Before trading, there are practical essentials that protect the business and clarify ownership.
Establishing shareholding
Before your company starts trading, you’ll need to set up the necessary shareholdings. Most small and medium-sized businesses go with ‘ordinary’ shares, often held by the directors.
However, you can issue different classes of shares with varying rights, depending on what works best for your business. Shares can also be issued at any stage of your business journey taking the right professional advice.
Selling shares is a great way to raise funds and attract investment but remember that anyone holding shares could be entitled to dividends (if paid on their class of shares) and will also have a stake in the company if it’s sold or wound up. The size of their stake depends on the rights tied to their shares.
You might also want to explore the Seed Enterprise Investment Scheme (SEIS), which can help start-ups raise up to £250,000. Investors in your business benefit from tax relief, making it an attractive option for early-stage funding.
Banking and insurance
Your company will need its own bank account, and to get started, the bank will ask for a copy of your Certificate of Incorporation.
You might also want to open a savings or reserve account to set aside funds for things like future tax bills.
Insurance is another must when setting up a business. Generally, there are three main types of cover to consider, and they are:
- Employers’ Liability Insurance
- Professional Indemnity Insurance
- Public Liability Insurance
However, it could also be wise to invest in business interruption insurance. This policy should clearly outline what payments you’d receive in the event of a pandemic or a similar disruption.
If you would like guidance on banking, insurance or shareholdings for your company, please get in touch as we have a good network of professional contacts, we can connect you with and support you through the set up.
This is the sixth article in a series of blogs to guide you through the process of establishing your next business.
Please find the rest of the series below:
Building your business – Making sure your company is running right
Choosing the right business structure for your new business
Why a business plan is more than a funding document
Back to basics – Tax rules that every limited company owner should understand
Employing staff – Payroll and pensions
Paying yourself as a director – what works best
Funding your business – Understanding your options
Shares, banking and insurance essentials for new businesses
Why early professional advice sets businesses up for success