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Last Updated: Monday, 23 July 2007, 05:17 GMT 06:17 UK
How to start a firm from home
Terrace houses
In some cases, you may need to get planning permission
Starting a business from home is a great way to avoid having to rent an office or other premises.

However, as small business expert George Derbyshire explains, there are a number of things to remember if you want to give your new firm the best chance of success.

QUESTION
Jean Bridge, UK

Where is the best place to find information on starting up a small business from home?

I would like to know about tax implications, marketing, and anything I should look out for. Thank you.

ANSWER
George Derbyshire, chief executive of the National Federation of Enterprise Agencies

Much will depend on the type of business you are starting.

However, in general terms, the areas you will need to address when you work from home are as follows.

The most important thing is to decide whether you are forming a limited company, or whether you will run your new business on a self-employed basis.

You are allowed to be employed in your day job and self-employed in your new business at home at the same time.

The only legal requirement is to declare your intention to the local HM Revenue & Customs (HMRC) office.

It is easy to register as self-employed. You can go online at HMRC's website and it is all fully explained.

A limited company is a more expensive option and your decision for going down this route would depend very much on the possible turnover you may have and your total tax situation.

You will be required to complete two forms, which get you registered and start your Class 2 National Insurance payments (currently 2.10/week).

They will want this to go "direct debit" from a bank account and, although it is not a legal requirement, you should have a separate bank account to run the business through, especially if you have existing employment and other forms of making money.

Legally, that is all you need to do to get started, unless you expect to earn above the VAT threshold (currently 61,000 annually). If that is the case, you will have to register for VAT.

Planning permission?

Look on the internet and other sources to check no-one else is trading under the same name as you.

If you are accepting money for services, then you will need to be insured on a public liability basis.

On any publicly-facing website you run, you will need to consider disclaimers and terms and conditions.

You may also need to contact your local council to ask about planning permission.

If you are unlikely to be causing disturbance to your neighbours through the operation of the business, there should not be a problem, but it also depends on the terms of tenancy/ownership of your property.

You will also need to inform your home insurance company that you are operating a business, as failure to do so may result in your policy being voided in the event of a claim.

Think about who will be answering the phone. If you use your phone for both domestic and business, how does this affect your credibility? Who will answer it, will a message be passed on etc?

There are certain benefits of offsetting some of your domestic costs against the business, if you are using an appropriate room on a permanent basis.

Have you got space to store surplus materials, if appropriate? These are bound to accumulate. Will they be safe and secure?

For more specific advice relevant to your business, you should contact your local Enterprise Agency. Many of them can offer a free consultation session.

You can search for your nearest agency on the National Federation of Enterprise Agency (NFEA) website, or by calling 01234 831623.

You can also ask a question online, which is sent to a local business adviser, on the NFEA's Small Business Advice website.


To ask George Derbyshire a question about how best to market your small business, use the e-mail form below.

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