Setting up business as 2nd income?

[Alfie7]

Hi all, please excuse as i am new to the forum. I was after some business related advice regarding setting up a business as a 2nd income.
my current situation is I am employed by local authority (12 yrs) as a supervisor earning 30k, however I am looking at setting up on my own as a sideline to start with until I get a steady flow of work, with the intentions of making it my permanent employment. Any advice on the following would be greatly appreciated. Thanks

1. Set up as sole trader or ltd company? And why?
2. What do I need in place to start up?

Any other useful info is also appreciated. Thanks again.

 

[Knobhead]

Ask the local authority if they have a small business advisory service.

 

[Octopus]

You'd be mad to set up as limited as a 2nd income.


1. Register with HMRC for your second income
2. Check with your employer that its OK or you could get dismissed pronto when they find out
3. Purchase PL ins
4. Purchase testers & tools
5. If doing notifiable work - join scheme - oops see you are in Wales so you will need this if doing domestic
6. Notify car insurance company of business class 1

and

7. Consult the business section on here...

and don't forget to save 30% of every pound you owe for your tax and NI you will have to pay.

Edit. You mentioned your salary but don't forget you get paid when you are sick, holidays, bank holidays, pension, life insurance etc

 

[monjoor]

They say you never be rich working for somebody else. Therefore setting up your own business is a wise move. I'm pretty sure you know your market and service/product very well. it's just a matter of taking that very step over the edge or otherwise known as a "risk".

I took that "risk" which cost me £500 initially and from that point never looked back.

1) Sole trader:

- Owned and run by one person
- He / she may still employ a large number of people but this is rare.
- Owner has responsibility for business objectives, activities , debts.
- Main source of finance - personnel savings, banks loans, family and friends
- Simplest and most numerous structure
- Typical sector: local butchers,corner shop, hair salon, window cleaner etc

- Trading licence if applicable
- VAT registration if annual turnover exceeds certain amount.

Advantage:

- Easy to setup for complicated legal formalities.
- Small amount of capital required.
- Personal control, independence, freedom!
- No formal set of accounts required
- Keep all profits (after tax)
- Speedy business decisions no need to consult with others
- Direct contact with customers, direct feedback.
- Closer working relationship with management and employee.

Disadvantages:

- Owners entirely responsibly for debts
- Unlimited liability - personal assets at risk in a event of failure.
- Often difficult to raise capital due to limited security and growth.
- Long hours, difficult to cover holidays and illness.
- Business worries cannot be shared.
- Divison or labour and specialisms difficult due to small size
- Owner be not be a specialist in all area, Expertise thinly spread.
- Lack of continuity- Owner dies, business and all the secrets etc dies.

Limited company

- Known as incorporated businesses and egos tested companies.
- One or more owner/ shareholder
- Directors usually family or friends
- Transfer of shares restricted cannot be advertised and offered for public sale .
- Designed to allow owner of a small family business to enjoy additional capital, continuity and limited liability, without giving up too much control

Advantages:

- Limited liability - personal assets of owners protected.
- Greater capital and continuity
- More opportunities for specialisation and economies of scale.
- Status - more organisations prepared to trade with companies.
- Ltd - protected from takeovers - restricted share transfer

Dis-advantages

- More expensive to set up and run
- Less flexible - Restricted to memorandum and articles of association.
- Accounts must be audited - Costly - public can see how much revenue generated
- Personal guarantee may still be required for loans.

 

[Farmelectrics]

so im gathering most people prefer sole trader

 

[PEG]

Ask the local authority if they have a small business advisory service.

Very sharp,sir :bobby: like it

 

[Knobhead]

You mentioned your salary but don't forget you get paid when you are sick, holidays, bank holidays, pension, life insurance etc

I was employed by a multinational while running two unrelated businesses of my own. The company knew about my activities and at times employed me in one of my alter ego positions.

Many companies have a policy where related work to your main employ is not allowed. This can result in dismissal.
One thing was pointed out. If I was off work as a result of anything to do with my sidelines my salary would not be paid.

Think about it.

 

[monjoor]

Companies can shove their policy up their backside. It's your free time after work etc do what ever you like.

 

[PEG]

Companies can shove their policy up their backside. It's your free time after work etc do what ever you like.

...They would be directing their written "policy",if you have agreed to it,to a far more litigious location,than a sphincter :icon12:

 

[telectrix]

???????

 

[Octopus]

Companies can shove their policy up their backside. It's your free time after work etc do what ever you like.

Not sure that is good advice

 

[telectrix]

as long as there's no conflict of interests, i can't see why any employer should dictate what you can and can't do in your own time.

 

[SJD]

1. Set up as sole trader or ltd company? And why?

Post #4 from monjoor lists a lot of the points of sole trader vs. ltd company, I just wanted to add one more point.

I run a ltd company, I'm the sole employee (once in a while I collaborate with someone, that is done either with separate invoices, or subcontracting & CIS).

I pay myself minimum wage as a salary to just avoid paying any tax or NI (about £660 per month), then I pay the remainder of earnings as a dividend, typically twice a year as lump sums. The company pays 20% tax on the profits, so the dividend has already been taxed, and provided I remain below the 40% threshold, there is no more tax to pay. Since my wife is a joint owner of the company, the dividends get split between us. I effectively save paying any NI on earnings.

Last couple of years, it has cost me a little over £500 per year for accounts and filing, but I've saved all the NI contributions.

 

[Knobhead]

as long as there's no conflict of interests, i can't see why any employer should dictate what you can and can't do in your own time.

Until you have an accident.

 

[monjoor]

"Until you have an accident" ?

Tony can you please expand on that.