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General Chat Thread, Starting your own sole trader in General; For a long time i've been thinking (like many of us do) of running a small biz on the side, ...
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    mossj's Avatar
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    Starting your own sole trader

    For a long time i've been thinking (like many of us do) of running a small biz on the side, I'm confident that I've nailed the technical aspect...

    But i really don't know about the non-technical (vat, taxes, company registration etc etc) bit, has anyone got any links/advice?

    p.s A google just bought up loads of advice for people looking to start businesses with there own premisis/employees/huge amounts of investment...

    p.p.s I'm not to bothered about the risks even in this climate, and investment is minimal as well..

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    All you need to do is register for self assessment with your local tax office. Then make sure you keep records of everything you spend and everything you charge. They'll send you a form every year, you fill it out and send it back (or get an accountant to do it). They'll then bill you. It'll be a good idea you put some of your earnings aside as you earn them for tax.

    I'd also find out about liability insurance. Especially since you're not registering as a limited company, so if the doo doo hits the fan they'd sue you personally.

    You don't need to register for VAT, until you're turning over quite a lot (I think it's £50k a quarter). Company registration is only for limited companies.

  3. 2 Thanks to K.C.Leblanc:

    bizzel (4th May 2009), mossj (3rd May 2009)

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    Jamman960's Avatar
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    For the registering side of things it'll all need to be done via companies house - Incorporating a company

    I'm not entirely sure on the rest but theres a fairly high threshold before you need to worry about being VAT registered - I think its towards 60k

    again HMRC is the department for VAT stuff -

    HM Revenue & Customs

    Both hmrc.gov.uk and companieshouse.gov.uk should cover most of the things you need to know.

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    Quote Originally Posted by Jamman960 View Post
    For the registering side of things it'll all need to be done via companies house - Incorporating a company
    That's only if he wants to start a limited company.

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    m25man's Avatar
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    Do yourself a favour and book yourself on one of the FREE courses available from your local Business Link before you fall into one of the many pitfalls that THIS government has created for Sole Traders and Small Business.

    It needn't be difficult and as soon as you find your feet join the FSB and get yourself down to the local FSB meetings.
    Network with as many peers as you can, in many cases it's not what you know but who you know!
    After a long period of PAYE I returned to being my own boss 3 years ago.

    Never looked back, last year our little 4 person operation turned over £1.2m, we never advertise and we have a waiting list of customers!

    I would be very cautious of taking advice from this forum on this particular subject unless those posting are actually running their own businesses!

    Bad technical advice from this forum at worse may leave you with a busted server, whilst bad business advice can leave you jobless, pennyless & homeless!

  7. 3 Thanks to m25man:

    AngryTechnician (1st July 2009), mossj (3rd May 2009), SimpleSi (5th May 2009)

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    powdarrmonkey's Avatar
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    Find yourself a good, small accountants (the sort who care) and come to some back-scratching arrangement - you manage their systems, they discount your fees or something similar. Get them to help you with sorting out what you need to record and with filling in the forms at the end of the year. They will be invaluable to you (if they're a small business specialist, even better).

    You probably want to find out about double-entry book keeping. I've found Microsoft's accounting package very helpful and I've also used GNUCash, which is more functional but less pretty.

    The VAT threshold this year (from 1st May just gone) is £68,000. It's measured annually, not quarterly as K.C.Leblanc said, but you can arrange to make your returns to HMRC quarterly, or sometimes monthly or annually. There is also a lower rate available for businesses turning over less than £150,000. But I doubt you'll need to worry about VAT at all if this is just going to be on the side of your normal job.
    Last edited by powdarrmonkey; 3rd May 2009 at 02:22 PM.

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    FABEnterprises's Avatar
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    Mossj, take a look at the business link website where you'll find lots of information about starting your own business, from the types of business ie sole trade, partnerships or a Limited company to advice on tax.

    Also take a look at and register with the various business forums, these can be an excellent source of information. Two of note are:

    UK Business Forums and A1BusinessForums

    Good luck in your new venture.

    Mason

  10. 2 Thanks to FABEnterprises:

    mossj (3rd May 2009), tech_guy (3rd May 2009)

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    Just a couple of pointers on how I did things.

    1. Register with HMRC as a sole-trader

    2. Get registered with the FSB (Federation of Small Businesses). They provide a LOT of useful services including legal, insurance and banking advice/offers.

    3. Get a business account (Not vital but it helps you keep business income and expenditure seperate and helps if/when you want to expand).

    4. Get a decent accounts package.. I'd recommend Kashflow and get into good habits of recording income and expenditure.... Also visit www.ukbusinessforums.co.uk and start asking questions about how to fill out your accounts.

    5. Finally, do a PROPER costs analysis of all your expenditure, including training, stationery, travel, phone, website, email, ISP, etc... and then work out what you actually need to cover in terms of costs before you even look at profits. This is VERY salutatory in terms of understanding why you need to chage £25 an hour instead of £10. I can provide a spreadsheet I use to keep myself up to speed on my fixed, variable costs and get sensible on my charging.


    From there on in it's all down to making a real impression, promising less, delivering more and building things up slowly but surely... Best of luck...

  12. 2 Thanks to contink:

    mossj (3rd May 2009), SimpleSi (5th May 2009)

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    mossj's Avatar
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    Okay i think i've got an idea of what i need to and in what order (correct if wrong)

    1. Get on a business link open day, for a drop in. Also register on the forums mentioned and research using them.

    2. Whilst waiting for an open day to come by, carry on sorting the technical aspect of things and maintain proper records using accounting program

    2.999. Tell school about business, as thats in my contract.

    3. With the advice gained from the open day, register with the hrmc (I'm guessing this dept also do tax self assesment) and buy the packages i need to do business/automate it the best i can.

    4. Start trading and hope for profit...



    I still have a few questions

    1.
    I plan to run this from home, and have as little physical infrastructure as possible (to keep costs as low as possible). How would I separate expenditure in terms of laptop/electric/isp, given that I use these regardless?

    2.
    from the business link site
    You must register for VAT if your annual sales are £67,000 or above but you may be able to register even if not
    Does that mean turn over or profit?

    What if i'm dealing with a school/charity that doesn't pay VAT, yet I'm below the threshold? The way i understood it is that they pay it then claim it back (but it would never reach the gov, to pay back). Do i charge with vat, and then if i don't hit the threshold, happy days?

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    powdarrmonkey's Avatar
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    Quote Originally Posted by mossj View Post
    2.
    from the business link site


    Does that mean turn over or profit?

    What if i'm dealing with a school/charity that doesn't pay VAT, yet I'm below the threshold? The way i understood it is that they pay it then claim it back (but it would never reach the gov, to pay back). Do i charge with vat, and then if i don't hit the threshold, happy days?
    (disclaimer: I am not an accountant nor vat registered) Turnover, which is your raw taking before subtracting any costs etc. If you're not VAT registered, you just don't charge for it.

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    contink's Avatar
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    Quote Originally Posted by mossj View Post
    I still have a few questions

    1.
    I plan to run this from home, and have as little physical infrastructure as possible (to keep costs as low as possible). How would I separate expenditure in terms of laptop/electric/isp, given that I use these regardless?
    You would need to ask an accountant..

    2.
    Does that mean turn over or profit?
    Turnover... If you sold one item and you charged £67,001, even if you only made 1p profit you would still need to be VAT registered.

    What if i'm dealing with a school/charity that doesn't pay VAT, yet I'm below the threshold? The way i understood it is that they pay it then claim it back (but it would never reach the gov, to pay back). Do i charge with vat, and then if i don't hit the threshold, happy days?
    Unfortunately if you buy the stuff and then sell it on to the school you cannot pass on the VAT in a way that the school can claim it back. You would be selling the item with VAT without being able to actually declare the VAT separately. You cannot deduct or otherwise do a damn thing with VAT unless you are VAT registered. For a school this sucks!

    The best workaround to this is to source the correct suppliers for the school and then get the school to purchase directly. This does mean you won't get any margin on the supply of the goods but I charge a fee for sourcing materials/software/etc... and the school gets the warranty direct from the supplier.

    To this end, getting to know people like CPL, etc... is definitely a good move. Oh and best of all it keeps your turnover lower and avoids pushing you into VAT any earlier than absolutely necessary.

    Let's be clear... VAT is a pure pig pain in the backside like a red hot poker being slowly shoved through your nose... THE HARD WAY! You just want to avoid it until you can afford an accountant to look after ALL your books.

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    russdev's Avatar
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    I would also if got good advice with your burser then ask them for advice as well.

    Pretty much what was said here was what I was told when I ran my own business.

    Also I am not accountant or a lawyer..

    Russ

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    Hiyah ... Ive done much the same as you ... a small thought on VAT ... I registered and have found it very easy to deal with ..... You simply calculate your Vat costs subtract them from your Vat charges and pay them the difference ... You basicly are collecting the tax for them and passing it on ... Its every 3 months and is on a cash basis IE only on what you have recieved rather than what you have invoiced... So by being registered you can increase you profit by 15% ....

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    m25man's Avatar
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    Quote Originally Posted by Brpilot99 View Post
    So by being registered you can increase you profit by 15% ....
    This is the kind of feckless comment I warned about...

    Charging VAT will most certainly NOT increase your profits by 15% - utter nonsense.
    The 15% VAT ultimately is a tax and you will be an unpaid tax collector as correctly stated.

    If you have no plans to resell goods or all of your customers are non VAT registered then you can consider putting off the VAT registration process until it becomes obligatory.

    If however you wish to purchase goods to resell then you will be far better off registering early.

    Service only businesses can marginally benefit from some of the "FLAT RATE" VAT schemes available but reselling goods will be a nightmare unless you can claim the VAT back on your purchases.

    The only way you will increase your profits by 15% by being VAT registered will be to commit VAT fraud.
    Claiming the VAT back on goods you have purchased but not declaring the VAT elsewhere!
    This could as stated by Brpilot increase your profit margins but will result in your arrest and loss of your business and possibly freedom.

    As I said be very careful of taking business advice from this forum.....

    Go to Business Link, seek professional advice and be lucky.

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    Dos_Box's Avatar
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    From my own experience of running EduGeek.

    1. Get an accountant.
    2. Only register for VAT if you know you are going over £60 in turnover.
    3. Learn the difference between sole trader and limited company.
    4. Get all contacts and dealings in writing (verbal agrements count for jack)!!!
    5. Be careful who you deal with. Some companies\individuals WILL string you along. Ask around about your clients first.
    6. Good luck

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