How I Started a UK Business

A question I didn’t think I would have had to field since starting my own business is “what did you have to do to start your business”.

A lot of the advice you see being shared about online (at least in the circles I run in) seems to be for American businesses, which is maybe why some folk have asked me this.

Another reason why is that I had been freelancing for years, so maybe people wrongly assumed you can just announce that you are a business and you become one.

A final reason might be because I’ve been told before that I am good at explaining things to people, especially when they are nervous about asking. So maybe everyone assumes that knowing how to set up a business is just some inert knowledge you should have.

Regardless of the reasons why, I get asked this a lot. This post is my answer.

My situation

First I should explain my situation a bit, if you are here looking for some advice and our situations are completely different then you may want to bow out early.

I’ve had my own side projects since before I started looking for my first job out of university. I have also taken on freelance work to supplement my income for about the same length of time.

Any money made from these projects or work got declared as part of my self-assessment form.

If you need to register for self-assessment you can find out more information in the official docs for it.

The last three jobs I’ve had in a row ended poorly, for brevity and nicety I will describe them as differences of opinion with members of management. I couldn’t decide if I was unlucky and got three assholes or if I was the asshole but I am smart enough to know a pattern when I see one, I didn’t want to go 4 for 4.

I decided to set up on my own. I had a handful of clients who had already said they would love to give me more work if I had more time and I was earning enough recurring revenue from other projects to know I could ramp that up in the next while.

Planning

I won’t go into detail about the planning I did ahead of setting things up because it is a bit out of scope for what I wanted to talk about today. It is fair to say though that I thought through what my business model would be, how I could make the money I wanted to make and what my backup plans were if it all failed.

I decided I would contract as a Ruby or JavaScript developer and as an interim CTO for a daily fee in order to make the most of my income at the start.

When not being contracted out I would be working on things that would either make it easier for people to want to contract me in the future, or working on projects that make me money on a recurring basis without needing to spend too much time on them after an initial investment.

My financial success criteria was that I should be making around £4000 a month after tax. If after a few months I couldn’t reliably make that amount then I would need to go to plan B.

Plan B was to get an engineering job doing Ruby or JS somewhere in London. People in this line of work are very fortunate that we are in high demand and I am confident with my skill set I could find work somewhere. Luckily I haven’t needed to consider Plan B since starting in October 2016.

Deciding to go the Ltd route

Once I decided I was going to strike out on my own I needed to decide between doing things as a Sole Trader, which is what I was doing before with my side-projects, or to form a limited company.

Forming a limited company sounds scary but there are some decent advantages (for someone in my position anyway).

The biggest advantage is that there is now a legal entity behind my work, which acts as a nice separation between business stuff and my stuff. Things like accounting become a lot easier when 100% of the money you need to account for is in one place and isn’t cluttered with things like receiving £30 from your Granda on your birthday!

I am going to go into more detail about setting up a business bank account shortly, but suffice to say you kind of need a limited company to be able to do this.

Having a limited company also means if I write some code that backfires and deletes a whole load of customer information (I haven’t… yet, hire me and you may be the lucky person!) then it is my company that can get into hot water, not me personally.

There are some places that say having a limited company means your personal money is 100% protected against say someone suing you for £1,000,000 and going after your personal assets. I’ve read other places that say that isn’t true and there are ways for people to go after personal money – suffice to say it is harder and the limited company does act as a barrier.

For my situation I would end up paying less tax by being a limited company, depending on your personal situation your mileage may vary. Always seek help.

Being a limited company does has some downsides – most accountancy plans end up costing more and you will need to set up new invoices and bank accounts for the company. I am sure there are other downsides but these are the ones I’ve ran into so far.

How I formed the company

Forming a Limited company in the UK was way more straight forward than I assumed it would be.

I went onto Go Limited, answered some fairly straightforward questions and a few days later I was good to go. It took maybe 20 minutes tops to go through everything.

The main things you need to consider are how you want your company to be structured, and who you want to be involved in your company, oh and of course your name.

For me this was pretty straight forward, I was going to be the sole director and the company was going to be called Tosbourn Ltd.

It should have cost me £10 to do this, but because I ended up using Crunch as my accountancy firm I got it for free.

Using an accountancy company

I’ve been told by so many people that a good accountant will end up making you money, so I knew that one of my first tasks would be to find one of those. Living in London meant I wasn’t looking forward to paying the prices I imagined I needed to pay - needs must.

I started looking around and researching various companies, and during my research a few people mentioned a company called Crunch.

Crunch are a UK accountancy firm that have a SaaS model, you pay them a monthly fee for access to their software, their accounts team, and their advice.

I am so happy I went with them, they were able to advise on the best way to set up my limited company and how I should be invoicing folk. I think I pay roughly £70 per month for their service and I honestly think that is a bargain.

They have connections with lots of other services you will eventually need, like banks. Banking was a big enough problem that it deserves a section to itself.

Setting up bank accounts

You don’t legally need a business bank account in order to accept money from your business but it really helps. Like I said earlier on, having one place that clearly shows business incoming and outgoing really simplifies the accounting process and helps you have a better idea of how well your business is doing financially.

Before I started researching banks I knew I didn’t want to go with my personal bank (for one thing, they are based in Northern Ireland and I live in England now) and I knew I didn’t want to go with Barclay’s as they were less than helpful when setting up a business account for another company I was involved in.

I had heard good things about Metro bank and asked someone at Crunch, they didn’t want to give me any direct advice on which bank I should pick, but did mention that they have a deal with Metro which meant they could do most of the paperwork, and the amount I would have to start with would be £1 (instead of, I think £1000). They also explained they have a hook into Metro so I can get my account synced to my accountancy software. Sold.

Even with Crunch’s help the process for getting a business bank account involves a lot of form signing and a lot more questions than I thought would be required (how much money do you plan to make, how are you going to grow your business over the year, do you sell abroad) apparently writing “tonnes, I hope” isn’t enough and you need to think these things through!

The process from start to finish took about 6 weeks, which I hear is fairly typical.

Buying stuff

So by this stage I’ve spent about £71, £70 on Crunch and £1 to populate my business account.

What more do I need?

Turns out even when you are working in the realm of software and web development you still need to scan and print plenty of things. I ended up buying this printer/scanner combo off amazon.

It also turns out that I’ve needed to post things more than I ever have before, having a ready supply of good envelopes and stamps has been very useful.

Everything else (desk, chair, computer, monitor) I already had.

There are other things I’ve bought like different books (none of which I have digested enough to review or recommend) and subscriptions to various dev tools, but these are very specific to the work I am doing, I’m sure you’ll have your own.

Conclusion

Hopefully you’ve found this post useful, I have loved owning my own business and can’t see shutting it down in favour of working full time for a company any time soon.

I’m still learning a lot of this stuff but happy to chat about my experiences more.

You might also be interested in reading some interviews with freelancers that I have conducted.

A quick note on Crunch

I’ve mentioned Crunch a good few times throughout this article. It isn’t because they paid me to write anything and it isn’t because I expect to make any referrals to them off the back of writing this.

Having said that, I should point out that if you use the referral code “tosbourn” should you decide to use them for anything then we both get some Amazon vouchers (I think £25’s worth).

I got them when I signed up via a recommendation