Be Your Own Boss

A Business Partnership can have unlimited or limited liability. A normal partnership has unlimited liability but a Limited Liability Partnership (LLP) has similar advantages to a Limited Company. As such it needs to be registered at Companies House.

Operating a business as an unlimited partnership is similar to operating as a sole trader from a legal perspective. The key differences are as follows:

• A partnership has more than one owner
• Accounting and taxation are more complex due to the need to prepare partnership accounts and allocate profit shares for tax purposes
• The business and the partners have ‘Joint and Several’ liability which is unlimited. This means that, any losses or other liabilities fall first on the business, then on the partners according to their share of the business, then fully on each individual partner. This means that any single partner could end up carrying all liabilities personally if the business and the other partners are unable to pay their share.

The last of these is quite a frightening prospect. It is for this reason that the Limited Liability Partnership form of business was created. It is a much safer option for the individual partner than operating as a ‘regular’ partnership.

In either case you should have a partnership agreement drawn up by a business lawyer as well as taking full financial and legal advice from qualified professionals.

‘Personally I prefer the simplicity of the sole trader for the very small ‘one man band’ low risk venture or the formal structure of the limited company for anything bigger or riskier.’

There are two types of limited liability company in UK. Private Companies are designated as Ltd or Limited, Public Companies are designated as Plc. I shall just deal with Private Limited Companies in this article as they are the most appropriate for small businesses.

The main point of a limited company is to give personal protection against company liabilities. As long as you comply with the relevant regulations, you will not be personally liable for the debts or other liabilities of your business. It is therefore a more appropriate business structure for any business that might face high risks in business.

There are also tax advantages in operating as a limited company once your business profits exceed the personal higher tax threshold. It may also be possible to get more favourable tax treatment for pension contributions, though this is a complex area needing specialist advice.

Another advantage to a limited company is that it is easier to build up a company as a tangible asset which you can sell in the future, perhaps to retire. This is because it is structured as a separate legal entitity and not entangled with your personal assets in the same way as a sole trader business.

The Companies Act separates out the owners of the company from the managers of the business. The owners of the business are the shareholders, of which there must be at least one. The shareholders’ liabilities are limited to the amount of money they have put into the business as a shareholding.

The managers of the business are the directors, of which there must be at least one. The directors are responsible for the running of the company and compliance with all regulations. They are also responsible for filing of financial accounts and annual return to Companies House as well as filing a corporation tax return to HMRC.

Providing the company is run legally and competently, there should be no liabilities for which the directors are personally responsible.

The regulations can be quite complex, so good legal and financial advice should be sought before proceeding.

Running a limited company can face more red tape and additional costs than a sole trader business, but the benefits usually outweigh the drawbacks.

For more detailed information go to www.companieshouse.gov.uk.

Sole Trader is the simplest business format of all. You can trade under your own name or a business name and you can set up almost anytime, anywhere with little restriction or red tape. There are a few key things you need to do first though:

• Register with HM Revenue and Customs (HMRC) - For Tax and National Insurance
• Open a separate business bank account
• Set up a system for recording all sales, income and expenses
• Check to see if your type of business needs any kind of license, there are very few
• If you are working from home, do you need planning permission?
• Check with HMRC to see if you need to register for VAT
• Get yourself a set of guidance leaflets for business from your local Trading Standards office - pay particular attention to Business Names regulations and Consumer Protection

The main things to bear in mind as a Sole Trader are:

You and the business are legally the same. This means that you are personally liable for all the debts and other liabilities of the business to the full extent of your personal assets. If the business goes bust, you could lose everything.

Your business profits are taxed as your personal earnings along with any other earned or investment income you may have. If your profits are high, you will very rapidly become subject to higher rate tax.

In addition to tax you will have to pay two types of National Insurance contributions. Class 2 contributions are a fixed weekly amount, Class 4 contributions are a percentage of your profits between a lower and upper limit. You will be given the current rates and necessary information when you register with HMRC.

For the reasons above it would be wise to consult an accountant experienced in working with small bsinesses prior to starting out.

You can get more information from your local Business Link who will provide you with a business aviser free of charge. Find your local office at www.businesslink.gov.uk.

A key decision facing the new business is what business format to choose when starting out. Basically there are a number of options which will be influenced by factors such as:

• How many of you will there be running the business?
• What potential risks and liabilities will you face?
• What are the tax implications of each option?
• How much bureaucracy (red tape!) are you prepared to face?
• Do you want to build a business with an assest value?

If you are setting up by yourself, there are two choices:

•  Sole Trader
• Private Limited Company

If there are two or more of you the choice is wider and adds:

• Partnership
• Limited Liability Partnership

I shall deal with each of these in separate articles to try to keep things as simple as possible!

Be Your Own Boss has had a long overdue ‘makeover’.

It’s been rebuilt using WordPress, a great tool for content managed websites, incorporating some of the latest Web 2.0 features. This makes it much easier to incorporate new content, so now I have no excuse for not adding lots of new information on the subject of starting and running your own business ;-). That should keep me busy!

The articles now give you the opportunity to comment and ask questions, blog style, so feel free to join in the business discussion. But please be nice

A few simple community rules:

• No fighting
• No abuse
• No Spamming
• No blatant self promotion
• Don’t include links in posts, put your email address and website in the boxes on the comment form

Your email address remains private, it’s just between you and me. Your website will be linked to from your name on the comment.

Comments are moderated, if they break the rules, they won’t appear!

I hope you like the new site. Join in, learn and have fun!

John

You wouldn’t get on a bus or train without knowing where you want to go, would you? Yet thousands of people go into business with only a vague idea of where they want their business to be in say 5 years time.

Whether you are starting a new business or growing an existing one, success depends on three things:

A. Knowing where you are now
B. Knowing where you want to be and when
C. Figuring out a route from A to B.

Then all you have to do is follow your route plan.

Many people looking for a business idea or opportunity look outside of themselves and their own interests. Yet the things we are most enthusiastic about are ourselves and our own interests! So why not make them work for you?

Running a business based on something you enjoy will ensure you work harder, enjoy your work and (this is the important bit..) communicate your enthusiasm to your customers!

Did you ever hear the saying, “Nobody ever got rich working for someone else!”?

On the other hand, around 80% of new businesses fail within the first 5 years!

So what makes being your own boss so attractive if the end result is most likely failure? The answer given by most would-be entrepreneurs is …

FREEDOM.

So how can you break free and go solo without crashing?

Well, not by jumping into every business opportunity that comes your way and giving it a whole month’s try before admitting defeat and going on to the next one! Believe it or not, a lot of people do just that.

The success secret is simple to describe but not necessarily simple to apply.

So here goes…

Rule 1 Recognise that you will be exchanging one boss for many, they are called customers and they can be more demanding than any employer.

Rule 2 Know yourself. What are your strengths and weaknesses? What are you prepared to do and what are you not prepared to do? What skills do you have? How do you relate to people? A knowledge of yourself will help to avoid entering a business unsuited to you.

Rule 3 Pick the right idea. This sounds obvious, but it isn’t always so. Will the product or service sell? Will it deliver a large enough profit to cover expenses, pay you and the taxman and leave some over to expand the
business? Can you afford to give it time to grow? Does it fit the YOU that resulted from rule 2?

Rule 4 What support is there to help you build your business? Going solo does not mean doing it alone. Some opportunities provide built in support e.g. Franchising or Network Marketing. Support is also available locally from Business Link and other sources.

Rule 5 There’s no such thing as something for nothing. “You only get what you want by helping enough other people get what they want!” - Zig Ziglar. In business the other people referred to are usually customers.

Rule 6 Pick your business carefully then focus on making it a success, without becoming too distracted by other things. When it is successful, you can then apply the same techniques to another opportunity if you want to.

There are other factors of course, but following these five rules will help you get started.

There are a number of ways to go solo without loads of capital and without too much risk. Once you have “cut your teeth” on one or more of these, you will be ready to tackle the complexities of a full blown business. Being self-employed is simpler then running a business (many people think they are the same thing - believe me, they are not!)

Being self-employed means precisely what it says ….. employing yourself - often in the same job you had as an employee. More often than not you will be home based with few costs. Running a business, on the other hand, often means premises, staff and a host of other costs have to be carried. Which means you have to make a lot of money before you get to keep any for yourself.

Over the next few months I shall be adding a few suggestions to get you thinking……..

O.K so you’ve set your initial goals, so now what?

What Business

If you already have a business idea… great! All you have to do is get to  work, right?

Wrong! Most people who just take an idea and start out cold don’t last very long. You need to think carefully about your business - what you are going to sell, how you are going to sell it, who are you going to sell it
to and how much for? Where will you get your supplies, how much will they cost, what other costs will you have? What records do you need to keep, will you need staff, what laws and regulations must you comply with? How much do you need to take out of the business to live on, how much do you need to put in to get it off the ground, how much do you need to retain in the business for future investment, how much do you need to keep back to pay taxes?

In other words, you need a plan ….. a Business Plan.

From this point on, I shall assume you have your business idea. If not, then go to the Ideas or Opportunities sections of this website.

There are four key sections of the business plan, they are:

The Overview

In this first section you lay out a summary of your idea for the business, background information on how the idea came about and a resume of the key people involved in the business - showing skills and abilities matched to their roles within the business.

The Marketing Plan

Here you include all your market research information - in other words, what makes you think you have a market for what you will be selling, what competition is already out there, what makes you so different? You also need to set out details of your product (whether goods or services) including the features of the product, the benefits it gives to the buyer and the price. You should clearly state how you will identify possible customers and how you will promote the product to them, including your sales message (i.e.why should they buy?), the method you will use to transmit the message (i.e advertising method), how you propose to close the sale and keep the customer happy (customer service methods).

The Financial Plan

This is where you detail the specifics of how you will fund the business including; start-up costs, operating costs, marketing costs, production costs etc. It should inlude profit projections and cash flow projections for at least the first twelve months and preferably for three years.

The Operational Plan

How are you actually going to run the business? How many staff do you need?

How will you control quality?

What systems and processes will you use to ensure you keep everything on track?

If all of this looks very daunting, it can be! But getting it right will contribute greatly to the future success of your venture. To help you to put your plan together, I have included a skeleton business plan for you to simply fill in the relevant sections by answering key questions. You will find it in the downloads area of the resources section of the website.

“Most people, whether in business or not, are too busy earning a living to make any real money!” So said a guy who became a major influence on my business life at an early stage. His name was Roy and he was what I often refer to affectionately as a `hustler’ - by which I mean someone who makes things happen by sheer force of will and personality. Roy introduced me to a number of `success’ concepts but the most important of all was the concept of setting goals.

I have since come across the same philosophy from a large number of people, all of whom are successful at what they do. They all say the same thing - “You can have anything you want if you know exactly what it is, set it as a specific objective and, most importantly, allow yourself to have it!”. So, it seams that you need to start out knowing what you want and set goals to achieve it.

Setting Goals

Over the years I have examined the ways in which these people set their goals and found a remarkably common approach. I have also refined this approach to ensure that goal conflicts don’t occur.

“Hang on! What’s a goal conflict?” I hear you ask. Well, goal conflicts occur when individual goals are pursued in isolation without reference to or co-ordination with other goals. For example, a particular business goal may involve working long hours for a while or travelling away from home. At the same time you have a personal goal to spend more time playing golf, whilst a family goal may be to spend more time with the kids! Something has to give …. hence goal conflict, one goal gets in the way of others. Simple really, but so often overlooked.

So how do you get it right? First of all it is important to recognise exactly what a goal or objective is. Most people are too vague and specify aims rather than objectives. For instance an aim might be to get rich - but how do you define rich? In this case a specific objective might be - “By the end of 2008 I shall be earning $100,000 per year and have $250,000 invested.” I hope you see the difference.

A goal must be tangible, measurable, achievable and have a time scale for completion and it must be described in detail. Another example - “I want a new car” is not a goal, it is a wish and, as far as I have been able to ascertain, to get your wish you need either a genie or a fairy godmother - neither seem to be in particularly good supply!

On the other hand - “On 1 August this year I shall take full ownership of a brand new Lexus 2000 automatic in metallic red with grey trim.” - is pretty specific.

Try this exercise. Take a sheet of paper and draw a vertical line down the centre. On the left side write the heading Personal Goals and on the right side put the heading Business Goals. At the very top in the centre write the heading Immediate Objectives.

List as many immediate personal goals as you can think of on the left and do the same for business goals on the right. Personal goals are to do with achieving the life-style you want. Business goals are directed at the way you want the business to develop e.g. To increase market share to 40% or double turnover or increase profits by 25% or maybe to employ an effective manager to give you more time for other things.

Later you can do the same for medium and long term goals, say for one year and five years ahead.

Next make sure that there is no conflict between personal and business goals, or between goals on the same list, in fact business goals should ideally support the personal goals, after all, what are you in business for?

Now take three personal goals and two business ones, five in all, and think about them in more detail as in the car example above. Then write them out in a similar way to the car example, in the first person future tense. Make sure that each goal is described in full detail, that you state a date by which or on which the goal will be achieved and that you state that you will achieve it. Write them clearly in large print in priority order on a separate, clean sheet of paper. Do not show this list to anyone other than someone who is working with you towards your goals and don’t talk about it. The act of writing down your goals in this way sets in place the plan for their achievement.

Work Your Goals

Every morning read your list out aloud to yourself then close your eyes and picture in your mind the achievement of the goal. Imagine the feeling of driving the car, banking the business takings, relaxing on the sun-drenched beach or whatever your goal entails. Then put the list away and go about your daily business with confidence. What you have just done is to program your subconscious mind to act as an auto pilot to help you achieve your goals.
Operating on auto pilot is what the subconscious does best, after all it does a pretty good job of keeping us alive in an increasingly hostile environment.

It is important that having so programmed your subconscious that you now let it get on with the job without hindrance from the conscious mind. That means not actively struggling to make things happen. All things take time, but with this method they usually take less time than by applying conscious force. You will find that ideas for fulfilling your objectives will simply come to you. When they do, act on them at once and you will find yourself moving inexorably towards the kind of life you want.

As each goal is achieved place a tick next to it on the list and say “thank you” . Replace that goal with a new one and write out a fresh list, then continue the process.

How does it work? The truth is I don’t actually know. Many people have tried to give an explanation, either scientific or metaphysical, but we know too little about how the mind (or the universe) works! All I know is that whenever I use this system it gets results and it also works the same way for many other people. Frankly, as long as it does that’s all that matters to me. I don’t need to know how a computer works to use one and I don’t need to know how a car engine works to be able to drive! I’ll leave the PhDs to work
out how while I just enjoy he result.

Don’t be sceptical, give it a try for yourself. If it works for you just think how it could change your life! If it doesn’t, what have you lost?