Starting a business
Discussion
Hi all,
I've recently been considering starting a handyman business up and have been doing lots of research into starting the company etc.
For various reasons I think a Ltd company is the way to go - am I best to find a local accountant to handle everything (company formation etc and then ongoing accounting/VAT/payroll requirements) so I can concentrate on the actual work?
How does it then work on a day to day basis? Do I just keep a record of all work/invoices etc and pass this on to the accountant? Or do I use software to track everything and then pass it on to the accountant? I'm just trying to understand the practical side of running a business and how it would work best.
Can/will an accountant do all of the required 'business running' administration?
Sorry if these are silly questions, I'm just trying to understand the bits its hard to find information about..! But I'd appreciate any advice
I've recently been considering starting a handyman business up and have been doing lots of research into starting the company etc.
For various reasons I think a Ltd company is the way to go - am I best to find a local accountant to handle everything (company formation etc and then ongoing accounting/VAT/payroll requirements) so I can concentrate on the actual work?
How does it then work on a day to day basis? Do I just keep a record of all work/invoices etc and pass this on to the accountant? Or do I use software to track everything and then pass it on to the accountant? I'm just trying to understand the practical side of running a business and how it would work best.
Can/will an accountant do all of the required 'business running' administration?
Sorry if these are silly questions, I'm just trying to understand the bits its hard to find information about..! But I'd appreciate any advice
Edited by jjcd on Thursday 23 February 11:50
Edited by jjcd on Thursday 23 February 12:53
You make things more complicated by incorporating; in your position I'd break yourself in gently as sole trader for a year or two, then when you've got the business safely off the ground you can take a view on whether you really need a limited company.
Regardless, the important thing is to record all money in/out. I kept a cashbook updated daily or weekly, with column headings as advised by my accountant (well bookeeper as I was a sole trader). However you can use software if you like.
VAT is totally independent of being a limited company. You don't have to register for VAT until your turnover is about £80K; however you can do so voluntarily below this if it suits you. I registered voluntarily because I bought lots of stuff in, and my customers were VAT-registered - so I saved money and the cost to them was unchanged. But if your customers are Joe Public you'll be 20% more expensive, so do the maths.
Hope this helps and good luck. If you are good at your work, and nice with people, and run a tight financial ship you should be OK.
Regardless, the important thing is to record all money in/out. I kept a cashbook updated daily or weekly, with column headings as advised by my accountant (well bookeeper as I was a sole trader). However you can use software if you like.
VAT is totally independent of being a limited company. You don't have to register for VAT until your turnover is about £80K; however you can do so voluntarily below this if it suits you. I registered voluntarily because I bought lots of stuff in, and my customers were VAT-registered - so I saved money and the cost to them was unchanged. But if your customers are Joe Public you'll be 20% more expensive, so do the maths.
Hope this helps and good luck. If you are good at your work, and nice with people, and run a tight financial ship you should be OK.
If it is just you in the business a Ltd company is unlikely to be beneficial, it opens up a world of admin requirements for you to deal with. As previously mentioned the VAT threshold is £80K therefore no need if turnover is lower than this. If your client base is primarily individuals and not VAT registered organisations adding the VAT can make you very uncompetitive. IIRC there is/was a way of buying materials direct for customers that avoids it going into your turnover calculation for VAT.
As far as book-keeping goes you will need to inform HMRC if you go into business as a sole trader. You will also need to keep business accounts. For a sole trader you will need to record your income and business expenses.
As far as book-keeping goes you will need to inform HMRC if you go into business as a sole trader. You will also need to keep business accounts. For a sole trader you will need to record your income and business expenses.
Thank you both for your replies.
The reasoning behind going down the Ltd route was because the plan would be (once I have started to generate enough work) to take on a few employees gradually and I thought it would be easier to start out as Ltd rather than change part way. Though maybe this isn't the case..
And with regards to VAT and the £80k threshold - I'd calculated that through buying/supplying materials I would likely exceed this figure, especially when I take on a few employees.
Plenty to research and think about!
The reasoning behind going down the Ltd route was because the plan would be (once I have started to generate enough work) to take on a few employees gradually and I thought it would be easier to start out as Ltd rather than change part way. Though maybe this isn't the case..
And with regards to VAT and the £80k threshold - I'd calculated that through buying/supplying materials I would likely exceed this figure, especially when I take on a few employees.
Plenty to research and think about!
Nothing wrong with ambition but to be thinking about employees before you've even started is a massive jump. I know a number of successful builders who don't employ anyone deliberately. They get contractors in or pay another self employed person as and when needed.
Go sole trader and do the books yourself. If you really can't or don't want to find a good local bookkeeper rather than an accountant.
Make sure you are reliable and do a good job every time, have the right insurance and you'll do well.
Go sole trader and do the books yourself. If you really can't or don't want to find a good local bookkeeper rather than an accountant.
Make sure you are reliable and do a good job every time, have the right insurance and you'll do well.
Eric - Okay that makes sense.. so perhaps working as a sole trader and getting customers to purchase direct to avoid me reaching the VAT threshold is the way to begin. Then at a later date maybe I'd have to go Ltd and charge VAT (when turnover ends up high enough). Though would it make more sense to go Ltd now, accepting the extra administration/cost, rather than change at a later date?
Trickywoo - Yes I know it probably sounds a bit over ambitious but I think it is possible to grow something to the level where there would be enough work for employees and thought perhaps I am better to plan ahead for this (though perhaps VAT would be a problem at this point and I'd become uncompetitive). But I do see what you mean, get something going first. Also I completely agree on your last point - I have done some work in this industry before and found being reliable/good at what you do stands you out from others and keeps clients coming back.
Trickywoo - Yes I know it probably sounds a bit over ambitious but I think it is possible to grow something to the level where there would be enough work for employees and thought perhaps I am better to plan ahead for this (though perhaps VAT would be a problem at this point and I'd become uncompetitive). But I do see what you mean, get something going first. Also I completely agree on your last point - I have done some work in this industry before and found being reliable/good at what you do stands you out from others and keeps clients coming back.
Eric Mc said:
That's why getting your customers to buy materials directly can assist you in keeping your sales invoicing to a level where it stays below the compulsory VAT registration threshold - which is actually £83,000 per annum at the moment.
This also limits your exposure to risk (someone disappearing and/or not paying after you've done the work and supplied the materials). You'll still lose money but not getting paid for your time is 'less worse' than not getting paid for your time and the materials you purchased. jjcd said:
Eric - Okay that makes sense.. so perhaps working as a sole trader and getting customers to purchase direct to avoid me reaching the VAT threshold is the way to begin. Then at a later date maybe I'd have to go Ltd and charge VAT (when turnover ends up high enough). Though would it make more sense to go Ltd now, accepting the extra administration/cost, rather than change at a later date?
I think you'd be better off putting 100% of your brainpower into finding, doing and invoicing work and getting paid than trying to get to grips with the extra responsibilities of being a Company Director. Your skills are handymanning.As for employees, that could be a whole world of pain, expense and unproductivity. As suggested, sub any surplus work out to trusted freelancers - with time you'll build up a valuable network - pay their bills and let them worry about their tax, holidays, paternity rights, sick pay yada blah. If they're no good, you just don't hire them again; you won't end up at an employment tribunal.
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