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Got a home business plan? Here’s what to do next
Do you dream of running a business from home? Being able to manage your own working hours without the tiresome commute and 9-5 may be a goal for many. Since 2020, many people have discovered the joys and woes of working from home, but how do you translate WFH to running your own home business?
In the last few years the working landscape has transformed greatly, as has consumer interest in wanting to ‘shop small’. With the rise of online e-commerce sites such as Etsy or ASOS Marketplace has made starting your own business a popular option. The internet has also cut the cost of a business startup: there’s no need for an expensive ‘bricks and mortar’ store or office. Instead you can start online and expand when your business allows you to do so. Despite this shift, there is more to running a home business than you might think. Understanding the basics, however, will allow you to save costs, time, and effort in the long run.
Formation: limited company or sole trader?
When you are thinking about starting a company, you need to decide which company type would benefit you the most.
If you are planning to go into business alone your choices are registering as a sole trader or forming a limited company. While a sole trader may seem the simplest way to start, it can limit the growth of your business. For example, as a sole trader, there is little distinction between you and the business. This means that any debt your business accrues becomes your personal debt.
Forming a limited company over being a sole trader has a number of advantages. For a start, your personal finances are separate from the business. Your company operates as a separate legal entity to yourself, which protects your personal finance. Secondly, once your home business starts to generate more income, limited company status will allow you to be paid some income as an employee, and the rest as dividends. It’s advisable to consult with an accountant to work out the most advantageous solution for you.
Managing your finances
You may think that you do not require an accountant if you are just starting a small business from home, but gaining specialist financial and legal advice when you start a business can have long-term benefits. For example, an accountant can advise you on how to claim expenses on things such as WiFi or a new laptop which can save you money in the long-term. Additionally, if you decide to set up as a limited company, you’ll need to prepare annual accounts each financial year. These are filed with HMRC as part of the company tax return and will be sent to all shareholders and Companies House. A limited company must also file a Confirmation Statement with Companies House, which includes information about the directors, shareholders and registered office. Having an accountant on-hand for advice may be crucial to getting these important jobs done correctly.
In contrast, sole traders are not legally required to have or file annual accounts, but they do still have to keep a record of business expenses and income to fill in their tax returns. So whichever type of company you choose for your business, invest some time in speaking to an accountant and a bookkeeper about the services they offer. As your home business grows, you might find it’s more efficient to spend your time developing the business, than keeping the books.
Don’t forget business insurance is still a necessity, even if your business is based at home. You need to cover your stock and equipment, and if you have people visiting you at home, you’ll need public liability insurance to make sure that you are not liable to any accidental injuries (you never know). You should also notify your home insurance provider as operating a business from home will inevitably affect your policy. There are also specific insurance policies available if you have employees, and professional indemnity insurance is a must if you offer professional services.
Marketing your home business
With all the paperwork in place, you can start thinking about how to reach your future customers. Starting with a website is essential, it should be a one stop shop for your customers, with details about your business and brand. Then, setting your business up on Social Media is the next step. With the rise of TikTok, Instagram and LinkedIn, it’s important to see which social media, if not all, will be beneficial to your business.
Spend your time analysing consumer buying habits first so you can develop a broad picture of who you need to target in order to sell. Being able to answer these questions will allow you to tailor your marketing efforts from the start. And, from there, refine as you go.
Depending on the type of business you offer traditional methods such as distributing leaflets locally and putting up posters can also pay off. Back this up with good old-fashioned business cards and leaflets for happy customers to pass on to friends. There is much more to marketing, which you can discover in our dedicated business advice resource.
Starting a home business is straightforward once you get the initial paperwork in place. Whether you need accounting consulting to assist with formation, or help setting up your website, Companies Made Simple are on hand to take some strain off the process. You can learn all about our company registration packages right here.