Q: I am setting up an information service. Can I do this privately, or would I have to register it as a business?
Aug 17 2005
Answered by: Jackie Jarvis Ask a question
I think from your question that you are wondering whether you can start this business as a self-employed person or whether you need to form a company. The answer is you can choose either business form.
You can start any business you like as a self-employed person. It's really very easy and straightforward. You simply have to let your local tax inspector and the Contributions Agency know that you are changing your status from employee to self-employed. There is a single form CWF1 which you can get from a the Inland Revenue. You can also contact its helpline for the newly self-employed, on 0845 9 154 515, or go to www.inlandrevenue.gov.uk.
Although there are some businesses offering to register your business name for you, there is no legal requirement to do so, and you don't need to spend the money. However, if you want to operate your self-employed business under a different name from your own, there are rules about disclosing your name. You must put your own name and address legibly on all business letters, on written orders for goods and services, on invoices and on written demands for payments of debts. You must also display your name and address prominently at your business premises or at any place to which your customers and suppliers have access. And if anyone with whom you are discussing business asks you to disclose your own name and address, you must do so immediately in writing.
The advantage of being self-employed is that it is simple to start up and your national insurance contributions are likely to be less (but also the benefits you could be entitled to).
Starting a company gives you advantages: it looks more serious to the outside world (customers and suppliers) and the rates of tax on profits can be less. In the past, companies had to have their accounts audited, but nowadays very small ones don't.
Many people choose to start a company because it gives limited liability, so that you personally won't become responsible for its debts if the business shouldn't work out. But as many directors have discovered in the past this isn't always the case. Directors are often asked to provide security for loans and overdrafts, or they are asked to guarantee payments such as rents or to large creditors.
There are some legal requirements which can trip up company directors, such as documents which are required by Companies House. However, there are a number of very good booklets available from them and they are very helpful over the telephone.
If you decide you want to form a company, the simplest way to do this is probably to buy a ready-made one off the shelf. Look in Yellow Pages under Company Registration Agents and you will see many companies advertising ready-made companies. It can cost from £60 to £160 to buy one. It will probably have a really weird name, so you can change it. The company you buy it from will be able to help you or you can organise it yourself. Ask Companies House for a leaflet, you can contact it on www.companieshouse.co.uk, or call 0870 333 3636.
You can also if you prefer ask one of these agents or a solicitor to form a company from scratch. The advantage of doing this is that you can have tailor-made Memorandum and Articles (M & A) drawn up for your business. The M & A sets out how you can organise things like board meetings, issuing shares and calling Emergency General Meetings. A solicitor can draw these up to give you more flexibility.
However, in your case it sounds like a pretty simple format would suit you and I think you might as well go for the cheapest and simplest route and buy a company off the shelf.
Comments