“The new normal”, doesn’t it sound like an empty and meaningless phrase? It almost sounds like what it actually means is “whatever comes next”.
A number of major changes have occurred in the way business is done. It is yet to decide whether it is a good or a bad idea to initiate a business during or after this pandemic. Attributable to the corona virus many businesses started their online platforms (if they did not have any). This online business situation is the new normal now and seems to stay in for a long run.
There may be questions in your mind like what would be the best business model post-pandemic? Would it be effective if you start a business because of the coronavirus? Will your existing business need to adapt to any changes due to the coronavirus? Well, as I mentioned before, this is the new normal and is here for the long run, so it would be a good idea to jot down your options and dive in, to start your business accordingly.
Before we hop on to the next step and look at your available options for initiating a new business post-COVID-19, I would want to make it clear that we are not particularly a business advice company, as an accountant in Milton Keynes, I am available to make suggestions for you about the financial inference of your business matters, but not work as a proper advisor for your business. Our expert accountants would be happy to carefully plan your finances for your start-up business and offer you an opinion leading to an excellent business idea. Now let’s take a look at various business models and ways for you to start up a business post-COVID.
First of all, for the basics, let’s take a quick survey of the main business structures in the UK. There is a number of different type of companies in UK law, but based on our experience as one of the premier accountants in Milton Keynes, we have short listed three out of the long list, which are by far the most common and successful. Each one of them will have its own unique significance on your financial model.
A sole proprietorship or a sole trader is a firm run and completely owned by a single person. This is effective if the business is run by you only, and you do not fancy being limited in all matters. You are the direct dealer, the money which is rolling is owned by you, and there is no legal distinction between you and the business entity, as you are the sole trader, hence you would be responsible for all the debts, taxes, and so on.
Sole trader business has a higher rate of risk if the financial state of your business alters. Also, such businesses are comparatively harder to sell if you want to pass it.
Partnerships and Limited Liability Partnerships (LLP)
Limited Liability Partnership (LLP), as it has in its name, is a type of partnership in which the business partners (some or all) have limited liabilities. LLP is designed in such a way that if one of the partners misconducted something, the rest of the partners would not be responsible or liable for it.
LLP’s are pretty common in some industries, specifically in legal and financial areas. Non-limited partnerships involve the liability of all present partners for debts just like sole traders. It is suggested to work with the Limited Liability Partnership way, having an agreement to bare all the responsibilities and financial matters equally.
A Limited company is a legal entity and is the most common business. This has complete involvement of the business and the business is accountable for any debts or such finances, however, directors of the company are not responsible for this stuff. Though there is one thing you should keep in mind that the guarantee of the directors of the company will definitely be required before any contracts for debts or borrowing.
The sort of business that you decide to proceed with, will still depend on the factors that you would have considered before the whole coronavirus pandemic. The question remains, will the pandemic actually make a difference to your choice? As far as we have studied and gathered information, yes, it would affect.
Now that we have discussed that whether the Covid-19 pandemic could affect your decision process when you think about starting a new business or not, let’s have a brief look at the finances and other issues if you want to conduct your business online.
Working with off-site Employees
This pandemic has affected businesses in multiple ways throughout the year, but the most noticeable and bold change it made, is the view of people for remote working. We have accepted it as a common practice, which is very effective if you look at it.
Here are some thoughts about some finance-related issues, on sustaining a business that involves employees working from home.
Need of change in the way of payment
You will find many an accountant in MK advise you that, there is commonly no need of changing the way you pay your team if they work from home. Though minor changes can be made. There is a possibility that the employment cost may change or vary for either one or both of the parties. During this time, some employers made salary amendments. If there is a need for you to re-arrange the salaries of your employees, it would be preferable to discuss it with an employment specialist to get proper guidance.
Employing home workers
Employing home workers is going to be more pocket friendly since the location’s cost would be cut off. You will not require a proper set up for your employees to sit and work in, including desks, lighting, air conditioning, and whatnot. All this may make quite a big difference in your finances. But this idea is not as simple as it may seem. If you’re initiating a business, hiring home workers would not really cut out much cost. When you hire an employee for your business, you need to make sure that they are provided with the right equipment for the job to be done. This means, you will have to bring forth the relevant special equipment required for the job that you are providing, it might include high power computers, with required software installed in them. This will have an impact on your budget. Therefore, it is recommended to sit back first, and take a look at your budget and expenses, line them up and apply what is best suitable for your business.
Contribution in the cost of heating and lighting for home workers
You sometimes need to consider contributing to the cost of your employees who work from home, perhaps as a gesture of goodwill. You can pay some of the costs of the mentioned expenses where you want to contribute. There are different conditions, such as strong internet connections. If your employee lacks a stable internet, you will have to contribute to them to get your job done. Though if they already have a stable connection, and their cost is not affected by your workload, then you wouldn’t need to consider contributing.
Paying sick pay and other leaves
You need to pay the home workers working for your business in the same pattern that you would, to workplace workers. According to the national legal requirement, you must pay your employees even when they are on legal leaves. This pay remains unaffected whether your employees are on your workplace or working from home. For example, maternity leave, sick leave, paying productivity bonuses, etc.
Dealing with Freelancers
Freelancers are ultimately self-employed, they are not your responsibility. If you are using freelancers for your business, there is no need to contribute or pay for their expenses such as a strong internet connection or whatsoever. Yet if you step out of a specific platform where they are freelancing and directly employ them, then it will probably be your responsibility to contribute or pay their insurance and tax.
Covid-19 in the near future
COVID-19 really turned the tables. None of us knew that things could be so different, and life would have a whole different perspective after this. So, lesson learned, anyone who is planning a business start-up or already has an existing business, keep it in such a way that if something like the coronavirus hits up again, it doesn’t majorly affect your business. Think about it, after a while when your business is at a good rank and higher stability, a wave of lockdown reoccurs. Would it affect your business or is your new (or modified) business independent of this situation.
However, it is important to have a financial backup, have your business financed in the coming months to keep your business independent of anything like a coronavirus pandemic.
Tax, although is another consideration. There is a small advantage for tax, to take a minimum amount from your company profits. You will have access to lower the tax for the other dividends. Non-LLP (Limited Liability Partnership) firms and sole traders self-assess their taxes and finances as individuals. This is an advantage when you do not want to complicate things with several business partners. You can simply work with your accountant and be paid in stages.
COVID -19 has affected and will further affect businesses in various ways. Post-pandemic, we anticipate that there will be changes in the way employment and finances including taxes will be structured all over the world.
The cost of Covid-19 relief funds for new and existing businesses need to be paid for in some way. The Chancellor of the Exchequer sent a clear message that taxation for self-employed and other areas will need to be changed to cover the bill. In this case, the sole trader and partnership status may suddenly lose their charm.
The outcomes of the pandemic on small businesses have shown and are yet to be seen. This changed the perspective of people to look at business structures. It is said that the current system is only a specific condition and will not last long, but we would suggest you design and empower your business in a way that no pandemic affects it in a negative aspect.
In context to all this, whatever is coming our way or should I say, whatever becomes the new normal, some core principles and adequate will remain true. If you have an effective idea for your business and have your finances planned well, you will definitely make it up to the mark and succeed. However, for financial guidance and assistance, you will need a good accountant by your side, and there are a number of accountants in Milton Keynes who will be happy to help you. Get advice on your best short listed options and do not wait anymore to start your business.
Call us as soon as you are ready to discuss your business planning, and we will be ready to help.