Business FAQs

I am going into a business partnership; do I need a business partnership agreement?
It's always best to have a business partnership deed so that if anything should happen to one of the business partners, or you should fall out, there is a legal agreement entered into at the start which establishes how the business partnership should be dissolved and how the assets and liabilities allocated.
What's the effect on my council tax banding if I work from home?
If you are an employee, so long as your employer agrees that you can work from home (and whether or not your employer provides you with equipment to carry out such work), you may be entitled to seek a reduction in council tax on the ground that the room you use as an office can no longer be used, for example as a bedroom. It would be advisable for you not to hold business meetings at your home, because too many of those might constitute a change of use and cause other problems with your local council.
Will I have to pay business rates working from home?
Your business rates depend on the space occupied by your business - contact your local authority for advice.
How do I pay myself from my company?
In principle, you can either pay yourself from your own company by a salary (which could be in the form of a bonus or other remuneration) or, so long as you hold shares in the company and there are profits out of which to pay it, you could pay yourself a dividend.

If you are paid a salary from your own company, normal PAYE rules apply.

If you are paid a dividend, your company doesn't have to pay any tax over at the time of making the distribution. This is because dividends can only be paid out of profits which have already been taxed. In principle, dividends are now a more tax-efficient way of withdrawing profits from a company than salary.

If you have lent money to your company and that company wishes you to be able to withdraw some of that loan (to have it paid back), there would be no tax involved with any such repayment.
How do I tell HM Revenue & Customs that I am self-employed?
When you become self-employed you must register with HMRC within three months from the end of the month in which your self-employment commenced.

You can tell HMRC that you are self-employed by completing and sending forms CWF1 (Notification of Self-Employment) and CA5601 (Application to Pay Class 2 Contributions by Direct Debit).

If your profits are below £6,475 for 2020/21, you can claim exemption from paying Class 2 contributions.
I am setting up my own business and don't intend to trade under my own name. What must I do?
All you need do is prepare a notice and display it where any customers, visitors, etc. can see it.
As a sole trader, what am I personally liable for in respect of the business?
As a sole trader you are personally liable for any debts or losses incurred by the business.
I don't need to raise any finance for my new business venture; should I still prepare a financial statement?
No, but you should still have a business plan stating what you are planning to do and what you want to achieve.

Prepare a table or spreadsheet including your planned figures, for example, the prospective number of customers, the average value of each sale, your sales income, materials bought, overheads, profit, etc.
What health and safety information must I provide to my employees?
In order to comply with the law, you should provide the following:

The Health and Safety Law poster/leaflet.

The location of first aiders and the first aid box.

The location of the accident book.

The health and safety policy document.
I've just started a business; what are the first things I should do regarding health and safety?
If you are starting a commercial or industrial business and are employing people, you're legally obliged to notify your local Health and Safety Executive (HSE) inspector or local authority.

If your business involves manufacturing or processing or providing a service such as dry cleaning or telephone repairs, ring the Health and Safety Executive's Infoline (tel. 0845 345 0055) and they will send you a Health and Safety form to complete.

If your business is a shop, office, restaurant, hotel, launderette or residential home, your local authority's environmental health department will send you a form.

If you are in doubt as to who to register with, telephone the Health and Safety Executive 's Infoline (tel. 0845 345 0055).
I've started my own business; when must I start adding VAT onto my business invoices?
For most new businesses, you must start adding VAT onto your business invoices when your turnover exceeds £85,000 a year. This VAT registration threshold will not change for two years from 1 April 2020.
Do I need a licence to run a catering business from home?
I've started my own business; when must I start adding VAT onto my business invoices?
What is a limited company?
A limited company is a legal entity, separate from any individual involved. A limited company is run by individuals who have specific responsibilities but it owns its own assets; it's liable for its own debts and those who use and run limited companies must always remember that, for example, the money in a company’s bank account belongs to the limited company and not to the company directors, nor to the shareholders. Being a separate legal entity means that a limited company must be run according to set rules and the government department primarily responsible for ensuring that a limited company adheres to those rules is Companies House.
What types of limited company are there?
There are seven types of limited company:

1. Private companies: Used mainly by small businesses.

2.Public companies: Used by larger businesses.

3.Companies limited by guarantee: This type of company has no share capital. Companies limited by guarantee are used mainly by charities and the way they are run is substantially the same as for private companies. The member’s liability is limited to an amount the member has personally guaranteed to contribute to the assets of the company if it is wound up; this guarantee also applies for a period of one year after membership has ceased.

4.European Public Companies (EPCs): Useful for businesses operating in more than one EU member state.

5.Overseas companies: Companies that are not registered in the UK.

6.Unlimited companies: Like normal companies but the members’ liability is not limited. Unlimited companies don't have to file accounts at Companies House and they can be converted to limited and vice versa. Unlimited companies are relatively rare.

7.Community Interest Companies (CICs): Started in 2004 to allow socially minded entrepreneurs to make profits for good causes. CICs pay tax, file accounts at Companies House but they cannot be a charity.

In addition to the above there are also:

Limited Liability Partnerships (LLPs): Not companies as such but, for the purposes of administration, LLPs have to follow broadly similar rules to those for private companies.

Right to Manage Companies (RTMs) and Commonhold Associations (CAs): Both of these were introduced in 2002 but they are all limited by guarantee.

Single Member Companies: Private companies that have just one shareholder. They are treated the same as all private companies. Companies limited by guarantee can also be Single Member Companies.
When should I use a limited company?
Hugh Williams, author of lawpack's How to Run a Limited Company, advises that most people starting a business shouldn’t think of forming a limited company. Far too many limited companies are formed each year and either they are not even used and remain dormant, or those who run them find themselves in a jam (often of a tax nature) that would never have happened if they had traded as a sole trader or business partnership.

In principle, most people should start in business on their own as a sole trader or in business partnership with others. If the profits are small, they would pay less tax and enjoy less hassle and lower professional fees than if they trade through a limited company.

Again in principle, limited companies can be useful when profits approach £100,000 and especially when the proprietors don't wish to draw all of the profits out for their own personal use.

Another instance where incorporation might be sensible is if a number of individuals wish to go into business together and wish to take advantage of limited liability.

A further instance would be where someone wants to set up a business with a view to growing it and selling it. A limited company is easier to sell than, for example, a business partnership, because, with a limited liability company, the whole business comes as a complete package and the accounts are more reliable from the purchaser’s point of view.
How do I form a limited company?
To form, or incorporate, a limited company you need to send the following documents to Companies House:

*Form IN01

*The completed Memorandum of Association

*The limited company’s constitution (known as its ‘Articles of Association’) unless you decide to adopt the Model Articles. In this case you don't need to submit the company’s proposed Articles and you mark form IN01 accordingly.

You can submit these limited company forms either by post or electronically.
What are company directors?
Limited company directors are the people charged with running the company. They are the company’s managers, if you like. It's on their shoulders that the responsibility for what the limited company does, rests. Directors may also be shareholders. Directors have specific responsibilities which may be summarised as follows:

·Their prime responsibility is to the limited company itself.

·They must act within the powers conferred on them by company law and the limited company’s own constitution.

·They must promote the success of the limited company.

·They must exercise independent judgement.

·They must exercise reasonable care, skill and diligence.

·They must avoid conflicts of interest and must not use their position to further their own interests.

·They must ensure that the limited company is able to pay its debts and may be held personally liable if it's unable to do so.

·They are responsible for ensuring that the limited company files all of the requisite forms at Companies House, including the annual statutory accounts.

·In principle, they must not accept personal benefits from third parties.

·They must declare any personal interest in a proposed transaction.
What is a company secretary?
The company secretary, where one has been appointed, is the individual charged with ensuring that the limited company fulfils all of its statutory duties. While it's not essential for a company secretary to be appointed, it's essential that the statutory duties are fulfilled so it's prudent to appoint someone specifically to attend to these matters. If this isn't done, there is a danger that some duties will not be done. In addition, if the company’s model Articles of Association provide for it to have a company secretary, then it must appoint one.
What are shares and share certificates?
In essence, shares only exist as pieces of paper called share certificates and, as such, have no intrinsic value. What is important is what these pieces of paper represent, which is a share of the ownership of the limited company. In other words, they are legal documents that will show how much of (how many shares in) a limited company a particular shareholder owns. The total value of shares that have been issued is the ‘share capital’ of the company. Shares can be transferred or sold and, so long as the underlying company has a marketable worth, the share certificates are indeed items of value.
Can my firm be sued?
A firm or business partnership, unlike a company, is not a legal entity separate from its members. An individual business partner will therefore be personally liable:

·for his own wrongful acts; and

·for the wrongful acts of his co-partners committed in the normal course of the firm's business; and

·for the wrongful acts of the employees of the partnership committed while acting in the course of their employment.

Where the partners are defendants under (1) or (2) above they are sued in the name of the firm (i.e. the claimants are expressed to be ''Thompson, Thompson and Smythe', a firm'). Only those business partners who were business partners at the time of the act complained of will be held liable.
Are there any emergency procedures that I, as an employer, must follow?
You must undertake a risk assessment of your business premises and identify any significant health and safety risks which may arise. These may include, for example, the potential for a major escalating fire, explosion, building collapse, pollution incident and/or bomb threat. Once these major risks which may result in serious and or imminent danger have been identified, a formal emergency procedure must be produced.

The emergency procedure should set out the role, identity and responsibilities of the competent persons nominated to implement the action. The emergency procedure should normally be written down, clearly setting out the limits of action to be taken by all employees. In particular, work shouldn't be resumed after an emergency if serious danger remains.

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