Displaying items by tag: Bookkeeping
In much the same way that we make judgements about our personal fitness: are we overweight, do we get enough exercise, do we eat the right food; similar judgements can be made about your business.
There is also a raft of external pressures that we have to consider as individuals. For example, if you are about to run a marathon your diet and daily exercise will need to prepare you for the physical demands of the coming event. Simply continuing a couch potato regime will inevitably lead to disaster.
In much the same way, we not only need to meet current demands when we sit down to manage our business activity on a day by day basis, we also need to keep a weather eye on changes to the economy and the antics of the politicians that pull the strings.
If a slow-down in activity is likely, for whatever reason, the demands on your business will likely result in lower sales, pressure on your profit margins, a reduction in cash balances and downward pressure on your earnings from the business.
Compare this with a rapid up-turn in economic activity. You will need sufficient cash reserves to meet increased sales, investment in stock and possible increased staffing costs.
In both cases, significant changes will make similar demands on your business cash flow, and whilst the details will differ, to survive these changes we need to be prepared, we need to manage our business fitness.
Without a doubt, losing the ability to move goods and personnel across Europe is probably the most dramatic change in the UK’s ability to trade in the EU since we first joined in the 1970s. Even if our business does not actively trade with companies in the EU, it is highly likely that a number of our suppliers and customers may do so.
How will this affect your business? What plans do you have in place to counter any down-side risks?
We suggest that undertake a formal risk assessment to identify and counter financial pressures that you may face after 31 October 2019. Please call so we can help you ready your business for the coming changes. The clock is ticking.
If you are setting up a new business one of the options, you will need to consider is your business structure. There are two basic choices:
- Be self-employed, or
- Incorporate your business, be a limited company.
There is a world of difference between the two options.
Self-employed suggests that you work on your own, and this is certainly one self-employed option, but there are others.
You could have a business partner, or partners, and trade as self-employed but in a formal partnership arrangement. There are two basic types of partnership: a limited partnership (where the partners are not personally liable for any business risks) and a non-limited version where the partners’ personal assets are at risk in the event that the business cannot pay its debts.
This personal liability aspect is one of the key reasons that need to be considered when deciding on a structure for your business. The other is the impact of NIC and income tax.
If you are self-employed the profits of the business are taxable based on the tax status of the business owner or owners. There is no flat rate applied to business profits. The more you earn, the more NIC and income tax you will pay. And don’t forget, if you are self-employed and you run into financial difficulties, your personal assets may be at risk – unless you have opted for the Limited Liability Partnership arrangement.
A limited company
Alternatively, you could set up a limited company that is treated as a legal entity in its own right. Companies pay corporation tax, not income tax, at a single rate, presently 19%.
At first sight it may seem like a no-brainer, why would you be self-employed and pay much higher rates of NIC and income tax? Combine this with the limited liability aspect and the argument for trading as limited seems compelling.
Planning is key
Every potential new business-person should consider both options. There are pluses and minuses to each, and both need to be considered.
If you are thinking about a new business, perhaps your first venture into self-employment, please call so we can help you consider all the possibilities. This is not a process to be taken lightly and messing up could prove to be very expensive.