Entrepreneurs want the ability to do business for themselves. It’s a strong impulse that many people have – but when do you actually take the plunge and form your own company?
Setting up a business is something Company Formation MadeSimple makes incredibly easy to do – and you might know already that you’re ready. If so choose a formation package and set up your business today.
But if you’re just thinking about setting up a business, and are not sure – when is the right time to set up a company?
When Does Setting Up A Business Become Necessary?
You need to set up a company when you start doing business. But it’s not necessarily that clear cut:
- When You Want To Reserve A Company Name – Setting up a business before you start trading is possible. When inspiration hits, it’s shocking how much can come out fully formed and ready to go, a lot of the time this is including the initial idea and the brand name. A great name could be snapped up by someone else, so sometimes you will want to reserve a company name before you start trading.
- When You Have Enough Time To Give – There’s little point starting a company when you have no time to manage it, unless you’re reserving a name. So, a big point to say is that setting up a business is necessary when you can devote enough time to it in order to make it profitable.
- When You Need Financing – Borrowing from a bank will mean you need to set up your business. Limited companies have a separate credit rating which means that business owners can keep their business and personal ratings separate. As a limited liability company your exposure to liability is reduced – so setting up a business might be appropriate if you are looking for a loan that is substantial.
Generally speaking, setting up a business becomes necessary when you’re close to being ready to start. There are numerous ways to determine this, but essentially determining whether you have a viable business venture is the most important – you don’t want to focus on registering formally before you’re certain.
If you’ve got a business operating outside of the UK limited company model, such as when you’re a sole-trader, you may wish to register a dormant company to reserve the name and start trading at a later date.
This can be appropriate for those just testing the water to see how things pan out – remember you will not be liable for Corporation Tax with a dormant company. You may still have to submit a return, however this can be taken care of with our Reserve a Company Name service as all statutory obligations and responsibilities are managed in house.
HMRC & Corporation Tax – What You Need To Know
It is important to know that when you are setting up your business you will be required to pay Corporation Tax to HMRC if your company is considered ‘active’. According to HMRC a trading company is generally considered to be active when it is:
- carrying on a business activity such as a trade or professional activity
- buying and selling goods with a view to making a profit or surplus
- providing services
- earning interest
- managing investments
- receiving any other income
So, when you’ve set up your business – you will be considered to be active by HMRC based on these criteria.
Setting Up A Business, In 4 Simple Steps
If you’re ready to set up your company you can do it in just 4 simple steps by searching for your company name and choosing one of our company formation packages today.
It’s always an exciting time when you’re setting up a business, but knowing the right time to do so can be key to having a solid start to a successful business.
Did you find this useful? There are many useful hints and tips on our blog, so make sure you check out the rest of our posts – especially the ones on ‘Company Registration’.