Becoming a Business Owner in Bromley

Once you’ve settled on your business idea – and a name to suit it – it’s time to look at the structure. And by structure, we mean the legal structure of your business. After all, there’s no point putting together a business plan or performing market research if you’re still unsure where you’ll stand in terms of tax and liabilities.

There are a variety of legal structures in the UK. This guide will focus on the three most common here in Bromley. They are:

Sole trader

This is what’s considered self-employment – it has no set-up costs, and simply requires you to register with HM Revenue & Customs (HMRC) for Self Assessment once you start trading.You can register on the GOV.UK website. Make sure to do this well in advance of your Self Assessment deadline as it can take up to 10 days (21 if you’re abroad) to receive your Unique Taxpayer Reference number. You’ll need both this and your account activation code in order to log in and file your tax return.

Pros

• – Quick and free to get started
• – Minimal reporting obligations
• – You receive all profits after tax

Cons

• – Any profit you make is taxed as personal income
• – You are personally responsible for any debts incurred
• – Restrictive in terms of scaling up your operation Limited liability company

This is one of the most common legal structures, and involves a private company that is incorporated and limited by shares. This means that the company has shareholders, and the liability of the shareholders to creditors of the company is limited to any money they invest.

As with self-employment, you can register your company with Companies House through the GOV.UK website. You should also bear in mind certain rules around your name choice. After registering, you’ll receive a ‘certificate of incorporation’, which confirms that your company legally exists and shows your company number as well as the date of formation.

It costs £12 in total, which can be paid by debit card, credit card or PayPal account. Once payment has been made, your company will typically be registered within 24 hours.

Pros

• – More tax efficient to maximise your take-home pay
• – Limits your liability if the business fails
• – Ability to claim on limited company expenses

Cons

• – Costlier to set up and run
• – Greater obligations for ongoing reporting

Partnership

If you’re going into business with a partner, you may decide to legally share responsibilities, profits and tax costs.

All partners must register as self-employed and submit separate tax returns as individuals. This is done through the Self Assessment gateway. You need to complete this process by the 5th October in your business’ second tax year, or you could be charged a penalty.

Pros

• – Easy to get started
• – Shares the administrative burden
• – Fewer legal obligations

Cons

• – The business has no independent legal status
• – Perceived lack of prestige
• – Potential for conflict

Whichever legal framework you decide to opt for, Bromley Council has support to match all three. Choosing any of the above arrangements still allows you to access our resources, but the one you land on may affect your financial structure and scale-up opportunities.

If you would like support on choosing a structure, you can contact business@bromley.gov.uk at www.bromleybusinesshub.org for more information.

Who your target audience is depends entirely on your product or service. They’ll also affect many aspects of your business, including:

• – Your budget
• – The price you charge for your product or service
• – How you market your product or service
• – Where you market your product or service

Let’s use an example. Imagine you’re hoping to launch a taxi firm that boasts the traditional experience of getting a cab as opposed to using an app. That venture has a specific type of audience – they have specific interests, needs and values that you need to map out and base your business around.

The same is true of opening a flower store in Orpington. Plenty of shoppers will prefer the other options to an independent, brick-and-mortar store, such as:

• – Online flower stores (convenience)
• – Supermarkets (price)
• – Larger chains (trust)

But there will be an audience for your brand. You just have to work out who it is, and why they would use you over your competitors. This is all information that should be included in your business plan.

Unsure exactly what it is your business does yet? Turn the question on its head and instead ask yourself what people are in need of right now. Is it an alternative to construction companies in West Wickham? Or are people looking for a broader retail experience closer to home? You could answer that demand by introducing an affordable clothing store on the Bromley Town high street.

Target audience examples

Below are some audience persona examples to help you get the ball rolling:

Taxi firm audience

• Age range: 40-70
• Gender: 70% male, 30% female
• Common job titles: Owner, Self-Employed, Health and Safety Lead, Technician
• Preferred channels: Print, Radio, Facebook
• Motivation to buy from you: Prefer a traditional taxi experience over an app-based transaction.

Flower shop audience

• Age range: 28-40
• Gender: 80% female, 20% male
• Common job titles: Marketing Executive, HR Manager, Creative Lead, Operations Manager
• Preferred channels: Instagram, Twitter, Email
• Motivation to buy from you: Feel a local shop offers a more personal experience and are invested in the success of small, local businesses.

Construction company (home improvement) audience

• Age range: 30-65
• Gender: 60% male, 40% female
• Common job titles: CFO, Systems Architect, Head of Sales, Recruitment Manager
• Preferred channels: Radio, Print, Email, Facebook
• Motivation to buy from you: Looking to make some home improvements after purchasing their property or recently becoming empty nesters. Prefer a local firm to a national brand.

Clothing store audience

• Age range: 16-28
• Gender: 90% female, 10% male
• Common job titles: Retail Assistant, Bar Manager, Copywriter, Sales Executive
• Preferred channels: TikTok, Facebook, Email, Print
• Motivation to buy from you: Want to enjoy a retail shopping experience but uninterested in travelling to central London.

While these audiences might not match your product or service, it should offer a good starting point. From there, you can decide on the messaging, marketing channels and branding that will resonate with your prospective customers.

Once you’ve finalised your target audience, you’re ready to create a well-researched business plan.

A business plan is a written document that outlines the aims of your business and how it generates income.

They’re used in pitch meetings with potential investors or loan applications from banks. You can also share them with potential customers, suppliers and employees to demonstrate your value proposition.

But a great business plan doesn’t just cover your strengths – it also reveals your weaknesses, and suggests ways you can overcome them. It does this by including the following information:

1. An overview of your business

This section needs to grab the reader. It should summarise how your business functions in a way that’s clear and immediately tells your audience how you intend to turn a profit. Include here your primary aim and how your business will achieve it.

2. An overview of the industry landscape

Investors won’t always be familiar with your industry, so make it clear in this section who the big players are, what threats and issues they face, and what there is to gain by investing in a challenger brand in this space.

3. The problem consumers in that industry face

This is where you make it clear where your competitors are failing. People who read this business plan need to know why the space is calling out for a new business. So ask yourself, what is the current demand in your industry? And in which ways are your competitors not addressing it?

4. How your business will address that problem

In this section, you’ll answer how your business will supply the demand in your current market. Bear in mind that this doesn’t necessarily mean a product. For example, Airbnb’s answer to this question would be to build an online marketplace and provide an alternative to overpriced hotels and legacy bed and breakfast venues.

5. The audience you intend to target

Of course, not every customer in your current industry is going to purchase from you, so this section requires you to hone your audience to your primary target market. Who is most likely to buy from you? And why? What is it about your product or service that speaks to them?

6. How you’ll reach that audience through marketing

A marketing plan is a key part of your business strategy. Here, you need to be explaining how you intend to reach that audience, and through what channels. For example, does your audience use social media? If so, will you run social media ads to bring them to your site? Or will you partner with affiliates who share your audience? Try to be as comprehensive as possible, listing every method you would choose and why.

7. A breakdown of your company financials

When writing this section, you may not have secured the funding you need to achieve your goals yet. In which case, detail how much investment you need to secure and how much money will be invested. Include your expectation of profit and how, over time, you intend to invest that profit back into your business.

8. An overview of your company structure

Again, when you write this, you may not have any other individuals lined up to work for you. However, you can still describe the roles you believe necessary to make your business a success in both the short and long term.

9. A SWOT analysis

A SWOT analysis is a breakdown of your strengths, weaknesses, opportunities and threats. You should carry this out for your business, as well as that of your competitors. It shows a comprehensive understanding of the market you’re hoping to penetrate, and acts as an entry point to your industry for investors struggling to see your unique selling proposition.

Businesses present this information in different ways. If you’d like some guidance, you can download free templates from the Invest Northern Ireland website or The Prince’s Trust website. The Start Up Loans programme also has a business plan template you can use, along with a cash flow forecast template.

Even if you prefer to take a unique approach, it’s worth referring to these resources to ensure you include everything that a reader would expect from a business plan.

There are five steps to registering your limited company, and while we touched on other business structures earlier, limited companies are unique in how they are created. Follow the below process, though, and you’ll be square with Companies House and other authorities.

1. Choose a company name

If you’re setting up a private limited company, your name cannot be the same as another registered company’s name. You may even have to change your name if it’s considered too close to another business’. This typically refers to businesses where the only difference between their name and another is:

• – Certain punctuation
• – Certain special characters
• – Words or characters that are similar to another word from the existing business
• – A word or character used commonly in UK company names (for example, ‘Bromley IT’ and ‘Bromley UK IT’ are effectively the same name

Companies House will tell you if they believe your name is too similar to another business. If they don’t, just be conscious that a business you aren’t aware of could raise a complaint further down the line.You can check if your preferred name is available by using Companies House’s availability checker. Additionally, you can check for any trade marks that could prevent you from using a certain phrase or name.

It’s also worth noting that you can’t register your name with an offensive word or phrase. These don’t just include curse words.

What’s more, your name can’t include terms such as ‘accredited’, or other words that suggest a connection with government or local authorities, unless you have explicit permission. If you need additional guidance on the terms you cannot use, read up more on incorporation and names on the GOV.UK site.

And finally, you can trade with a name that’s different to your registered name. This is known as a ‘business name’, and it has its own rules too. It shouldn’t:

• – Infringe another company’s trade mark
• – Include ‘limited’, ‘ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’, or ‘plc’
• – Contain a sensitive word

2. Choose directors and a company secretary

You must appoint a director, but you don’t have to appoint a company secretary. A director is legally responsible for running the company and making sure the accounts and reports are properly prepared.

They must be aged 16 or over and have a UK registered office address. They also must provide a correspondence address. If you are the director of your business, your personal information will be publicly available from Companies House.

Specifically, a director is responsible for:

• – Following the company’s rules, shown in its articles of association
• – Keeping company records and report changes
• – Filing your accounts and your Company Tax Return
• – Informing shareholders if they personally benefit from a transaction the company makes
• – Paying Corporation Tax

The records that the director keeps include those about the company itself, as well as financial information:

Information about the company:

• – Directors, shareholders and company secretaries
• – The results of any shareholder votes and resolutions
• – Promises for the company to repay loans at a specific date in the future (‘debentures’) and who they must be paid back to
• – Promises the company makes for payments if something goes wrong and it’s the company’s fault (‘indemnities’)
• – Transactions when someone buys shares in the company
• – Loans or mortgages secured against the company’s assets

Accounting information:

• – All money received and spent by the company
• – Details of assets owned by the company
• – Debts the company owes or is owed
• – Stock the company owns at the end of the financial year
• – The stocktakings you used to work out the stock figure
• – All goods bought and sold
• – Who you bought and sold goods to and from (unless you run a retail business)

While you can have an accountant to handle some of these tasks, it is still the director who is legally responsible for each of them.

Need help choosing an accountant? Bromley Business Hub’s directory lists all the local practices that can take the complexity out of managing your own finances.

3. Decide on your shareholders or guarantors (and identify those with significant control over your company)

Most limited companies are ‘limited by shares’, meaning that they’re owned by shareholders. You can be limited by guarantee and have guarantors with a ‘guaranteed amount’ instead.

There are multiple ways to allocate shares, but what’s important is that you understand that you may need shareholders to vote and agree when you’re making changes to the company.

A person with significant control (PSC) is someone who owns a large part of, or controls, your company. This is an individual (or individuals) with the most sway when it comes to your business, and you must record who they are. Most PSCs are those who hold:

• – More than 25% of shares in the company
• – More than 25% of voting rights in the company
• – The right to appoint or remove the majority of the board of directors

If you don’t have a PSC, you won’t be required to provide this information.

4. Prepare documents on how to run your company

As the owner of a limited company, you have to prepare a ‘memorandum of association’ and ‘articles of association’.

A memorandum of association is a legal statement signed by all initial shareholders or guarantors agreeing to form the company. If you register your company online, you don’t need to write your own memorandum of association. Instead, it will be created automatically as part of your registration.

Articles of association are written rules about running the company that are agreed by directors, the company secretary, and shareholders or guarantors. These could be standard articles, otherwise known as ‘model articles’, that were prescribed by the Companies Act 2006.

In both instances, you could be the sole author of these documents.

5. Register your company

You register your company through the government website. You’ll receive a ‘certificate of incorporation’, which confirms that the company legally exists and shows the company number as well as the date of formation.

You’ll need at least three pieces of personal identification, as well as information concerning your shareholders or guarantors, for example:

• – Town of birth
• – Mother’s maiden name
• – Father’s first name
• – Telephone number
• – National Insurance number
• – Passport number

It costs £12 to register your company and this can be paid by either debit or credit card or a PayPal account. Your company is usually registered within 24 hours.

Finally, you must provide a registered office address when you set up a limited company. This is where all written communication must be sent. The address must be:

• – A physical address in the UK
• – In the same country your company is registered in (for example, a company registered in Scotland must have a registered office address in Scotland)

You can use a PO Box, but you must still include a physical address and postcode.

When you register with Companies House, you should also register for Corporation Tax. Corporation Tax is what you pay on your profits from doing business as a limited company.

If you registered your company by post, or by using an agency or third-party software, you can register for Corporation Tax here. You must do this, otherwise you will be seen to be avoiding tax.

Once you’re registered, you must work out your Corporation Tax on your own. To do this, you’ll need to keep records and use them to prepare a Company Tax Return. This displays your profit or loss, and can be handled by an accountant.

Once you’ve prepared your Company Tax Return, you should be able to work out your total Corporation Tax amount. At this point, you pay said Corporation Tax no later than nine months and one day after the end of your accounting period. You can pay here, or alternatively through methods such as:

• – Online banking
• – CHAPS
• – Direct debit

Once paid, you submit your Company Tax Return. The deadline is 12 months after the end of the accounting period it covers.

You’ll have to pay a penalty if you miss the deadline. Initially, you’ll be charged £100 for being a day late. After three months, you’ll be charged an additional £100. At six months, HMRC will estimate your Corporation Tax bill and add a penalty of 10% of the unpaid tax. And at 12 months, you’ll be charged an additional 10% of any unpaid tax.