Strategic Tools For Starting A Small Business.

You need not look further. We have the answers to help you make informed decisions about the future of your small business. Remember, failing to plan adequately could lead you to tougher times ahead.

Once you have made up your mind to invest , you need to get to grips with the legal requirements for starting a small business.

Setting up your small business in the right way will help you to keep costs under check. It can also help prevent your working relationships with business partners turning sour, one of the major causes of business failure.

Legal framework for Starting your Small Business.

Four major options

• If you are going to trade as a sole trader, you will be alone and self-employed, with no special legal structure.
• If you are going to trade as a partnership, then you will be required to team up with one or more people, to work together as partners and share the profits (or losses) of your small business.
• If you are starting a small business by registering it as a limited company limited company, then it will be a separate legal entity, distinct from you as a person, other shareholders,directors and employees.

  Unlike a sole trader or partnership, a limited company is not the same as you the individuals who own or run it. For example, it is a separate legal entity and can sue or be sued in its own name.

• A limited liability partnership has some of the advantages (and disadvantages) of both a company and a partnership.
  For example, it is a separate legal entity and can continue despite the resignation or death of some members.

You might use other legal forms. For example a co-operative, if the small business belongs to the employees.

A Community Interest Company gives a social enterprise the flexibility of the limited company form, but with additional features to ensure that it operates for the good of the community, not simply for private gain.

After starting your small business, It is possible for you to change its legal form long after you have started trading. That is you change from being a sole trader to a partnership or limited company. But any change will cost you time and money.

• If you have registered for VAT tax, you will have to tell your local VAT office within 30 days of the change.


• As your accounting guides, we shall be giving you advice on other tax-related issues that are likely to affect the future of your small business.

Power of a name when starting a small business

Choose a name that will create a positive impression and help your marketing. For example, suppose John Brown and Mary Black set up a delivery small business based in Arkansas . They might consider several names:

• Action Deliveries sounds like a dynamic delivery business. It would come near the top of any alphabetical list, such as in Yellow Pages, and is easy to remember.


• Arkansas deliveries would tell people what the business does and where it does it.


• John Mary provides no information on its product or service, so could leave potential customers none the wiser.


• J&M Deliveries sounds like a small, and perhaps amateurish, delivery business.

Naming your small business

You can trade under your own name, or choose a different name for your small business.

• As a sole trader you could use your own name or the chosen alternative. In our example, John Brown could trade as John Brown, J Brown, or John Brown Services.
• As a partnership, you could trade under the names of all the partners or a chosen business name. In our example, John Brown and Mary Black might trade as J Brown and M Black or as J & M Services.
• If registered as a limited company or limited liability partnership, your small business can trade under its registered name or use a different business name.

But If you later opt to buy an off-the- shelf company, you could apply to alter the registered name, hence starting a small business in a new dimension.

• To further protect your business name from use by others you can register it as a trade mark, or a domain name (for your website and email addresses), or both.

To check web domain names free of charge, search at a name registration service such as www.netnames.co.uk.

Always check you are not infringing anyone’s trade marks with the name you pick .

• If you trade under any name other than your own or your registered business name you must disclose the ownership of the business and an official address on your stationery, on a sign post at your premises and to any business contact who asks for it.
• Certain names are not allowed. The name must not be misleading or likely to cause confusion with an existing business. Names judged to be offensive are also banned by Companies House.
• Check the name you want to use, or one close to it, is not being used by another business in a similar line.
• Certain words are prohibited by law. For example in the UK , names like British, Royal and Bank are restricted.
• Only limited companies can use the word Limited or Ltd in their names. You may be required to justify use of some words . For example, international
• Only limited liability partnerships can use Limited liability partnership or LLP. Ask your solicitor, or ask your Company Registra for their guideline on prohibited words.

More legal requirements before starting a small business

You may need some form of licence (eg for running a nursing home or a betting shop).

• Some licences, such as the licence to sell alcohol in a pub, are personal. You cannot assume you will get a licence because a previous owner had one.

Do you have adequate insurance ?

• If you have employees, you must have employers’ liability insurance.

Get your tax, National Insurance and VAT affairs organised

• Notify your Inspector of Taxes and the Department for Work and Pensions when you start trading.


• If you are going to employ people, ask Revenue & Customs to send you a new employer’s starter pack.


• If your sales will quickly reach the VAT threshold , ask your local accountant when you should register for VAT

Before starting a small business at home, you must ensure your premises comply with property regulations. The main issues to consider are:

• Do your title deeds, mortgage or tenancy agreement prohibit business activities ?


• Do you require planning permission ?


• Does your home office setup add value to your new business ?


• Will your home cease to be ‘essentially residential' ?


• Will the business attract visitors who may disturb your neighbors ?


• If part of your home is treated as non-residential, there may be tax implications.

Your small business has to be seen to comply with health and safety regulations, even if it is home-based.

Finally, ensure your business does not fall foul of environmental regulations.

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