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Selling Tips & Tricks > Set up your business

  1. Choose the legal structure
  2. Get an idea of what to sell
  3. Research the market
  4. Develop your own strategy
  5. Find partners and suppliers
  6. Sell your product

Choose the legal structure

First you will need to decide which legal structure is right for your business before you register and start trading. It’s important to understand the different risks and benefits before you choose.

 

You can register your business as:

 

  • Sole trader
  • Limited company
  • Business partnership

 

 

1. Sole trader

 

If you’re a sole trader, you’re running your own business as an individual. You can keep all your business’ profits after you’ve paid tax on them.

 

Sole traders’ legal responsibilities:

 

You’re personally responsible for:

 

    • any losses your business makes,
    • keeping records of your business’ sales and spending,
    • your business debts,
    • bills for anything you buy for your business, like stock or equipment,
    • keeping records of your business’ sales and expenses,
    • sending a Self Assessment tax return every year,
    • paying Income Tax on the profits your business makes and National Insurance.

 

 

How to set up as sole trader:

 

You must register with HM Revenue & Customs (HMRC) as soon as you can after starting your business.

 

If you register later than 5 October in your business’ second tax year, you could be charged a penalty. For example. If you start up as a sole trader during tax year 2012 to 2013, you must register before 5 October 2013.

 

 

Naming your business

 

You can use your own name or trade under a business name. There are rules on using a business name. For example, you can’t:

 

    • use the terms ‘Limited,’ ‘Ltd’, ‘public limited company,’ ‘plc,’ ‘limited liability partnership,’ ‘LLP’ or their Welsh equivalents,
    • use sensitive words or expressions unless you have permission,
    • suggest a connection with government or local authorities,
    • use a name that is too similar to a registered trademark,
    • be offensive.

 

You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters.

 

 

Sole traders’ tax responsibilities

 

You must:

 

    • send a Self Assessment tax return every year,
    • pay Income Tax on the profits your business makes,
    • pay National Insurance.

 

You will also have to register for VAT if you expect your business’ takings to be more than £77,000 a year.

 

 

2. Limited company

 

A limited company is an organization that you can set up to run your business. It’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

 

 

Who owns limited companies

 

Every limited company has ‘members’ - people or organizations who own shares in the company. Directors are responsible for running the company. Directors often own shares, but they don’t have to.

 

 

Limited companies’ legal responsibilities

 

There are many legal responsibilities involved with being a director and running a limited company. Most limited companies are ‘limited by shares’. This means that the company’s responsibilities for financial liabilities it can’t pay are limited to the value of company shares that haven’t been paid for.

 

For example. A company limited by shares issues 1,000 shares valued at £1 each when it’s set up. Its 2 shareholders own 250 shares each. If the company goes bust, the maximum it has to pay towards outstanding bills is £500 - the value of the 500 shares issued but not paid for.

 

Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.

 

Other types of company

Most companies are private companies limited by shares. There are 3 other types.

 

    • Private company limited by guarantee: Directors or shareholders financially back the organization up to a specific amount if things go wrong.

 

    • Private unlimited company: Directors or shareholders are liable for all debts if things go wrong.

 

    • Public limited company: Companies where shares are traded publicly on a market, like the London Stock Exchange.

 

 

How to set up a limited company

 

You must set up the company with Companies House and let HM Revenue & Customs (HMRC) know when the company starts business activities.

 

Every financial year, the company must:

 

    • put together statutory accounts,
    • send Companies House an annual return,
    • send HMRC a Company Tax Return.

 

The company must register for VAT if you expect its takings to be more than £77,000 a year.

 

If you’re a director of a limited company, you must:

 

    • fill in a Self Assessment tax return every year,
    • pay tax and National Insurance through the PAYE system if the company pays you a salary.

 

 

Register your company

 

Before you register:

All limited companies must be registered (incorporated) with Companies House. To do this you need:

 

 

    • the company’s name and registered address,
    • at least one director,
    • at least one shareholder,
    • details of the company’s shares - known as ‘memorandum of association’,
    • rules about how the company is run - known as ‘articles of association’

 

How to register:

 

    • online - but only if the company is limited by shares and uses model articles of association,
    • by post using form IN01 - you must do this if you change the model articles or use your own,
    • using an agent.

 

 

Fees and how long it takes:

 

Online takes 48 hours and costs £15 (paid by debit or credit card or Paypal). Postal applications take 8 to 10 days and cost £40 (paid by cheque made out to ‘Companies House’). You can get a same day service by post. It costs £100 but you must get your application to Companies House by 3pm.

 

Name your company

 

The names of all private limited companies in the UK must end in either ‘Limited’ or ‘Ltd’ and the name can’t:

 

    • be the same as any other name on the Companies House index of names,
    • contain a ‘sensitive’ word or expression unless you get permission,
    • suggest a connection with government or local authorities,
    • be offensive.

 

The Welsh equivalents of ‘Limited’ or ‘Ltd’ are ‘Cyfyngedig’ and ‘Cyf’.

 

Companies House has more guidance on company names.

 

Registering a company name doesn’t mean your trademark is protected, you have to register trademarks separately.

 

 

Registered address

 

The registered office address is where official communications are sent – e.g. letters from Companies House and HM Revenue & Customs. The address doesn’t have to be where you operate your business from but it must be:

 

    • a physical address - it can’t be a Post Office box,
    • in the same country that your company is registered in – e.g. a company registered in Wales must have a registered address in Wales,

 

You can use your home address or the address of the person who will manage your Corporation Tax if these addresses meet the rules above.

 

 

Get an idea of what to sell

 

The most important thing on Dealstocker is choosing what to sell, since your success will mostly depend on that. Read more about what to sell in our “What to sell” section in Selling tips and tricks.

 

 

Research the market

 

Check if there’s real demand for what you’re planning to sell. When starting a retail business, think about testing your idea by taking a short-term lease on premises for a few weeks or months.

 

Here are some useful tips:

 

  • Identify potential customers. Talk to them and find out about their needs.
  • If you are selling your own manufactured products find out if you’re meeting a real customer need.
  • Get feedback and find out what they’d be willing to pay for it. Try out different prices with different customers in a consistent, realistic way to see what people will really pay.
  • If there are other businesses competing for your market, think about what will make you different.

 

 

Develop your own strategy

 

Dealstocker enables a variety of options so you can develop your own business strategy to get most out of your deals. Read more about business strategies in our “Business strategies” section in Selling tips and tricks.

 

It is always a good idea to write some kind of business plan or draft to sum up the customer need you’re aiming to meet. It should clearly show the results of your customer research, and that you’re able to explain how you can turn your idea into viable business before you invest lots of time and money. This plan will also be a very helpful tool to convince your potential partners and suppliers.

 

 

Find partners and suppliers

 

Finding the right supplier can be one of the most important strategies, since your prices will most likely depend on it.

 

Once you determined what to sell, it is time to find the right (best) supplier:

 

  • Search online
  • Draw up a list of potential suppliers
  • Negotiate prices
  • Start to develop relationships
  • Get a sense of which suppliers are reliable and trustworthy

 

You’ll need to agree on payment terms with your suppliers, and get them in writing. This includes your ‘trade credit’ period (within how many days you agree to pay invoices), and whether they can offer you discounts for things like buying in bulk or quick payments.

 

 

Sell your product

 

The next logical step would be building a website to sell your products. But guess what. You do not have to do that, because we did it for you! Read more about how to sell in our “How to sell” section.

 

 

Related topics: Selling tips and tricks • What to sell • Business strategies

To read more about setting up your business please visit https://www.gov.uk/starting-up-a-business/set-up-your-business

 

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