For many people, retirement is an opportunity to wind down, relax, and take stock.
Starting a small business in retirement is becoming popular
We all look forward to the chance to put our feet up for a bit. But having worked for someone else for their entire career, many people are using retirement as a chance to take matters into their own hands and start their own business.
A recent survey from Clydesdale and Yorkshire Bank suggests that the number of retiree entrepreneurs is rising – with a staggering 12 per cent of the businesses the polled having been started by an individual in retirement.
Retirement can be a great opportunity to start the business you always thought about. Here are a few of the most important things to think about.
What are the first steps?
Your first step will be to decide what you want your business to do. This might sound obvious, but it is important that you have a firm idea of what you will do, and how you will do it, before you begin.
Many people decide to use the skills they developed during their career to help build a business in retirement. But there is nothing stopping you branching out into an entirely new area. Remember, though, that you might need extra training or new equipment before you begin.
Do I need to register a company?
Not necessarily. Choosing a legal structure is an important step, and one that will have lasting implications for your business. It is often presumed that business owners need to set up a limited company, but this is not necessarily the case.
A limited company structure provides you with a relatively high degree of legal protection. You will not be held liable for debts run up in the company’s name, for example. But this choice also has downsides, including a significantly increased paperwork burden.
Alternatively, you might choose to operate as a sole trader. While you don’t enjoy the legal protection offered by a limited company structure, this choice is much simpler to administer. You are free to make decisions about the running of your business, and all your profits are taxed just like regular income. You do not have to file documents with Companies House as a sole trader.
Finally, if you are opening your business with one or more other people, you might choose a partnership or limited liability partnership. Click here for more information on choosing a legal structure.
How do I market myself?
This is the million dollar question! Finding customers or clients is one of the most difficult parts of running a business.
If you anticipate that the bulk of your customers will come from your local area, consider taking out ads in your local paper or phone book. You might also think about running a free event to celebrate your opening, and offer discounts to those who attend.
You might also want to consider online marketing techniques. The internet can be a great way to target potential customers cheaply and efficiently.
What are the tax implications?
This will depend on your choice of legal structure. If you decide to set up a limited company, your profits will be subject to Corporation Tax. You will be required to file accounts, and you will need to pay the tax direct to HMRC.
If you choose to operate as a sole trader, you will need to register as self-employed. Your profits will be taxed as income. You will need to complete an annual Self Assessment tax return (as do company directors), and you will be required to pay your tax directly to HMRC. You will also have to pay weekly National Insurance contributions.
You should also remember that you may be required to register for VAT. Read more on VAT registration thresholds.
Finally, remember that the extra income generated by your business may have an impact on any means tested benefits you are receiving.
What about insurance?
Insurance is a vital necessity for every business owner. Regardless of the size of your firm, you need to make sure that you are properly protected.
There is a range of insurance covers that you might need. Your exact requirements will, of course, depend on the nature of your business. For example, you might take out public liability insurance, which protects you against claims arising from an injury suffered by a member of the public or third party as a result of your actions. You might also consider professional indemnity, which protects you financially in the event that you make a mistake or give faulty advice.
You should also consider insurance for your premises. If you are working from home, remember that your existing policy may not be sufficient – particularly if you are buying new equipment.
Finally, if you become an employer you will be legally obliged to take out employers’ liability insurance.