Never underestimate how much money you need to start, how long it will before you turn a profit or how hard you will have to work.

Is one of your main goals for your life to start your own business? Maybe building your own business has been on your bucket list for a very long time? Don't begin with your current employer; you've already heard the success rate or lack thereof for new startup businesses.

We all have the success ratio of business failure seared into our brains. According to the U.S. Small Business Administration, 30 percent of businesses fail within their first year and around half of all businesses close-up shop within five years. Only a third of businesses will make it to their tenth anniversary.

There are a number of factors why so many businesses don’t succeed. The leading cause is lack of profits and funding, meaning underestimating how much money is needed to fund a business. Does this mean that you should give up on your dream? Absolutely not. But you need the proper tools, resources and mindset before jumping feet-first into your new adventure.

Starting a business, 101.

Starting a business isn’t easy -- though it seems like it's effortless when accomplished entrepreneurs share their success stories. We hear about founders who seem to quietly buy a website and turn it into a million-dollar business. In reality, starting a business involves careful evaluation, planning and several financial and legal activities. Let's quickly recap the steps you'll want to take before launching your business.

Evaluate yourself: When thinking about what steps you'll take before launching a business, consider what skills and expertise you already possess. As you examine what you’re passionate about and the lifestyle you want to live -- pause ask yourself, “Why do I want to start my own business?”

Brainstorm business ideas: Begin thinking about what bothers you in the business sector and how you can fix it. Maybe you have the knowledge or expertise to improve an existing business idea. Are you aware of trends and find yourself always thinking ahead of the curve? Do you possess skills that you can apply to a new or existing industry? These questions will help you brainstorm additional business ideas.

Conduct market research: Market research will let you know if there’s an opportunity to make a decent profit in differing areas. Extensive exploration and analysis of your market will help you determine what gives your idea a competitive advantage over other similar fields and industries. If possible, give potential customers a chance to interact with your product or service so they can provide feedback to you.

Write your business plan: Your business plan is a blueprint that will guide you throughout the life of your business. In a nutshell, it should discuss the purpose of your business, who your customers are, your long-term goals and how you’ll finance your business. 

Make your business official:  There are clear-cut areas to have locked down for a solid business:

  • Determine the structure of your business (LLC, corporation, or partnership).
  • Give your business a name.
  • Registering your business in your state and also federally.
  • Obtain a state and federal tax ID.
  • Acquire the proper permits and licenses.
  • Open up a business bank account.
  • Register for trademark, copyrights, or patents.
  • Be sure to get legal advice where needed.

Pick a business location: Thanks to technology, it’s possible to start a businessremotely right from your home. For brick-and-mortar business ideas you'll want to think about demographics, accessibility, proximity to competitors, and the cost of rent and utilities.

Finance your business: How will you finance your business? There are numerous ways you can cover the economics of your new business including saving up the money and funding the business yourself. Many ask friends and family for help or obtain a grant or loan. Other options may be crowdfunding, trading equity, or working with Angel or Venture Capitalist investors.

Develop and improve your product or service: Seek frequent feedback from your target audience to determine what they like and what they don’t or won't accept. Hire specialists who can help you turn your dream into a reality.

An essential ingredient for a winning business is your mindset.

Unlike becoming a doctor, electrician, mechanic or lawyer -- there are no standardized tests or certification to announce that you are now prepared to become a business owner. Even an MBA is woefully underwhelming in its claim for business preparation. While there are always classes that business owners will find useful, finding the right ones may take some time.

Your university can give you the classes or courses, and the information you desire in essential areas such as accounting, marketing basics, finances, etc. However, the fact remains that as a business owner, you'll need to develop the right mindset.

No matter how educated, experienced, or passionate you are -- having a winning business mindset will help you. Your mindset will make a difference in how you conduct your business and make personal decisions. Mindset determines how you keep yourself up, happy, motivated and driven.

Related: 10 Mistakes to Avoid When Starting an Online Business

The entrepreneurial equation.

According to Carl Roth in her influential book “The Entrepreneur Equation,” here are ten mindsets that every entrepreneur should develop before starting their own business:

Assess your motivation: Yes -- it is your business. But, you will have to answer to customers, partners, lenders, and investors.

Evaluate how you work with others: Even if you’re a solopreneur -- you still will have to work with other people -- such as accountants, lawyers, customers, and freelancers. You will want to work together seamlessly with everyone you can in your new business; strengthen your communication and people skills.

Know your responsibilities: Starting and running your own business is a 24/7 job. Know how that’s going to affect your personal life.

Sharpen your management skills: You need to know how to manage your team so that they can be more productive. Additionally, you'll need to know how to interact and work with vendors and suppliers. Having experience in your industry could assist with this.

It’s not what you know, but who you know: Take stock of your network of professionals. Think about people who can connect you with differing business services -- like lawyers, as well as investors and lenders.

Be honest about your relationship with money: Financial management can make or break your business. If you’re a careless spender, then you’ll probably have cash flow problems. Get control here first -- or you’ll be spending more than you're bringing in.

Assess your personality: Being a business owner means that you need to be flexible and prepared for the unexpected. If you get extremely stressed when things don’t go as planned -- running your own business won’t gel with your personality type.

Examine your competitors: A close assessment of your competition allows you to determine what makes you different and how you stand out from other businesses. This information and analytical thought can be used to build your brand.

Test your scalability: Successful business owners do not do everything on their own. They rely on automation and delegation. If your business sinks because you’re not around -- then use your skill to have a successful career. Better a successful path of achievement than remaining a failed business owner, though you may "get" to have this passage under your belt, too.

Related: 4 Differences Between Solopreneurs and an Entrepreneur Working Alone

The best entrepreneurial guides and resources.

Starting and running your own business is no easy task. You work a ton of hours, have to face financial uncertainties, and you'll be putting out numerous fires. To make matters worse, you’re probably doing all this work by yourself.

The goods news is that there is no shortage of guides and resources that can lend you a hand in starting and managing your business.

General information:

US Small Business Administration: The US SBA is a go-to resource for business owners. Here you can find most of the information you will likely need. You'll learn how to write a business plan, structure a business, register a company, and apply for a permit.

Entrepreneur: Entrepreneur.com is a well-respected publication that shares advice on starting and growing a business. Daily publishing guarantees the popular and up-to-date articles and guides that discuss everything from marketing to taxes to productivity.

The Self Employed: The Self-Employed.com is an excellent site where business owners can find advice about funding, taxes, and marketing their business.

Funding and financing.

Loans: If you need a loan check out sites like KabbageBlueVineFundbox or Small Business and Community Development Programs.

Grants: For grants, resources like The National Association for the Self Employed and Small Business Innovation Research Program are some of your best options.

Peer-to-peer leadership: Prosper and Funding Circle can connect you with peer-to-peer lenders.

Crowdfunding: Crowdfunding your business? Launch a campaign on Kickstarter or Indiegogo.

How to manage money: Evergreen Small Business provides advice on how small business can keep track of finances.

Legal: LegalZoom allows you to incorporate your business and is affordable.

  • Rocket Lawyer lets you create legal documents and ask lawyers questions.
  • Nolo has business forms, as well as guides on how to structure your business.
  • Atrium is a new upcoming law startup that helps small businesses. Help with everything legal.

Marketing:

Networking:

  • YEC can help you with professional networking. EO for the more seasoned entrepreneur. Be willing to help others.
  • Business Networking International (BIN) can help you get referrals by connecting you with other businesses in your community.
  • SCORE is an organization that pairs businesses with volunteer mentors. This institution helps business owners develop and grow their business. There’s also online resources and online courses.
  • LinkedIn Small Business requires a membership. Once joined, business owners can use LinkedIn to connect, promote, and network their business.
  • Volunteer Match can locate volunteer opportunities in your community.
  • Your local Chamber of Commerce or Rotary Club.

The essential tools you need to start a business.

Finally, you need to use the right tools to help you grow and maintain your business. Thanks to technology, these tools are affordable, easy-to-use and can automate some of your most redundant tasks. While not an extensive list, here are some tools you should consider. I personally use each and every one of these tools and can speak to how amazing they are!

  • Expensify can easily track your expenses.
  • LivePlan can help develop a solid business plan.
  • WordPress is a free platform to build a customized website.
  • 99Designs is a great site to find designers for your logo or website.
  • Fiverr and UpWork are excellent locations to find talented freelancers.
  • Aweber and MailChimp can be used to generate leads and run an email marketing campaign.
  • Hootsuite and Buffer automates your social media efforts, like scheduling posts in advance and engaging with followers.
  • Due or QuickBooks can make your accounting as painless as possible.
  • TurboTax lets you do your business and personal taxes yourself.
  • Trello is a project management system that lets you assign and mentor tasks.
  • G Suite is the foundation of your business and it comes with Gmail and Drive.
  • HubSpot is an all-in-one marketing platform that comes with CRM and marketing and sales suites.
  • Google Adwords and Facebook Ads can market your business online.
  • Google Analytics provides demographic and behavioral information about your audience, along with which marketing efforts are working.
  • With Calendar, you can share your calendar with others, as well as use machine learning to receive smart scheduling suggestions.
  • G2 helps with all your company reviews.
  • Intercom helps you to chat and market strategically to your potential customers.
  • For customer service, use Survey Monkey and FreshDesk.
  • LastPass remembers and stores all of your passwords.
  • Keeps in touch with clients and virtual workers via ZoomLifesizeSlack and Skype..
  • Gusto handles your HR and payroll needs.

Related: 10 Lessons to Learn From Failing Startups (Including My Own)

There are so many variables you'll face when building your new business. Go into your business knowing that you can do everything correctly and still come out on the short end -- with a failure. There are things for which you can't possibly prepare. Even those things will keep you up nights, they'll provide you with experience for your next go around.

Get tough; go for your new business with everything you have and don't hesitate. You will have many wins in building your business -- but nothing worth doing is effortless.

Never underestimate how much money you need to start, how long it will before you turn a profit or how hard you will have to work.

Is one of your main goals for your life to start your own business? Maybe building your own business has been on your bucket list for a very long time? Don't begin with your current employer; you've already heard the success rate or lack thereof for new startup businesses.

We all have the success ratio of business failure seared into our brains. According to the U.S. Small Business Administration, 30 percent of businesses fail within their first year and around half of all businesses close-up shop within five years. Only a third of businesses will make it to their tenth anniversary.

There are a number of factors why so many businesses don’t succeed. The leading cause is lack of profits and funding, meaning underestimating how much money is needed to fund a business. Does this mean that you should give up on your dream? Absolutely not. But you need the proper tools, resources and mindset before jumping feet-first into your new adventure.

Starting a business, 101.

Starting a business isn’t easy -- though it seems like it's effortless when accomplished entrepreneurs share their success stories. We hear about founders who seem to quietly buy a website and turn it into a million-dollar business. In reality, starting a business involves careful evaluation, planning and several financial and legal activities. Let's quickly recap the steps you'll want to take before launching your business.

Evaluate yourself: When thinking about what steps you'll take before launching a business, consider what skills and expertise you already possess. As you examine what you’re passionate about and the lifestyle you want to live -- pause ask yourself, “Why do I want to start my own business?”

Brainstorm business ideas: Begin thinking about what bothers you in the business sector and how you can fix it. Maybe you have the knowledge or expertise to improve an existing business idea. Are you aware of trends and find yourself always thinking ahead of the curve? Do you possess skills that you can apply to a new or existing industry? These questions will help you brainstorm additional business ideas.

Conduct market research: Market research will let you know if there’s an opportunity to make a decent profit in differing areas. Extensive exploration and analysis of your market will help you determine what gives your idea a competitive advantage over other similar fields and industries. If possible, give potential customers a chance to interact with your product or service so they can provide feedback to you.

Write your business plan: Your business plan is a blueprint that will guide you throughout the life of your business. In a nutshell, it should discuss the purpose of your business, who your customers are, your long-term goals and how you’ll finance your business. 

Make your business official:  There are clear-cut areas to have locked down for a solid business:

  • Determine the structure of your business (LLC, corporation, or partnership).
  • Give your business a name.
  • Registering your business in your state and also federally.
  • Obtain a state and federal tax ID.
  • Acquire the proper permits and licenses.
  • Open up a business bank account.
  • Register for trademark, copyrights, or patents.
  • Be sure to get legal advice where needed.

Pick a business location: Thanks to technology, it’s possible to start a businessremotely right from your home. For brick-and-mortar business ideas you'll want to think about demographics, accessibility, proximity to competitors, and the cost of rent and utilities.

Finance your business: How will you finance your business? There are numerous ways you can cover the economics of your new business including saving up the money and funding the business yourself. Many ask friends and family for help or obtain a grant or loan. Other options may be crowdfunding, trading equity, or working with Angel or Venture Capitalist investors.

Develop and improve your product or service: Seek frequent feedback from your target audience to determine what they like and what they don’t or won't accept. Hire specialists who can help you turn your dream into a reality.

An essential ingredient for a winning business is your mindset.

Unlike becoming a doctor, electrician, mechanic or lawyer -- there are no standardized tests or certification to announce that you are now prepared to become a business owner. Even an MBA is woefully underwhelming in its claim for business preparation. While there are always classes that business owners will find useful, finding the right ones may take some time.

Your university can give you the classes or courses, and the information you desire in essential areas such as accounting, marketing basics, finances, etc. However, the fact remains that as a business owner, you'll need to develop the right mindset.

No matter how educated, experienced, or passionate you are -- having a winning business mindset will help you. Your mindset will make a difference in how you conduct your business and make personal decisions. Mindset determines how you keep yourself up, happy, motivated and driven.

Related: 10 Mistakes to Avoid When Starting an Online Business

The entrepreneurial equation.

According to Carl Roth in her influential book “The Entrepreneur Equation,” here are ten mindsets that every entrepreneur should develop before starting their own business:

Assess your motivation: Yes -- it is your business. But, you will have to answer to customers, partners, lenders, and investors.

Evaluate how you work with others: Even if you’re a solopreneur -- you still will have to work with other people -- such as accountants, lawyers, customers, and freelancers. You will want to work together seamlessly with everyone you can in your new business; strengthen your communication and people skills.

Know your responsibilities: Starting and running your own business is a 24/7 job. Know how that’s going to affect your personal life.

Sharpen your management skills: You need to know how to manage your team so that they can be more productive. Additionally, you'll need to know how to interact and work with vendors and suppliers. Having experience in your industry could assist with this.

It’s not what you know, but who you know: Take stock of your network of professionals. Think about people who can connect you with differing business services -- like lawyers, as well as investors and lenders.

Be honest about your relationship with money: Financial management can make or break your business. If you’re a careless spender, then you’ll probably have cash flow problems. Get control here first -- or you’ll be spending more than you're bringing in.

Assess your personality: Being a business owner means that you need to be flexible and prepared for the unexpected. If you get extremely stressed when things don’t go as planned -- running your own business won’t gel with your personality type.

Examine your competitors: A close assessment of your competition allows you to determine what makes you different and how you stand out from other businesses. This information and analytical thought can be used to build your brand.

Test your scalability: Successful business owners do not do everything on their own. They rely on automation and delegation. If your business sinks because you’re not around -- then use your skill to have a successful career. Better a successful path of achievement than remaining a failed business owner, though you may "get" to have this passage under your belt, too.

Related: 4 Differences Between Solopreneurs and an Entrepreneur Working Alone

The best entrepreneurial guides and resources.

Starting and running your own business is no easy task. You work a ton of hours, have to face financial uncertainties, and you'll be putting out numerous fires. To make matters worse, you’re probably doing all this work by yourself.

The goods news is that there is no shortage of guides and resources that can lend you a hand in starting and managing your business.

General information:

US Small Business Administration: The US SBA is a go-to resource for business owners. Here you can find most of the information you will likely need. You'll learn how to write a business plan, structure a business, register a company, and apply for a permit.

Entrepreneur: Entrepreneur.com is a well-respected publication that shares advice on starting and growing a business. Daily publishing guarantees the popular and up-to-date articles and guides that discuss everything from marketing to taxes to productivity.

The Self Employed: The Self-Employed.com is an excellent site where business owners can find advice about funding, taxes, and marketing their business.

Funding and financing.

Loans: If you need a loan check out sites like KabbageBlueVineFundbox or Small Business and Community Development Programs.

Grants: For grants, resources like The National Association for the Self Employed and Small Business Innovation Research Program are some of your best options.

Peer-to-peer leadership: Prosper and Funding Circle can connect you with peer-to-peer lenders.

Crowdfunding: Crowdfunding your business? Launch a campaign on Kickstarter or Indiegogo.

How to manage money: Evergreen Small Business provides advice on how small business can keep track of finances.

Legal: LegalZoom allows you to incorporate your business and is affordable.

  • Rocket Lawyer lets you create legal documents and ask lawyers questions.
  • Nolo has business forms, as well as guides on how to structure your business.
  • Atrium is a new upcoming law startup that helps small businesses. Help with everything legal.

Marketing:

Networking:

  • YEC can help you with professional networking. EO for the more seasoned entrepreneur. Be willing to help others.
  • Business Networking International (BIN) can help you get referrals by connecting you with other businesses in your community.
  • SCORE is an organization that pairs businesses with volunteer mentors. This institution helps business owners develop and grow their business. There’s also online resources and online courses.
  • LinkedIn Small Business requires a membership. Once joined, business owners can use LinkedIn to connect, promote, and network their business.
  • Volunteer Match can locate volunteer opportunities in your community.
  • Your local Chamber of Commerce or Rotary Club.

The essential tools you need to start a business.

Finally, you need to use the right tools to help you grow and maintain your business. Thanks to technology, these tools are affordable, easy-to-use and can automate some of your most redundant tasks. While not an extensive list, here are some tools you should consider. I personally use each and every one of these tools and can speak to how amazing they are!

  • Expensify can easily track your expenses.
  • LivePlan can help develop a solid business plan.
  • WordPress is a free platform to build a customized website.
  • 99Designs is a great site to find designers for your logo or website.
  • Fiverr and UpWork are excellent locations to find talented freelancers.
  • Aweber and MailChimp can be used to generate leads and run an email marketing campaign.
  • Hootsuite and Buffer automates your social media efforts, like scheduling posts in advance and engaging with followers.
  • Due or QuickBooks can make your accounting as painless as possible.
  • TurboTax lets you do your business and personal taxes yourself.
  • Trello is a project management system that lets you assign and mentor tasks.
  • G Suite is the foundation of your business and it comes with Gmail and Drive.
  • HubSpot is an all-in-one marketing platform that comes with CRM and marketing and sales suites.
  • Google Adwords and Facebook Ads can market your business online.
  • Google Analytics provides demographic and behavioral information about your audience, along with which marketing efforts are working.
  • With Calendar, you can share your calendar with others, as well as use machine learning to receive smart scheduling suggestions.
  • G2 helps with all your company reviews.
  • Intercom helps you to chat and market strategically to your potential customers.
  • For customer service, use Survey Monkey and FreshDesk.
  • LastPass remembers and stores all of your passwords.
  • Keeps in touch with clients and virtual workers via ZoomLifesizeSlack and Skype..
  • Gusto handles your HR and payroll needs.

Related: 10 Lessons to Learn From Failing Startups (Including My Own)

There are so many variables you'll face when building your new business. Go into your business knowing that you can do everything correctly and still come out on the short end -- with a failure. There are things for which you can't possibly prepare. Even those things will keep you up nights, they'll provide you with experience for your next go around.

Get tough; go for your new business with everything you have and don't hesitate. You will have many wins in building your business -- but nothing worth doing is effortless.

An extra 1.5 million people became self-employed between 2001 and 2017 and now around one in six people earn their living this way. If you’re thinking of taking the plunge, it can be quite daunting. You need to think about your business structure, budgeting and paying your own tax. In this guide, you can discover the pros and cons of working for yourself, how to keep accurate records and what help is available to you if you choose to become self-employed.

What to think about when starting a business or becoming self-employed

?

Top tip

The key to working for yourself or starting a successful business is to plan, plan and then plan some more.

Working for yourself can be very rewarding:

  • Do something that interests you or you’re passionate about.
  • Choose your own hours.
  • Work around other commitments like your children.
  • Have more control over your income.

But there are also some downsides:

  • Working long hours and weekends.
  • Dealing with an irregular income.
  • Having to do your own bookkeeping and tax return.
  • [n[ Limited or no access to employment benefits like paid leave.[/n]
HMRC have created an easy to use Interactive guide for anyone looking to start a new business in the UK.

What help is available if you become self-employed

Fortunately, when it comes to self-employment, there’s plenty of help and advice out there.

Government-backed advice services around the UK will help you with everything from creating a business plan and researching the market, to finding finance and recruiting staff.

So, depending on where you live, they should be your first port of call.

Different kinds of self-employed businesses

If you’re thinking about starting your own business or becoming self-employed, one of the first things you will need to think about is your business structure.

Sole trader

This is the simplest business structure. You will run your own business as an individual and keep any after-tax profits.

However, your personal and business assets are not considered separate. This means you’re personally responsible for debts associated with the business. You can reduce this problem through insurance, or by choosing one of the other business structures mentioned below.

But, don’t be put off by the idea of being a business. A sole trader is just that – one person, you, working for themselves. You don’t need to be a shop owner. You could be a taxi driver or hairdresser. Becoming a business is just the official term.

To become a sole trader, all you need to do is register as self-employed with HM Revenue & Customs (HMRC).

Partnership

A partnership, as the names suggests, is when you go into business with one or more other people and have shared responsibility for the business.

It’s important you draw up a partnership agreement, so everyone involved knows how the profits are split up.

Business debts are dealt with under what is known as Joint and Several Liability. This means all members of the partnership are responsible for the debts either in full, or individually, depending on how much they can afford to repay.

All partners will need to submit a Self Assessment tax return for their own share of the profits, and a nominated partner will have to submit a partnership Self Assessment for the business.

Private limited company (Ltd)

A private limited company (Ltd), is its own legal entity and is completely separate from the people owning and running it. It will need to be registered (or incorporated) with Companies’ House, must have a suitable name and an address.

The company will have a director (usually the person who started the business) who is legally responsible for running the company, and at least one shareholder (also known as a member).

A Ltd will have to pay corporation tax on any profits, and the after-tax profits are divided up among the shareholders.

The company will need to submit its annual accounts to Companies’ House and a tax return to HMRC. The director will also need to fill in a Self Assessment tax return, but will only pay tax on the money they earned by running the business, not the profits.

While these are the easiest to set-up and understand, there are some other options.

Limited partnership

A limited partnership must have at least one general partner and one limited partner. The general partner is responsible for running the business and the partnerships’ debts. The limited partner is only liable for the amount they originally invested in the business.

Limited liability partnerships (LLP)

LLPs are a hybrid of a partnership and a limited company. Like a partnership, it can be set up by two or more people, but like a Ltd, it must be incorporated with Companies’ House, have a suitable name and address and is legally separate from the individuals running it.

It must also have at least two shareholders (or members) and each shareholder pays tax on their share of the profits. Partners liability for the business debts are limited to the amount of money they invested.

Thinking of buying a franchise?

If you’re interested in becoming self-employed or starting your own business, but don’t want to start from scratch, a franchise might be worth considering.

A franchise is where you buy a licence from a business owner to use an existing business idea and brand name. Some well-known franchises include American fast food chains McDonalds, Burger King and KFC, but there are thousands of other franchise opportunities available from global names to local organisations.

The start-up costs can be quite high, but you will be buying into an established brand and the deal should include training and guidance on setting-up, running and growing your franchise.

But be aware of scams. Check that the brand is established and that the franchiser is marketing the brand actively.

To find out more about franchising visit the British Franchise Association’s website.
There’s more about buying a franchise on the NI Business Info website.

What you need to do when starting a business and becoming self-employed

When you’re thinking about becoming self-employed or setting up a business, there are a lot of things you need to consider. This is not an exhaustive list, but it does cover some of the major areas you will need to think about.

You can find more information about setting-up your own business on Gov.uk.

Draw up a budget

First, and possibly most importantly, you need to draw up a budget. You need to think about all the costs it’s going to take to get your business off the ground and operational. These costs might include:

  • renting a business premises or shop front and costs associated with it including electricity and internet access
  • buying or hiring vehicle(s) and the cost of fuel and maintenance
  • equipment including tools, computers and phones
  • setting up and hosting a website
  • advertising and marketing materials
  • staff.

But remember, you might not need all of these. Many profitable businesses have no need for a physical premises, you might already have a lot of the equipment you need and staff might not be necessary until the business is more established.

However, you will also need to think about your personal costs such as rent, mortgage, utility bills, childcare and food.

You will then need to think about how much of your own money you can afford to invest to find out if you will need to look for investment or a business loan.

Business plan

There are two main reasons for writing a business plan:

  1. For business reasons so you can set out your objectives, develop ideas and plan for the short and medium term.
  2. To present to people outside your business, usually to banks or potential investors if you’re looking to raise money.

Regardless of who you’re presenting it to, it’s important to be realistic and honest about your costs and earning potential.

If it will be seen by people outside your business, make sure it looks professional, is well structured and contains all the information people would expect to see.

An extra 1.5 million people became self-employed between 2001 and 2017 and now around one in six people earn their living this way. If you’re thinking of taking the plunge, it can be quite daunting. You need to think about your business structure, budgeting and paying your own tax. In this guide, you can discover the pros and cons of working for yourself, how to keep accurate records and what help is available to you if you choose to become self-employed.

What to think about when starting a business or becoming self-employed

?

Top tip

The key to working for yourself or starting a successful business is to plan, plan and then plan some more.

Working for yourself can be very rewarding:

  • Do something that interests you or you’re passionate about.
  • Choose your own hours.
  • Work around other commitments like your children.
  • Have more control over your income.

But there are also some downsides:

  • Working long hours and weekends.
  • Dealing with an irregular income.
  • Having to do your own bookkeeping and tax return.
  • [n[ Limited or no access to employment benefits like paid leave.[/n]
HMRC have created an easy to use Interactive guide for anyone looking to start a new business in the UK.

What help is available if you become self-employed

Fortunately, when it comes to self-employment, there’s plenty of help and advice out there.

Government-backed advice services around the UK will help you with everything from creating a business plan and researching the market, to finding finance and recruiting staff.

So, depending on where you live, they should be your first port of call.

Different kinds of self-employed businesses

If you’re thinking about starting your own business or becoming self-employed, one of the first things you will need to think about is your business structure.

Sole trader

This is the simplest business structure. You will run your own business as an individual and keep any after-tax profits.

However, your personal and business assets are not considered separate. This means you’re personally responsible for debts associated with the business. You can reduce this problem through insurance, or by choosing one of the other business structures mentioned below.

But, don’t be put off by the idea of being a business. A sole trader is just that – one person, you, working for themselves. You don’t need to be a shop owner. You could be a taxi driver or hairdresser. Becoming a business is just the official term.

To become a sole trader, all you need to do is register as self-employed with HM Revenue & Customs (HMRC).

Partnership

A partnership, as the names suggests, is when you go into business with one or more other people and have shared responsibility for the business.

It’s important you draw up a partnership agreement, so everyone involved knows how the profits are split up.

Business debts are dealt with under what is known as Joint and Several Liability. This means all members of the partnership are responsible for the debts either in full, or individually, depending on how much they can afford to repay.

All partners will need to submit a Self Assessment tax return for their own share of the profits, and a nominated partner will have to submit a partnership Self Assessment for the business.

Private limited company (Ltd)

A private limited company (Ltd), is its own legal entity and is completely separate from the people owning and running it. It will need to be registered (or incorporated) with Companies’ House, must have a suitable name and an address.

The company will have a director (usually the person who started the business) who is legally responsible for running the company, and at least one shareholder (also known as a member).

A Ltd will have to pay corporation tax on any profits, and the after-tax profits are divided up among the shareholders.

The company will need to submit its annual accounts to Companies’ House and a tax return to HMRC. The director will also need to fill in a Self Assessment tax return, but will only pay tax on the money they earned by running the business, not the profits.

While these are the easiest to set-up and understand, there are some other options.

Limited partnership

A limited partnership must have at least one general partner and one limited partner. The general partner is responsible for running the business and the partnerships’ debts. The limited partner is only liable for the amount they originally invested in the business.

Limited liability partnerships (LLP)

LLPs are a hybrid of a partnership and a limited company. Like a partnership, it can be set up by two or more people, but like a Ltd, it must be incorporated with Companies’ House, have a suitable name and address and is legally separate from the individuals running it.

It must also have at least two shareholders (or members) and each shareholder pays tax on their share of the profits. Partners liability for the business debts are limited to the amount of money they invested.

Thinking of buying a franchise?

If you’re interested in becoming self-employed or starting your own business, but don’t want to start from scratch, a franchise might be worth considering.

A franchise is where you buy a licence from a business owner to use an existing business idea and brand name. Some well-known franchises include American fast food chains McDonalds, Burger King and KFC, but there are thousands of other franchise opportunities available from global names to local organisations.

The start-up costs can be quite high, but you will be buying into an established brand and the deal should include training and guidance on setting-up, running and growing your franchise.

But be aware of scams. Check that the brand is established and that the franchiser is marketing the brand actively.

To find out more about franchising visit the British Franchise Association’s website.
There’s more about buying a franchise on the NI Business Info website.

What you need to do when starting a business and becoming self-employed

When you’re thinking about becoming self-employed or setting up a business, there are a lot of things you need to consider. This is not an exhaustive list, but it does cover some of the major areas you will need to think about.

You can find more information about setting-up your own business on Gov.uk.

Draw up a budget

First, and possibly most importantly, you need to draw up a budget. You need to think about all the costs it’s going to take to get your business off the ground and operational. These costs might include:

  • renting a business premises or shop front and costs associated with it including electricity and internet access
  • buying or hiring vehicle(s) and the cost of fuel and maintenance
  • equipment including tools, computers and phones
  • setting up and hosting a website
  • advertising and marketing materials
  • staff.

But remember, you might not need all of these. Many profitable businesses have no need for a physical premises, you might already have a lot of the equipment you need and staff might not be necessary until the business is more established.

However, you will also need to think about your personal costs such as rent, mortgage, utility bills, childcare and food.

You will then need to think about how much of your own money you can afford to invest to find out if you will need to look for investment or a business loan.

Business plan

There are two main reasons for writing a business plan:

  1. For business reasons so you can set out your objectives, develop ideas and plan for the short and medium term.
  2. To present to people outside your business, usually to banks or potential investors if you’re looking to raise money.

Regardless of who you’re presenting it to, it’s important to be realistic and honest about your costs and earning potential.

If it will be seen by people outside your business, make sure it looks professional, is well structured and contains all the information people would expect to see.

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