as an individual. You can keep all your business’ profits after you’ve paid tax on them. You can take on staff - ‘sole trader’ means you’re responsible for the business, not that you have to work alone.
- Legal responsibilities You’re personally responsible for: any losses your business makes bills for things you buy for your business, like stock or equipment keeping records of your business’ sales and spending If your are irresponsible they can come after your personal assets, i.e. your house
- If you register later than 5 October in your business’ second tax year, you could be charged a penalty Current campaign you might have seen on the tubes about “We’re closing in on undeclared income”
- Essentially two sole traders working togetherYou’re personally responsible for your share of: any losses your business makes bills for things you buy for your business, like stock or equipment If you don’t want to be personally responsible for a business’ losses, you can set up a limited partnership or limited liability partnership. A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’, and can also be a partner in a partnership.
- You must choose a ‘nominated partner’. This is the partner who will be responsible for keeping business records and managing tax returns. The nominated partner must register the partnership with HM Revenue & Customs. When they do this, they will automatically register personally for Self Assessment.
- No legal requirement for proper accounting records to be kept These are just a few of the benefits
- A private company limited by shares is owned by its members (called shareholders). The liability of each member is limited to the original value of the shares issued to them, but not paid for. ExampleA shareholder has 500 shares originally valued at £1 each. They have previously paid for 100 shares, ie £100. At the time the company fails, they’re liable up to the original value of shares they haven’t paid for, ie £400.
- A private company limited by guarantee means the members of the company financially back it up to an amount agreed previously, if things go wrong. Its members aren’t called shareholders.
- All limited companies must be registered (incorporated) with Companies House. To do this you need: the company’s name and registered address at least one director at least one shareholder details of the company’s shares - known as ‘memorandum of association’ rules about how the company is run - known as ‘articles of association’
- Shareholders are owners of the company and they have certain rights eg, directors must get shareholders to vote and agree on changes to the company.
- You must tell HMRC: the date you started in business your company name and registered number the main address where you do business from what kind of business you do the date you’ll make your annual accounts up to if you’ve taken over a business or you’re part of a group