Starting Out FAQ’s

21 July 2021

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Starting out on a new business endeavour can be overwhelming - we know, we’ve been there. It can feel like you’re spinning 10 plates while fighting fires that pop up in every direction. But it doesn’t have to be that way! Partnering up with the right people can help you find your flow and move in the right direction. Starting a new business should be thrilling, even if there is an element of risk involved. Whatever questions you have, we’ve either got the answers or we know who does. Feel free to reach out - it will be the best decision you can make! Here are some of the most common startup questions we get:

What funding options are available for startups?

There are a lot of finance options when you consider how to fund your startup. The right one for you will depend on how much you need, how quickly you need it, and what you’re willing to sacrifice to get it. 

Personal savings are usually the first route to think about. The risk here is that you might lose your money – so you need to be in a position to manage without it if things don’t work out how you planned. 

If you’re looking for more than you can afford personally, bank loans and overdrafts, and government grants are worth looking at. You’ll need a clear business plan for either, but government schemes are unlikely to cover the entire cost. 

Private investors, venture capital, and private equity are good options, as long as you don’t mind handing over some of the control. For these, you’ll need a great business plan, including financial forecasts, and the promise of some healthy (but realistic!) return on investment to wow people. 

Crowdfunding and peer-to-peer loans are two examples of less traditional routes to funding that you could take. Websites like Kickstarter and Seedr have taken off massively thanks to the increased popularity of crowdfunding. Not a bad option, as long as you have something to woo your initial investors, like early access to a product or service. 

Peer-to-peer lending platforms match public investors with those in need of money. They tend to be lower in interest than bank loans, but you’ll have to impress to be deemed worthy! 

How should I pay myself as a company director?

There are a lot of factors to consider when paying yourself as a company director. In fact, we’ve written a whole article about it. Tax is the obvious one, but it’s also worth thinking about how your R&D credits will be affected, and your eligibility for state pension later in life too. 

The usual route directors take is to be paid via dividends. Dividends get paid to shareholders when the company makes a profit. However, you could end up paying as much as 38.1% tax if these are over £2,000 per year, on top of 20% corporation tax. 

If your company is yet to turn a profit, you’ll have to pay yourself through salary. There’s also the option of paying out through an ISA or a pension. 

Whatever your decision, paying yourself as a director requires some careful planning. Every situation is different, and it will change as your company develops, so it’s best to get expert advice whenever possible. 

At what point should I get an accountant for my startup?

You absolutely can manage your startup finances alone, but I’m guessing you didn’t get into business to manage bookkeeping, admin, and HMRC compliance standards, right? Lucky for you, we did.

By teaming up with a progressive and engaged cloud-based accountant, you’ll have more time to work on your business, rather than in it, and a roadmap to financial success that you can feel confident about.

You could wait to bring an outsourced accountant onboard until you have more money in the pot to spend on them, but that might be counterproductive. A good accountant will help you set up your goals, budgets, and forecasts in a more efficient and accurate way from the start. This could save you time and money down the line by getting it right the first time, saving you from having to overhaul your entire financial ecosystem when you do decide to get some help. 

What startup costs are tax-deductible?

You can claim expenses for your company up to 7 years (6 months for services) before it starts trading. These are known to HMRC as pre-trading expenditure, and are recorded as if the money is spent on your first day of trading. The key is that you can claim only for the expenses that you incur which are wholly, exclusively and necessary during the everyday running of your business.

Some examples of things that could fall under this category are:

If you keep accurate records, any good accountant should be able to advise you on the most affordable way to handle these costs.

Starting a business should be exciting – don’t let getting your head around the finances stop you from enjoying it. If you need a helping hand from someone who’s done it, give us a call 01454 300 999, or drop an email to info@fd-works.co.uk.

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