In this seventh part of the series of our ‘Navigating the world of entrepreneurship – How ready are you to start a business?’, we look at registering your business.
This step involves the legalising your business such as choosing your business structure, opening a business bank account, bookkeeping and accounting.
One of the major decisions you will have to make before you start your own business is to determine the legal structure for your venture. The question is how do you decide which legal structure is right for your business?
By legalising and registering your business you are protecting yourself and your business from serious penalties if anything goes wrong. It also provides you and your business with some form of legal identity and prevents you from a number of risks in the future.
Therefore before you start your own business or get involved in any business activities, you should consider carefully which legal structure is right for your business. You need to seek professional legal guidance and advise before you make any decisions of choosing a legal structure for your new business.
There are various types of business structure to choose from. However, there are four main legal structures and these include the following: Sole trade (Sole proprietorship) an unincorporated business owned exclusively by one person in which there is no legal distinction between the owner and the business entity; Partnership which involves two or more individuals that agree to share in the profits and losses of their business; Limited company which is a privately managed business, owned by its shareholders and run by its directors; and Limited Liability Partnership (LLP) which is similar to a partnership except that the partner’s liability is limited to the amount of money they invest in the business.
Each comes with its own advantages and disadvantages. The structure you choose depends on your situation, business activities, your long-term goals, and your preferences.
Opening your business account
When it comes to finances, it’s important that right from the start of your business you set up a separate bank account for your business as combining business and personal finances can be a very risky thing to do.
As you setup your business bank account you must ensure that you open it using your business or trading name. This not only helps you separate your personal finances from your business finances, it also gives your clients and customers confidence and also confirms that you are a properly registered business.
So whether your are operating your business as a sole trader, partnership or as a limited company, it’s worth opening your business account as soon as possible. You should make this one of your top priorities as some of your customers or clients, particularly other businesses, may prefer to pay by cheque or bank transfer into your business bank account.
Bookkeeping and Accounting
The process of planning, managing and tracking aspects of business finances such as expenses, payments, bills, payroll etc can be time challenging, consuming and frustrating. As an entrepreneur or a small business it’s even harder to find time to manage all these tasks or hiring someone who can handle these functions on a regular basis, especially when you are just starting up.
For anyone setting up a new business venture there are tax implications and legal requirements that you need to fulfil. A qualified accountant can help keep you up to date with all your accounting and bookkeeping needs.
Your accounting needs will initially be very minimal and straightforward, particularly if you utilise the online accounting and bookkeeping software to do your own bookkeeping.
Some of the well known accounting software are Xero, SAGE, Quickbooks, FreeAgent, FreshBooks KashFlow just to mention a few. These range in price so shopping around and comparing the features would be essential.
We hope you found the above information enjoyable but most of all helpful!
If you’ve missed any of the series of our ’Navigating the world of entrepreneurship – How ready are you to start a business?’, discover them here.