For
Founders
Funding
Office Hours
Funding Lab
Growth Spurts
Studio
Growth Playbooks
The Forward Fortnightly
For
Investors
Investor Centre
Strategy
Our board
Regulatory News
Our
Company
People
Portfolio
Blog
Press
cAREERS
ESG
Apply for funding
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.
Decline
Accept
Finance
Basics

Laying the foundations for your business.

When starting a business, there are many things you need to think about from an organisational and financial perspective. We’ve pulled together the key things to bear in mind, so that you can ensure that you’re ready to trade from day one. It’s so much easier if you start off on the right foot, rather than trying to organise these things after the first few months.

KEY TAKEAWAYS

  • Set up your company with Companies House.
  • Register your company with HRMC.
  • Good bookkeeping is crucial.
  • Make sure that you have adequate insurance in place.

You need a company.

The first thing you’ll need to do is physically set up your company. The cheapest way to do so is to use the Companies House webfiling approach. It costs £12 and the Companies House website walks you through each step of the process.

To set up your company, you need to: 

  • Have a suitable company name
  • Provide a registered office address. Keep in mind this is public record, so you should carefully consider if want to use a home address
  • Nominate a director of your business
  • Work out what the share capital will be and who will be the shareholders.  It is usually a good idea to allot a small number of shares on incorporation as the share capital needs to be paid by the shareholder. Any additional shares can be allotted at a future date.
  • Assign who are the PSC (Persons of Significant Control) of the company. These are usually people with 25% shareholdings, but it’s not always the case.
  • Decide whether you are going to use standard memorandum and articles of association

‍

Once a company is incorporated, you will need to submit annual accounts and compliance statements on an annual basis. 

In addition to this, it’s worth bearing in mind that there are also other filings that need to be supplied to Companies House for every change made to the company ( for example shares, articles of associations, directors), but most can be done online. However, some forms still have to be submitted on paper and by post to Companies House. When in doubt, the Companies House helpdesk is usually very helpful. 

You need to register for taxes.

You have to create an HMRC Gateway, which will enable you to add the taxes to view, as and when they are created. When it comes to taxes, you need to look at: 

  1. Corporation Tax

This will automatically be done once you create a company at Companies House. Your Unique Tax number is a 10 digit number that will be contained in any correspondence received from HMRC with respect to Corporation.

The first Corporation tax return will be due 12 months from the date of incorporation and you will need to attach a full set of statutory accounts.

  1. PAYE

If you are planning on employing people in the business, you will need to register a PAYE scheme with HMRC. To do so, you need to supply HMRC with the following details: 

  • The Directors’ personal details (Address, UTR Number, National Insurance Number)
  • Your Company’s information, including registered office and registration number
  • Expected number of employees in the next year
  • Date you will be paying your first employee
  • Bank accounts details

At this point, it might be a good idea to get your payroll software in place or to outsource the accounting function. If payroll software is the best option for you, you should look into Xero Payroll, Quickbooks Payroll, Sage One payroll and Clearbooks Payroll. All of these are extremely efficient, and used by hundreds of companies. 

Once registered with HMRC, you will need to run a payroll and submit an RTI file on a monthly basis informing HMRC of the PAYE, NIC, and Student Loan deducted from employees.

It's also worth noting that PAYE/NIC and Student Loan deductions are payable by the company on 19th of the following month.

‍

  1. VAT

VAT is not a compulsory registration for UK businesses until your turnover exceeds £85K. Before you decide to register for VAT, keep in mind that once registered, you can reclaim VAT paid on goods and services purchased for use in your business. However, you will need to charge VAT on all UK sales from the date of registration. Here are a few more things to consider: 

  • VAT can be reclaimed on services purchased in the 6 months prior to registering for VAT. This can be a consideration with respect to the timing of your VAT registration.
  • Consider your pricing with and without VAT before registering for VAT. Who are your customers? Are they VAT registered businesses or are they individuals who cannot claim VAT?
  • You will need to prepare a periodic VAT return (usually quarterly), so make sure you keep good VAT records.  

When you are ready to register for VAT, the below list comprises key information that you will be required to provide:

  • The VAT number of any business which the director(s) of the new company have had involvement in the last 2 years
  • Each director’s personal details (address, UTR number,  National Insurance number)
  • Company information (registered office, registration number)
  • Predicted turnover in next 12 months
  • Predicted EEC sales and purchases
  • Date of VAT registration
  • Your company bank account details

Keep good accounting records.

From the beginning, you should keep good accounting records for the company. There are a few ways this can be done:

  • Outsource the accounting function to a qualified bookkeeper or accounting firm. 
  • Use a suitable accounting system, such as; Xero, Quickbooks, Sage Online or Clearbooks.

All accounting systems cater for different types of business. You should review the functionality before deciding which one to pick. There are also usually discounts available, so it’s always worth shopping around for the best price once you have chosen the software package you want. 

Once you pick the right one for your business, don’t rush the setup process. Once your accounting software is properly set up (i.e direct bank feeds, creating bank rules, chart of account and report formatting) it will save you time going forward.  A little bit of pain now will reap rewards in the future!  

Other things that are often forgotten.

  • HR Management

Keeping track of employee data (e.g. salary, time off, sick days, next of kin) can be a task, but there are some useful software tools that make this much simpler. We suggest looking at Charlie HR or BreatheHR. 

  •  Insurance

Make sure that you have adequate insurance in place. Depending on the type of company, you will need different types of insurance. For example, if you are selling a service - you should have Professional Indemnity Insurance. If you are selling goods - you should have Product insurance. 

When you start employing staff, then you should have Employment Liability Insurance. Don’t forget to secure adequate insurance to avoid any disappointment later!

‍

Following the above simple steps in the earliest days of your business will ensure you’ve met your obligations both legally and to your own employees and directors. Whilst financial planning and infrastructure may not be the most exciting part of the startup journey, it’s absolutely vital to ensure you are not vulnerable or in breach of regulations later down the line.     

Written By

Lloyd Smith

CFO + Executive Director

Lloyd joined Forward from the ATI Group, a provider of legal technology, software and information services, where he held the position of Chief Financial Officer at several of its UK and Ireland businesses. Prior to joining ATI, he spent five years in audit at EY and four years in PwC’s deals team, working with a mix of private equity firms, AIM-listed businesses, banks and other private companies.

Building a startup? Stay ahead of the pack with The Forward Fortnightly.
Subscribe today to get tech news and trends, growth tips and advice and exclusive event invitations, straight to your inbox every fortnight.
subscribe
Related
Getting to a first meeting with VCs.
read
No items found.
Takeaway

No items found.

You may also be interested in...

Finance

How to start a data room.

read
Finance

What to file at Companies House and how.

read

Tel: 020 3514 1552

Huckletree Shoreditch, Alphabeta Building, 18 Finsbury Square, London EC2A 1AH

Forward Partners is authorised and 
regulated by the Financial 
Conduct Authority (FRN 737783)

FOLLOW US
Founders
funding
Studio
BELIEFS
GUIDES
Investors
Investor
centre
Strategy
Our Board
Investor newsletter
Regulatory nEWS
faqs
Forward
Our TEAM
CAREERS
PORTFOLIO
BLOG
Press
Connect
APPLY FOR 
FUNDING 
OFFICE HOURs
FUNDING LAB
FORWARD 
FORTNIGHTLY
Policies
T&c'S
Privacy
Disclaimer
Code of Conduct
Env pOLICY
i&d pOLICY
Resources
Press Resources
AIM26