Overview
British businesses are classified into three categories: large (250 or more employees), medium (50 to 249 employees) and small (0 to 49 employees). You may sometimes hear ‘micro’ businesses referred to as well – these are classified as having up to nine employees). Often grouped together, small and medium-sized enterprises (SMEs) account for an astonishing 99.9% of all UK businesses.

Getting started
Although there is nothing unusual about starting up a business, you are advised to think about gaining experience by working for someone else in a similar field before branching out on your own. There is a great deal of theory and even more practice involved in running a commercial concern, and the newcomer to this area will need help, advice and a certain amount of luck if they are to succeed. Unless you have such a brilliant idea that any delay in launching means someone else may get there first, it is strongly recommended that you gain business experience before going it alone.

Do bear in mind that almost half of all new businesses fail in their first three years, with the major reason being poor preparation and planning. So, before you get started, you will need to establish a ‘business mission’, and carry out a personal analysis or audit to see if you possess the qualities needed to make your business a success. Following on from this mission comes a business plan that may be as short as six months or may look ten years ahead. Most people consider the period up to about three to five years out, but focus on the specifics of the next 12 months or so.

• Think about why you want to start a business.
• Operating in a field that is known to you, or at least familiar, is safer when starting up.
• Setting up from scratch has the advantage of a clean start, but gives little feel for whether the idea is going to work.
• Buying an existing business can be expensive (and that includes franchising).
• Cash businesses avoid chasing small sales invoices.
• Look around at successful and unsuccessful businesses, and try out ideas on friends and family.

Sole trader
Sole traders operate under their own name, or a business name, are entitled to all the profits and are responsible for all the losses. They must keep proper business records and accounts, but do not need to submit them to scrutiny to anyone except the tax and legal authorities. They are, however, personally liable for any debts the business may incur.

Partnership
A partnership is customary for a number of professions, and is an arrangement whereby a number of people effectively agree to operate as a sole trader. They may have a formal deed of partnership, or simply split the profits or losses equally. Some income may be divided in proportion to individuals’ levels of investment and the rest is treated as salary, split according to worth and contribution.
Limited liability partnership
A limited liability partnership has to disclose annual accounts and returns. Members have limited liability in the event of a loss (although the partnership will be fully liable), but they will be taxed as if it were an ordinary partnership.

Limited company
This simply means that the members of the company (the shareholders) are liable only for the debts of the company up to the amount unpaid on any share(s) they have bought. There are a number of rules and regulations, and the disclosure of financial and some business information to Companies House is required. The members cannot be held responsible for the company’s debts unless a court decides there has been negligence or malpractice.

It is also possible to have private unlimited companies (very rare) and private limited companies limited by guarantee (e.g. charities and not-for-profit organisations), where members’ liability is limited to the amount they have agreed to contribute to the company’s assets if it is wound up. Public limited companies have the designation ‘plc’ after their names; this means that shares can be sold to members of the general public, although ‘listing’ on a stock exchange requires many criteria to be met so that investors are properly protected.

Company directors and secretaries must understand their responsibilities and the legal implications of their appointment, including the company’s Memorandum and Articles of Association. Individuals thinking about using a limited company as their private trading vehicle should be aware that IR35 regulations distinguish between a ‘contract of service’ and a ‘contract for services’, and a single-contract company is liable to be treated as a sole trader.

Franchise
A franchise is now a common way of starting a business, and is basically one person copying another’s proven business and receiving support from them, in exchange for an up-front payment (the franchise fee) and ongoing fees (royalties). It is an option for those who have some money to invest and who want the independence of self-employment coupled with the support of the franchisor. Franchising is more likely to succeed than other forms of business start-up.
To find out more about franchising, please refer to the relevant article on our website: www.questonline.co.uk. 
    
Issues to consider
Once you have decided that starting your own business is the way ahead for you, you should spend some time researching the following areas.
l Financial issues – including sales and purchases records, VAT (if registered), wages, Income Tax and National Insurance, bank accounts, cash flow, loans, benefits in kind, dividends, insurances and Corporation Tax on any profit made. More businesses fail because they get their cash flow wrong and become insolvent than because they have any other weakness.

• Health and safety – including registration with the Health and Safety Executive (for factories and workshops) and/or the local authority (for offices and shops). There will be additional requirements if the business involves food and drink or is liable to cause pollution.
• Environmental issues – including the disposal of business rubbish, hazardous materials, or certain solvents and aerosols.
• Employees – including their legal rights, recruitment, employment, discrimination, sickness, pregnancy, dismissal and discipline. Employer’s Liability Insurance is a legal requirement to afford protection for employees who might be injured at work.
• Premises may be necessary for manufacturing or retail businesses, while others can trade from the owner’s home, reducing overheads and leading to a better quality of life. For businesses that need premises, the most important thing to consider is location.

l Intellectual property and licences involving any company name and logo, inventions, product design and copyright. Certain business activities will need to be licensed by a wide range of authorities.

Business start-up help and guidance
There is an enormous amount of assistance available, from a wide variety of sources. These include:

• government (Department for Business Innovation & Skills (BIS))
• regional authorities (e.g. Business Links)
• the Prince’s Trust
• banks (perhaps less helpful than in the past)
• professional advisers (solicitors, accountants, insurance and pensions advisers, marketing experts, specialist trainers, IT experts).

Those leaving the Services are particularly fortunate in also being able to draw on the expertise of the following organisations, who can offer assistance that is targeted to their specific situation:

• the Career Transition Partnership (CTP) (offers self-employment awareness and business start-up courses)
• the Royal British Legion (see the information about its Be the Boss campaign, below).
• In addition, and as in many other areas of civilian life, the importance of networking cannot be overstated.

Do you want to ‘Be the Boss’?
Be the Boss is a service offered by the Royal British Legion, which aims to support recent UK Service leavers to plan, fund and grow their own small businesses. Funded by BIS, the Legion and its partner organisations offer training in small business start-up, assistance in writing a business plan and financial forecast, funding to assist in the launch or growth of a business, and periodic health checks and business mentoring to applicants from across the UK. Total funding values average between £3,000 and £7,500, but may not exceed a total of £30,000 for each individual over the length of their involvement in the scheme.
Be the Boss – which is open to former members of the Armed Forces discharged on or after 7 October 2001 – aims to help Service leavers wishing to start their own business to build the skills necessary to:

• market and sell their product
• manage their finances
• employ people
• find and keep customers
• pay the correct tax
• identify funding and support.

Applicants should first register on the Legion’s employment and training portal, CivvyStreet (see ‘Key contacts’): click on ‘Be the Boss’ for more information and to access the online application form.

The Legion says that it is committed to supporting Service leavers to build on the training and discipline they have developed while in uniform, and to leverage these skills in order to become equally successful in enterprise.