Thinking of starting a SMALL business to deal with in my own time - Information Pleas

[Graham M]

Hi there, I'm considering starting my own business that I will be able to deal with in my own time (IE when not at my full-time job) I'm considering starting my own Web Hosting business, I have all the means nesscesary to do it, I just need a push in the right direction.

1. Register as a sole trader - how do I do this, how much does it cost etc?
2. Income tax, im guessing I'd have to pay tax on my earnings for this... but how?
3. erm...

Yeah so im thinking there must be someone here whom has done something similar. I need to know who to inform, who to talk to, its only going to be a small venture, no loans or anything needed just yet. Any advice would be very welcome.

Thanks
Graham

P.S. this is just a small project and obviously i want to do it legitimately so that the tax man doesnt get wind of anything im doing without informing them and landing me in poo. Likelihood is I wont make much money out of it anyway, just enough to pay for the host at the moment (I already have the host, so thats not a problem) Once i have earned enough to pay for the host, I might think about getting it upgraded to handle more people anyway which means more outgoings per month and less cash in my pocket anyway.

[homealone]

this link looks quite useful, Graham

http://www.bizhelp24.com/business_start_up/start_a_new_business_how_to.shtml

- lots of other links in the body of the article, too :)

[Graham M]

Excellent, that's cleared up a few questions, greenie for you!

Anything else?

[homealone]

Excellent, that's cleared up a few questions, greenie for you!

Anything else?

thanks for the rep :tu: - I think your best bet is to try for some advice from other members who run their own small businesses - I'm just a PAYE victim, so can't help much in practical terms :)

[Graham M]

anyone else have any input on this?

cheers.

[SMHarman]

You need to decide whether to incorporate or be a sole trader, the former is the best for the long run, but in the short term sole trading is easiest.
You need to register with the NI peeps and pay self employed NIC
If your turnover is over 60k you need to register and pay VAT. If you sell to retail customers then VAT registration is a bad thing.
You need to do your bookkeeping, you need to set up a separate business bank account.
That should keep you out of trouble.

[Graham M]

Thanks for that SHHarman, greenie coming your way.

OK so why is registering for VAT bad if ill be dealing with retail customers? What about income tax.

What does "Book-keeping" involve exactly?

Cheers.

[Strzelecki]

A friend and I have done just the same thing you are thinking of. Go to your bank and speak to the business people there, they should be very helpful. www.hmrc.gov.uk/startingup should also provide you with some information, the relevant forms to fill in etc. NIC contribution fro self employed are currently £2.05 a week, payable every 13 weeks or by direct debit (but if you earn under the £4215 limit you shouldn't have to pay this). When you say webhosting, is it reseller space or do you have dedicted server(s). What software will you be using?

[Graham M]

I currently have a VPS (Virtual Private Server) which is like a partition of a huge server (quad xeon 2.4, 8gb RAM) if i get enough cash from this I could quite easily upgrade to a proper dedicated but dont need that much scope yet. With the current package I have, it can all be controlled with VPP (Virtuozzo Power Panel), WHM (Web Host Manager) and Cpanel, I have root access so setting anything i need up isn't a problem.

[Strzelecki]

May I recommend ModernBill for your billing and ordering system if you're going to have one, it's very good and intergrated with cPanel nicely so you have nearly 100% automation. It is a very good way of earning a little bit of cash, a bit of effort in the short term but it doesn't take much to get it ticking over.

[Hom3r]

You could try and see if your local college has people that can advise you

[Graham]

Hi there, I'm considering starting my own business that I will be able to deal with in my own time (IE when not at my full-time job) I'm considering starting my own Web Hosting business, I have all the means nesscesary to do it, I just need a push in the right direction.

Ok, before I get to the rest of your questions, a few of mine:

1) What is it going to cost you? Have you worked out a business plan?

2) Will you be having a separate business bank account? People will most likely want to pay by credit card, so you'll probably need a Merchant Account. Check how much each bank is liable to charge you for this and what sort of fees you'll be looking at on each transaction.

3) Why are people going to come to you? What do you have to offer (USP or Unique Selling Point) that makes you attractive and sets you apart from the competition?

4) You say you're going to do this part time, but what happens when the system goes titsup in the middle of the day or the middle of the night?

5) Who supplies your net connection? How much will they charge you? What guarantees do you have that your connection will work 24/7?

6) How are you going to finance it? From your own pocket? You say you won't need bank loans, but are you sure? Have you worked out your costs?

Now for your questions:

1. Register as a sole trader - how do I do this, how much does it cost etc?
2. Income tax, im guessing I'd have to pay tax on my earnings for this... but how?
3. erm...

If you're a sole trader, all you need to do is to tell the Inland Revenue that you're doing this and declare it on your tax return.

You'll also have to pay Class 2 National Insurance, but if you start earning over (I think it's about 20k) you'll get clobbered for Class 4 (which are seriously expensive and give you *no* benefit whatsoever!)

You may want to consider going for a Limited Company, it costs a few hundred quid to set up and you need a Company Secretary, but if you have an accountant (*strongly* recommended!) they will most likely have a Company Secretary business that will do all that stuff for you.

Remember that if you are a sole trader *you* personally are liable for *ALL* debts of the company, so if things go wrong you could have to sell off all your assets to pay the debts. If you go Limited, the liability is restricted to the company's assets.

Yeah so im thinking there must be someone here whom has done something similar.

Well I have :)

I need to know who to inform, who to talk to, its only going to be a small venture, no loans or anything needed just yet. Any advice would be very welcome.

I note others have posted useful links, also check for local Small Business advice in the Yellow Pages etc and go to all the banks and get all the information you can get from them.

I wish you luck :)

[lippy]

Not sure if it's still the same now but you didn't have to inform the Inland Revenue for the first 3 months.
Gives you time to get it going,or not.

The CAB are good for advice.

Good luck

[SMHarman]

OK so why is registering for VAT bad if ill be dealing with retail customers?If you sell to a company that is VAT registered it is a flow through cost, you charge them £100+va t - £117.50 , they sell that thing for £200 + VAT £235, the £17.50 VAT they paid you is deducted from the £35 VAT they now need to pay HMCE (or whatever they call themselves these days) and they pay £17.50 VAT to the govt, however they have collected that VAT from their customer. In the example above they have made £100 £200 sold for less £100 cost, you can ignore the VAT.

If you sell to retail...
You buy something for £100+VA T £117.50 , if you are not registered, that VAT is a cost to you so it has cost £117.50 , but on the other hand you need not pay VAT, so to make £100 profit you only need sell the same product for £217.50 nearly £20 less.

That said, when you hit the VAT registration limit you will need to start charging VAT and either absorb this (and reduce your profit) or charge it to your customers (and put your prices up), Turnover needs to be about £60k before this occurs, so if your small venture will not hit those kinds of turnover you need not worry. You should include a paragraph in your T&Cs saying that you are not VAT registered and when the time comes the VAT charges will be passed to you as a customer though.

What about income tax.Income tax only applies if you are a sole trader, you will take your income, your expenses and other deductables and come out with a taxable profit which you will add to a tax return along with your PAYE income and pay tax on it in the same way as PAYE, so you will need to keep 20 - 40% of your profits to one side to pay the taxman.
If you incorporate, the profits of the company are taxed at a different rate (starting from about 23% but currently with an exemption on the first £10k. The money does not get taxed in your hands until it is paid out to you, either as a dividend, or as pay.
Tax on companies and individuals is different, as are the benefits, for example as a sole trader if you decide you need a mobile phone/pda/laptop to be able to hook up and fix any problems while on the go the cost of buying these, even though there will be personal use is deuctable from your tax return. If you get these through the company then they may be considered as benefits in kind (something you have recieved instead of cash) and taxed as income instead.
What does "Book-keeping" involve exactly?Keeping detailed records of all your income and expenditure. At its simplest, buying a book and two binders. Writing income at the top of one page of the book and expenditure at the top of the other and everytime you recieve / pay something getting a reciept putting it in the binder and writing it in the book. At the end of the year you or your accountant can use this to work out your tax return. At the end of each month you can add it all up and see how you are doing.

Another point re- NIC - if you are PAYE and earn above the upper earnings limit (around £30k) then you can register for self employed NIC and then write to them saying your employed NIC payments cover your self employed in full and claim exemption. The low earning exemption has also been detailed here by someone else.

[Chrysalis]

You dont need to register the company if you are a sole trader, registering gives you the advantage of limited liability. You also dont need to be vat registered until your turnover hits a certian amount.