Business set-up
Before you decide to set up a business you have to go through all the above steps: in brief, you need to realise that your own initiative will substantially differ from employment, make sure that you have enough experience in the field you are venturing in, and that there are real opportunities in the market to explore. Now let’s outline the procedure of setting up a business. Particular steps differ from one country to another so we can only present here an outline which should be concretised in the context of national regulations.
First you should choose an appropriate structure for your business. Most businesses operate as sole traders, partnerships or limited companies. One of the first two forms is usually chosen by independent artisans as these are the easiest ways to start and run a business. If you are a ‘sole trader’ this means that only you own the business and you can work alone or employ other people. In a business partnership, you are running a business as an individual but all the partners share responsibility for it. Reliable and skilled partners are a great asset in a business but the key issue here is responsibility – ‘shared responsibility’ – so you must be sure about your prospective partners’ capacity in this respect.
Sole trader
As a sole trader you will run your own business as a self-employed individual taking full responsibility for its success or failure.
– You can use your own name but you can also trade under a business name: you will have to include both the names in any official documentation, like invoices and letters.
– You will need to register your business with the relevant office in your country: in most European countries the procedure is very simple, in some the process can be completed online.
– You will need to register as a tax payer and get national security number: again you have to check the national regulations, some of which simplify the process and let you do everything at ‘one desk’.
– You will be required to keep records of your income and expenses, which means that you or your accountant will have to calculate your own tax.
– You will need to send self-calculated tax returns every year (or more frequently, depending on national regulations).
– You will be responsible for paying your income tax on your profits and national security as required by national law.
– If your turnover reaches the VAT threshold you will need to register for VAT, calculate and pay the tax (usually on the monthly basis).
– And obviously, you will take full responsibility for your business debts and bills for anything you buy for your venture.
Business partnership
In a business partnership you will run a business as an individual but you will share responsibility for it with the other partners.
– The business can be named according to certain rules depending on national regulations: for example it cannot be the same as another registered company’s name; you will still have to include all the partners’ names on any official paperwork of your business.
– You will need to register your partnership and its individual members with the relevant office in your country: the procedure is similar to registration of a sole trader but it is usually one partner who is ‘nominated’ to act for the whole partnership.
– Each of the partners will need to register as a tax payer and get national security number: this usually can be done through registering the partnership of individual members by a nominated partner.
– You will be required to keep records of your income and expenses, which means that you or your accountant will have to calculate your taxes.
– You will need to send tax returns both as the partnership and individual members: the nominated partner will let each member know their share of the profits and losses for their individual tax calculation.
– You will be responsible for paying your income tax on your profits and national security as required by your national law.
– Your partnership will have to register for VAT if their turnover reaches a certain threshold and then calculate and pay the tax; this obligation relates to the whole partnership, not individual members.
– And most importantly, actions by other members of the partnership may directly impact on you: for example, if the partnership tax return is late all the partners can be fined, not only the one who was in charge of calculating and sending it; similarly if there is a claim against the partnership from a customer or contractor, all the partners will be liable, not only those who were directly involved in the litigation.
