Start up legal and tax issues

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Presentation transcript:

Start up legal and tax issues

Business names The business name can not be the same as another established business. The name should promote the business It could be a family name: eg Marks and Spencers It could give information about the business. It could be a combination eg Jawad Supermarket. If the company is a limited liability company it will have Ltd. Or Limited after it.

Keeping records All businesses must keep records A record is what has happened in the past What records do you think a business should keep? Companies must keep records concerning tax so they can calculate and pay the right amount of tax. Taxes are paid to Her Majesty’s Revenue and Customs (HMRC)

Keeping records What are entrepreneurs good at? Do you think they are good at keeping records? What can they do about this?

Keeping records If you do not keep track of your tax records you might not pay the right amount of tax. Not paying taxes can lead to businesses being forced to close and the owners being jailed.

Taxes A business has to pay a variety of taxes. These will depend on: The amount of sales the business has in a year Whether or not the business employs any staff Whether or not the company is a sole trader or a limited liability company

VAT Value added tax or (VAT) is a tax on the sales of a business. It is charged at 20% of the value. So a product on sale for 12 pounds will include 2 pounds of VAT. If total sales were 120,000 for the year, the business would have to pay 20,000 pounds in VAT. However VAT paid on supplies a business has purchased can be deducted from this

VAT If a business has sales of less than 73,000 pounds in a year. It does not have to pay VAT. This means it can charge less for its products and so may have a competitive advantage.

Income tax A business pays income tax in two ways: If it employs people it must collect the tax charged on their salary and pay it to the HRMC. This is called Pay as you earn or PAYE. If the business is a sole trader the business must pay income tax on their profits – the difference between their sales and their costs.

National Insurance Contributions This is another tax based on salary. It pays for people’s state pension and certain other benefits. Businesses pay different types of NICs: Employee’s, which is deducted from the employee’s salary and paid to HMRC by the business Employer’s which is calculated as a portion of the employee’s salary and paid to HMRC by the business If the business is a sole trader they will have to pay NICs based on the owner’s earnings

Corporation tax This is only paid by limited liability companies. It is a tax on the profits of a company