Is Interbright Business’s Support Plan service free?
Yes, Interbright Business’s Support Plan service is free to all new and developing businesses who would like support. We do charge for individual mentorship sessions and training should you wish to purchase these services.
What is a Sole Trader?
A sole trader is a person who is self-employed and runs their own business as an individual. The business and the person are not separate —so, if you decided to become a sole trader, you would be personally responsible for any losses the business incurred. You keep all of the profits after you have paid tax.
Sole traders are responsible personally for keeping records of business sales, business spending and the business’ financial affairs. This includes sending a Self-Assessment tax return every year and registering for VAT if and when your takings are over the VAT threshold.
There is a fairly small amount of paperwork involved when setting up as a sole trader.
You don’t have to publish details of your business on Companies House, so your privacy is protected.
You have complete control over your business. There are no other shareholders to consult and no directors to answer to.
You get to keep all of the profits after tax.
You can sidestep the issues of IR35 and disguised employment (those rules only apply to limited companies).
As a sole trader, you are personally liable for any business losses, meaning that your personal belongings and property are all at risk.
Operating as a sole trader you will more than likely end up paying more tax than an equivalent limited company.
In certain sectors, potential clients much prefer to deal with limited companies rather than sole traders.
If you are looking to grow your business, the sole trader structure can become quite restrictive fairly quickly.
If you are seeking investment to develop your business, you may experience more difficulties than if you were registered as a limited company.
What is a limited company?
A limited company is a business that is an entity in its own right. That means it is distinct from the individuals who own and operate the company, and their liability is limited to the investment they made into the company (hence the name ‘limited’).
A limited company can be divided into shares between different people. All limited companies in the UK need to be registered with Companies House and they must follow the rules laid out by the Companies Act of 2006.
With a limited company, you will always have limited liability. That means you are only ever liable for the investment you made in the business.
In most circumstances, you’re likely to pay less tax as a limited company than you would as a sole trader.
There are more things that you can claim as a business expense than you would be able to as a sole trader.
A limited company is generally seen as more professional than a sole trader. As such, you’ll have more credibility when seeking out potential clients.
You will have more borrowing power as a limited company. Investors will see you as more reputable than a sole trader, and your limited company will have its own credit rating.
Without support from a specialist, there is generally more paperwork when setting up a limited company than going down the sole trader route.
As a shareholder, your personal details will be available for the public to see via Companies House.
Any key business decisions will have to be agreed by all shareholders unless you are the sole shareholder.
You will need to be aware of the pitfalls of IR35.
It’s highly advisable to employ the skills of an accountant in order to get maximum profitability from a limited company.
Should I complete a Business Plan when starting a new business?
In one word, yes.
Starting a business without a business plan is like going on holiday without a map, you will get lost! It’s best not to overthink the plan, because things will change over time with your business as you learn and grow. But it’s a very good idea to do your research, check the competition in the market and gather some information on the financial viability of your service, the business model and how it will generate income.
For this you can complete financial projections on what you will charge for your service or product, and how much profit you will be left with when all expenses are paid.
You should also seek to plan where you would like your business to be in a years’ time, two years’ time and create financial projections for your anticipated growth.
If you would like a free Business Plan template you can request one here:
What type of Business insurance do I need?
Different businesses need different insurances. Take a look at the list and see what insurances are going to be needed based on your business model.
Public liability insurance
Public liability insurance will protect you in the event that you cause damage to property, such as when visiting a client’s site, or cause physical harm, injury or even death to a third party as a direct result of your business activities.
If you run a business and customers visit your premises, you should take out this type of cover.
Employers’ liability insurance
Employers’ liability insurance protects your business in the event of claims by employees for injuries or sickness which resulted from their work.
This type of cover is compulsory for all businesses which have employees, however there are some important exceptions to this rule:
You do not have to take out cover if you are a limited company director, own at least half the shares in the company, and you are the only employee.
If you are a sole trader, and employ only close family members, you are also exempt from the rules.
Professional indemnity Insurance (PI) cover
Professional indemnity insurance will cover the cost of claims against you by dissatisfied clients for negligence, loss of documents or data, and infringement of copyright.
It is particularly relevant for people who provide professional advice to end clients, such as consultants and accountants.
In some cases you may be contractually obliged to take out a certain level of cover – this is often the case for IT contractors and interim managers.
Tax protection insurance
A useful type of cover, this will cover the cost of professional representation in the event that you undergo an HMRC enquiry relating to any area of taxation. Depending on the level of cover, it may even cover any extra taxes you are found to owe.
Directors’ and Officers’ insurance
This will cover a company’s directors in case they are accused of misleading the company, or engaging in ‘wrongful acts’.
If you have business premises, you may want to cover the contents against a range of calamities, as you would do with home contents insurance. If you run a business from home, make sure that your home contents cover will protect any business property.
This is standard insurance for any vehicles your business owns. Make sure you check with your insurer if you decide to use your own vehicle for business use.
This will cover the accidental damage to, or loss/theft of any business equipment.
Legal expenses cover
If you have to employ the services of legal experts on behalf of your business, this type of cover will protect you in a range of scenarios.
If you would like support with Business Insurance please click here: