Consider Jemima Neal, the 14-year-old daughter of Sam Neal, CEO of the family-run Geoff Neal Group. Back in September (2023) Printweek reported on her new apparel business, Mima Rose, where the young Neal herself designs t-shirts and hoodies which are then handed to production partner Uno Group UK to be printed via a digital transfer process.

In order to set up the business, Neal negotiated for a business development loan with her father.

It’ll be interesting to see how the business progresses.

Of course, Neal’s business is going to be different to that of a new-start printer. Even so, the principles of setting up are very similar as are the multitude of considerations.

First steps

Take the first: the business plan. Budding entrepreneurs need to think about their aspirations in terms of where they’ll start and potentially end up. This then leads to the next step: creating a financial plan to fund the proposition which features a cashflow forecast, profit/loss forecasts for the next year and bank statements for the last six months as well as background on the business owners.

And as for finance, there are plenty of options out there; Close Brothers Asset Finance, Compass Business Finance, Paragon Bank and Funding Circle are just some of the options.

Next comes the entity: sole trader, partnership, or limited company. Here Helen Thornley, a technical officer at the Association of Taxation Technicians, says that each approach has pros and cons and that “a good accountant should be able to help with this decision”. They can be found by visiting the website of any of one the professional bodies – Google ‘how to find a qualified accountant’.

Even so, she thinks it helpful to understand some of the basics. She points to various distinctions, noting that at one end of the spectrum comes simplicity and personal liability through sole tradership and partnerships, while at the other, is a company that is owned by its shareholders and run by its directors.

And while most will likely set up as a company, Thornley notes that even seasoned directors can come off the rails if they do not fully understand the implications of their business structure. In particular, she says that “a company is a separate legal entity, which gives the owners more protection if something goes wrong. And in the event that the company can’t pay its debts, the shareholders’ liability is normally limited to the amount they paid for their shares unless they’ve given personal guarantees”.

However, she details that “running a company brings more responsibilities and directors must accept certain legal duties, including that of acting in the best interests of the company”.

Indeed, there are countless stories on Printweek of directors having been banned for breaching their duties to the company or for breaking the law.

Further, while a shareholder-director might own and run the company, Thornley says that “that doesn’t mean that they can dip into company bank account when they feel like it. Instead, monies must be extracted – either by paying salary or by voting dividends out of company profits”.

Solicitors can be found via the Law Society’s website.

Tax

Misunderstanding – deliberately or otherwise – can be a recipe for disaster. For this reason, businesses and their owners need to tell HMRC at the earliest opportunity about the new enterprise. Individuals will need to start filling out self-assessment returns and will be responsible for paying their own National Insurance while incorporated entities need to register to pay Corporation Tax.

In all probability, most will incorporate for the reasons stated above. And as with the legal duties that are attached to a corporate structure, so Thornley details that operating this way brings as much complexity for tax purposes. She explains that “the company itself will pay Corporation Tax on its taxable profits. For small companies, this is due as a single payment nine months after the company’s year-end. In addition, the individuals involved will pay Income Tax and National Insurance on any money that they have taken out of the company in the form of salary or dividends.” 

It follows that profits depend not just on sales, but also on expenses that can be offset for tax purposes. Many in business are surprised to find out, as Thornley highlights, that “profits are calculated differently for tax compared with how they may be shown in business accounts”.

In general, she says that provided expenses are incurred wholly and exclusively for the business, they should be allowable as a deduction against business income. This includes many of the everyday running costs such as rent, rates, insurance, wages, office stationery, heat and light.

However, there are complications. Thornley says that capital items which a business may use over a number of years such as fixtures and fittings, computers, printing machinery and vehicles are treated differently for tax purposes with relief is given in the form of capital allowances. She says that “in most cases, full relief will be available, but care should be taken – especially with cars as firms may not get the tax relief in full in the year of purchase and users could have to pay a benefit in kind if it’s used privately”.

And to get the best out of the tax system, Thornley advises that the simplest approach is to keep a record of all potential business costs, together with supporting evidence such as invoices, before discussing the position with the accountant at the end of the year.

Lastly, on VAT, Thornley says that there are schemes to help both small and young businesses ease their way through the regime such as Annual Accounting (just one VAT return a year), Cash Accounting (VAT based on monies paid and received, with automatic debt relief) and the Flat Rate Scheme (a fixed percentage of turnover with less admin). An accountant can advise further on each.

Staff

Staff and related issues can prove extremely hazardous if good advice isn’t sought. Employees and job applicants have rights and will try to enforce them. Further, the law places obligations on employers to, for example, ensure the legal right of someone to work in the country, handle dismissals in a given way, and follow health and safety legislation.

Firms are best advised to consult a solicitor on employee contracts, recruitment and employment processes, and holiday and sick pay to name but a few key areas of employment law. Advice can also be obtained from Acas, a government funded, but independent organisation.

Beyond that, Thornley says employers must supply a written statement of the main conditions of employment within two months of the employee starting work, regardless of whether an employment contract is put in writing. Also, she points out that “there’s the need pay staff the National Minimum Wage appropriate for their age and also, potentially enrol them into a workplace pension”.

And from a tax perspective, employers must register with HMRC to obtain a PAYE reference for the business and tell HMRC every time a new member of staff is hired. But Thornley says that there’s more: “Each time you pay your staff, you need to deduct income tax and employee’s national insurance, calculate your employer’s national insurance liability and report these figures to HMRC on or before the date of payment.”

Premises

Lastly, there’s the matter of choosing premises which is littered with booby traps. Landlords invariably write contracts in their favour with, for example, clauses covering ‘dilapidations’ (where tenants may have to pay to repair premises both before and after rental), high insurance or common usage charges, infrequent ‘break clauses’ that make it hard to end a lease part of the way through, or upwards only rent reviews. Using a good surveyor or lawyer is essential to get through this maze. A member of the Royal Institution of Chartered Surveyors is an expense worth incurring.

Summary

This is but a light touch on a very complex subject. But while no-one ever said that running a business was easy, it does offer plenty of freedoms and rewards. The key, though, is good advice. 

The franchise route

An option which may appeal to some is enter the world of commerce via a franchise where a known and proven brand and trading platform is used as the basis for a business.

According to the British Franchise Association (BFA), the market is huge. Its January 2018 BFA/NatWest Franchise Survey – the latest data available – reported that franchises in the UK were turning over around £17.2bn, through 48,600 franchised units that employed 710,000 people.

Setting up a franchise can be very worthwhile, but franchisees need to enter into agreements with their eyes wide open. They need to be aware of restrictions placed on the business, its owners, who they can sell to on exit, and associated franchise costs. There are also risks in relation to the brand and operation that the franchisee cannot control.

Many owners report that they enjoy – to an extent – the freedom of choosing their working hours, when to take holidays, how they work, who they work with and the fact that they rise and fall by their own merits. Successful franchise operations tend to have a much lower failure rate than completely new businesses.

One such example is US-based Minuteman Press International.

Nick Titus, president of the 50-year-old company, of which 45 involved franchising, considers that “franchising is a solid option for aspiring business owners who want to be their own boss but don’t want to go it alone”.

He’s firmly of the view that “potential franchisees should do their research and due diligence and should speak with the franchisor directly to really get a feel for the franchise and see if it’s the right fit for them”.

No matter the brand, he sees indicators of success being a proven track record, longevity in the industry, along with franchisee reviews and testimonials. On the flipside, he would be bothered about any lack of transparency from the franchisor: They “should be straightforward with any potential franchisees and allow them to tour local franchises to speak with current owners”.

 Interestingly, Titus has found that owners who follow the company’s system the closest are the most successful. By definition, he says that “the franchise model is best suited to business-minded individuals who are looking to be their own boss but also receive crucial support”. Equally though, he says that his franchise model “is not suited for ‘absentee owners’ as it is important to manage the business and be proactive.”

Case study: Minuteman Press Oxford

Owner of a Minuteman Press franchise in Oxford since August 2010, Amad Hassan, previously worked at the BMW plant in the city for some 10 years helping make the Mini. He says that he had for some time wanted to start a business, but the impetus to begin his journey came from being fed up “working shifts at BMW – both days and nights – with not much of a lifestyle that I could enjoy with the family”.

 So, as he tells, he started looking for a franchise that would offer him a stable platform for a business. “I came across Minuteman Press and met a representative of the company who showed me some franchise sites and explained how they work.” Hassan needed a little reassurance since, as he outlines, “I didn’t have any experience with print” and had never been in business before. To say that he “was bit nervous” might be an understatement.

 But more than 13 years later Hassan has a success on his hands. He says that he is “very comfortable with Minuteman Press” and its step-by-step explanation of the business. It helped too that if ever he had any questions assistance was “just a phone call away”.

Minuteman Press gave Hassan a helping hand with the lease of the shop, equipment, his business plan and in setting up the site. Guidance on marketing came from Minuteman Press too.

 As Hassan summarises, “I’ve now been with Minuteman Press for 13 years running – and am running a successful business.”