Top tips for starting your own business

Turning a great business idea into your own business can be a complicated process to navigate. Usually starting as a one-person enterprise, the role of a startup entrepreneur has to encompass multiple functions.

These can include developing the offering and brand – whether that’s thinking creatively about establishing your product or service and making it a reality, or building the business’ purpose, target audience, identity and brand mission.

But there are also many practical steps and actions to take to actually set up the company itself, from the business structure, to legalities, to running the finances.

Here are my top five tips on some key things you need to consider and make decisions on right from the start, to help turn a dream into a running business.

Keep financial records

One thing you should establish early on is a way to manage and record your finances. There will be a lot of costs associated with your business, so the sooner you start noting down all incoming payments and outgoing expenses, the better.

Even if these are small costs such as buying stationery or equipment for your home office, or mileage on your car to get to meetings, it’s worth spending a few minutes each week recording everything to help keep your business expenditure on track.

You may even be able to recoup some of these initial set up costs later down the line, provided you can justify them as business related expenses.

Decide whether to operate as a sole trader or limited company

A big initial decision for an individual to make is whether to set your business up as a sole trader or a limited company.

There are benefits and drawbacks for each business structure, and choosing which route to take can also depend on the nature and size of your business. Make sure you thoroughly research to decide which option is best for you.

A lot of solo entrepreneurs often operate as sole traders, as there are lower accountancy fees and fewer filing responsibilities. If you did want to establish your business this way, you’ll need to register for a self-assessment tax return, and pay National Insurance contributions and Personal Income tax on any profits over your individual tax free allowance. However if your business profits reach a certain amount, you could end up paying more tax than operating as a limited company.

Sole traders are also personally responsible if something goes wrong with the business and your personal assets could be liable. You should consider taking insurance for your trade in the event that someone files a claim against you.

Alternatively, you may choose to start your business as a limited company. Some people only choose this once their business profits reach a certain amount due to tax efficiencies.

With this structure, you need to register your business with Companies House. Any money withdrawn must be formally recorded as a salary, dividend or loan, with corporation tax- paid on taxable profits.

Self-assessment tax requirements must also be considered here by the Company Directors and advice sought where necessary to ensure you are fulfilling your personal tax obligations.

One benefit of a limited company is that your personal assets, such as property, are protected against company debts, unlike a sole trader. Some of your clients may also have a policy of working with limited companies only, so do your due diligence for your particular industry.

Separate your business funds from your personal funds

Before you start trading, you must ensure you keep your ingoings and outgoings for the business separate to your personal spending and income. This should help to avoid any tax return issues. With a limited company you need to set up a business bank account in the name of your business.

Some business accounts offer additional features designed to make banking easier for small businesses. For example, Starling Bank’s Business Toolkit (just £7 per month) can help you manage invoices, bills, tax and VAT from one bank account, so everything is simplified and managed in one place.

Protect yourself with contracts

When you start trading, you must ensure you protect yourself in writing with contracts for your business.

While you probably don’t have a legal team just yet, you can make your own contracts that set out the terms of a project or service for clients. These should include details of deliverables, timeframes, and payment terms.

You can find contract templates online, including through the Federation of Self-Employed and Small Businesses (FSB) legal hub, where you can also connect with experts if you need further legal advice.

When you’re working with suppliers, you can ask them for a contract from their side. You should review it thoroughly to make sure you’re happy with their terms, what they’re delivering to you, and when, and how best to pay them.

Set up relevant business insurances

Business insurance helps protect you and your business against unfortunate events. If something goes wrong, it can mean the difference between staying in business or not. Before entering into a contract with a client or supplier, some may also require proof of adequate insurance cover.

Business insurance can cover all kinds of things. For example, public liability insurance can cover you for accidents in the workplace, or if you damage other people’s property. Professional indemnity insurance protects you against claims of negligence, or loss of documents or data, and product liability insurance covers any damage or injury from products you sell.

Most of these are optional, but it’s compulsory in the UK to get employer’s liability insurance when you start to employ staff or subcontractors, or even having someone do work experience.

Other types of insurance can offer protection from instances of theft, fire, legal fees, or if a customer or an employee makes a claim against you. Review the different types of business insurances before you start trading.

You should make the decision about which insurances are right for your business based on the risk and probability of different circumstances, and weigh that up with the cost of the premiums and any excess amount not covered by the insurance. Every business is different, so choosing which to set up should be tailored to your needs.

Rose Buckler, Head of Business Banking Operations at Starling Bank

Rose joined Starling Bank in May 2022 as Head of Business Banking Operations. Previously she spent more than 15 years leading Retail and Commercial banking teams including Large Corporate and high-leveraged, private-equity backed businesses. Working with businesses at different stages of growth has provided Rose with great insight and understanding of diverse business banking needs.

Starling Bank