Starting Out

Name
The first thing I did was to decide on a name for my Product Design business.
This was pretty easy, I just took my initials and added 'tech' and then to emphasise what the business was about just added 'Design' - AMTech Design. First job done, simple !

Sole Trader or Ltd.
I also decided at this point to go for the easier option of running a business, ie. Sole Trader. This means a lot less paperwork and just requires filling out a tax return each year, paying tax on your profits.
The main disadvantage of not being Ltd. is that you are solely responsible for the company, if you're in debt you have to pay up, things like that and basically you are the company. Ltd companies are really separate entities in the legal sense, if you get into money trouble, you personally aren't liable. But they are a bit more complicated to run, so for me with this being a part time business at the moment I didn't see the need. Sole trader is the best option for now. If in the future I wanted to transfer to Ltd then this can be done with no hassle. There's a lot of information on HMRC website about this.

However the thing to remember is that Ltd companies are registered with Companies House and you have to have a unique name, so please be aware that the name you choose now may not be available in the future for the Ltd option. To be honest this is a chance I've took but it's not really the ideal way of going about it. Have a look at Companies House for more info. Another option is to register the name but as a Dormant Ltd company. I did look into this at the time but was told this would still incur a yearly fee so decided against it.

Business Bank Account
You don't need to do this but I decided it would be much easier to separate my personal and business bank accounts, mainly for ease of bookkeeping. I looked around for the best deal in terms of free business banking and found one that was free for 2 yrs so opted for that.

Keep Records for the Taxman !
This may sound obvious but you should always keep records of all transactions, things like receipts and invoices. I also do a monthly cash flow record sheet that shows my income and outgoings each month. This is just for my own record and is in addition to receiving monthly bank statements. These records are vitral for when you come to fill out the annual tax return and make the job so much easier. Because I also have a fulltime job, In effect I'm paying tax twice and that's 20% of my profits, so only pay tax on what you need to !

National Insurance
Being self-employed means paying Class 2 & Class 4 NI. But you only need to pay Class 2 if your earnings are above £5,075, which is a flat rate of £2.40 a week (at the time or writing). Class 4 is paid as a percentage of your annual taxable profits, 8% between £5,175 & £43,875 (at the time of writing). I didn't reckon on earning even £5K in my first year so I registered for a certificate of exemption. Another cost saving ! Plus I already pay Class 1 NI in my full time job.

Accountant
Right now I don't have an accountant, I can't really justify it and I do a self-assessment tax return online to save cost. Again this will be another area that I'll look at in the the future should business increase. I'm aware that accountants could probably save me money in the long run but my turnover doesn't warrant it.


These are the basics for setting yourself up, On the next blog I'm going to explain how I'm trying to get more business and make money.