Setting Up Your Business

Now that you have your qualification, it's time to set up your business. At this point, you have a few options. You can either choose to find employment and work for another business, or you can set up as self-employed. When it comes to self-employed energy assessment, there are more choices to be made. Namely, do you want to be a 'sole trader' or set up a limited company?

A sole trader is a self-employed individual who owns and operates their own business. The business doesn't have a separate legal identity from the owner, so it could be said that the owner and the business are the same.

People like this option because it is simple to get started, with minimal administration required to start off. 

The government's website guides you through each step of the process. It can be found by here: https://www.gov.uk/register-for-self-assessment

In addition to there being little documentation required initially, the operation of the business is fairly straightforward too. As a sole trader, you are required to do a self-assessment tax return each year for Her Majesty's Revenue and Custom (HMRC).  As part of this, you have to keep track of:

• Your business expenses
• Your business income 

As a sole trader, there is no financial distinction between you and your business. This means that you are personally liable for any losses or business debt if anything happens. 

A Limited Company is an entity in its own right that is separate from its owner(s). All operations are actioned under the Limited Company, not the individuals behind it. 

As long as there's no fraud, 'limited liability' means you won't be personally responsible for the business's financial losses. Thus, a limited company provides extra protection if things go wrong.

Unlike sole traders, where the business is tied to a single individual, Limited Companies provide the scope for the business to have multiple shareholders. 

Being a Limited Company comes with a certain credibility. It may help you to score big contracts or access finance. Also, it could bolster trust in your clients. 

Since the business exists outside of its shareholders, it will not cease to exist upon the retirement or resignation of those individuals. So, this can offer more security for employees and clients. 

There is an initial cost to registering a limited company. Currently, if you choose to register through the government portal it will cost you £12. Although, there are other options so it's worth looking around.

Setting up a limited company requires a lot more administration than becoming a sole trader. This will not necessarily be a quick process. Although, it is manageable when armed with the needed information. Or, you could hire someone else (such as an accountant) to handle this part for you. 

There is a higher legal responsibility and administration needed for record-keeping. You must maintain fastidious note of:

• company records
• financial records
• accounting records

This could become a cost if you decide to hire an accountant or bookkeeper to handle this for you. At the very least, it will cost you time. 

Partnerships are an important option to note. A partnership is like being a sole trader, but with more than one owner. Each partner gets a share of the profits and pays income tax on their share. Partnerships have less risk because responsibilities and losses are shared. When starting a partnership, it's a good idea to create a partnership agreement. This legal document sets clear rules and can help prevent future disagreements.

Maybe you are employed by a business as your primary income, but you'd like to do some energy assessment on the side. In this case, you will likely want to become a sole trader. Once the profits from your independent energy assessment services exceed £1000 annually you will be required to submit a self-assessment tax return to HMRC. It is important to note that if you are employed by a business, you should always consult with them and your employment contract before embarking on independent work to ensure there's no breach of contract. 

After considering all of this information you should choose whichever option suits you. The next step is registering your business. 

First, you need to register for self-assessment. HMRC calculates tax on self-employed individuals using self-assessment tax returns which have to be filled out by business-owners annually. You can register for self-assessment here.

Now it's time to choose a business name. You could choose to use your personal name, or you may decide to pick something else. Some choose to come up with a separate business name to sound like a larger organisation, rather than trading under their personal name. This name will be visible on your documentation, so it's worth some consideration. 

There are a few guidelines you need to follow when choosing a business name. Your business name:

• cannot contain any offensive words or phrases
• cannot contain the words/phrases: ‘public limited company’, ‘plc’, 'Limited', 'Ltd', ‘limited liability partnership’, or ‘LLP’.
• cannot be the same as an existing TM
• cannot contain 'sensitive' words without proper permissions. For instance, the word 'Accredited' is protected and you can only use it with the proper permissions. You can find a list of these restricted words here.

Before you decide on a name, you need to check that it is available. You can do so using the following links: check your company name availability & search for a trademark

First, you must decide on a name for your business. When choosing your name, it is best to consider the following guidelines:

• must end in 'Limited' or 'Ltd' (or the welsh equivalent)
• shouldn't contain any offensive words or phrases
• cannot be the same as an existing TM (you can check availability using the following links: check your company name availability & search for a trademark)
  
• cannot contain 'sensitive' words without proper permissions. For instance, the word 'Accredited' is protected and you can only use it with the proper permissions. You can find a list of these restricted words here.

• Decide who will be the directors, shareholder and person with significant control (PSC).
• Fill out documents to outline how you will run your company. This includes the memorandum and articles of association. Once you have filled out these documents they must be agreed and signed by shareholders and directors. 
• Decide how your financial, accounting, and company records will be kept. Also, it is imperative to select someone to be responsible for them.

You can find more information on how to set up a limited company at this link: Setting up a limited company

Now, you need to register your company. You could do this through the government's website or choose another option. As mentioned earlier, there is a small cost involved so make sure you do your research. 

The registration process requires some personal information about you and the rest of the shareholders, so be sure to collect this before you begin. To register your company you will need to register an official address for your business and choose a Standard industrial classification of economic activities (SIC) code. 

Once you have registered the company, you must also register for corporation tax. In most cases, you can do this at the same time as registering with Companies House. If not, you can do it separately with HM Revenue and Customs (HMRC) afterwards.

• Your business's VAT taxable turnover is anticipated to surpass £85,000 within the next 30 days. 
• Your business had VAT taxable turnover exceeding £85,000 over the past 12 months.

Outside of these circumstances, registering for VAT is voluntary. You may choose to do this to enhance credibility or to claim back some VAT. However, this might incur increased admin and accounting costs which could result in having to raise your prices. You can access up-to-date information about VAT requirements on the government's website.