Cash to start your business

Cash to start your business

Finding cash to start your business is easy if you are aware of the available sources you could explore.

Your own cash

You may start your business with using your own cash. May be it is the only available sources of funding for you. Sometime getting funding from the banks, building societies or other financial institutions may be challenging because there is no track record of trading with which to demonstrate your business’s commercial viability and ability to repay.

The advantage of using your own cash to start your business is that you are able to retain full control and ownership of your business. You do not have to give a personal security on your business loan.

However, there are disadvantages to this approach where you may not have sufficient cash to fund your business properly to the stage where it can take care of itself or at least your business starts generating income from sales.

Cash resources to start your business

  • Your personal savings.
  • Selling idle personal assets like your road bikes, your treadmill for cash
  • Personal loans from family and friends,
  • Borrowing on credit cards
  • Use Payday loan
  • Re-mortgage your own home

Ensure you keep up with the repayment terms of your credit cards companies, payday loan providers and your mortgage company to avoid default charge and excessive interests charges on your outstanding loan amount.

Late payment could also have an impact on your credit rating, and it stays on your rating record for 6 years. This is important if you intend to borrow money from banks or other financial institutions, such as buy a car under hire purchase or buy a house using a mortgage.

Business plan

It is always a good idea to prepare a business plan for your business, it helps you to put things into perspectives and allow you to prioritize your business expenditure and your business to do list.

Your business plan shall include a cash flow forecast as it will help you think through how much money your business is needed and where you can get the monies and the cheapest funding options available.

Fixed assets register

Fixed assets register

Fixed assets register is for your company’s long term assets such as machinery, delivery vans and computers. These business assets would be categorized in your company accounts as fixed assets. Your company could claim capital allowances on them.

You would usually write off your fixed asset cost to your profit and loss account over the asset’s economic useful life. For example, machinery may have longer economic useful life than your computers in your office.The wear and tear process is called depreciation by accountants.

It is make sense to record all your limited company assets into one place. This is called fixed assets register.

Your company’s accountants would normally do physical verification of your company assets as part of their audit work to ensure the figure recorded in your company accounts are correct, for example, if your company has bought a laptop last year and the cost is booked in your company accounts and the laptop has been stolen, then the cost of the stolen laptop must be written off to your company profit and loss account and your fixed assets register must be updated.

What to record in your fixed assets register?

The following information should be recorded in your fixed assets register, for every asset bought for your company’s use.

  • Date of your asset was purchased
  • Your supplier details
  • Description of your asset
  • The cost of your asset
  • Allocate unique reference number if your asset does not have its own serial number for easy identification by your accountants or your auditors.
  • Date of your asset last revalued
  • Amount of revaluation
  • Economic useful life of your asset such as computer generally last for 3 years.
  • Depreciation policy applied to your asset whether straight line method or reducing balance method is used.
  • Accumulated depreciation amount charge to profit and loss account so far
  • Net book value of your asset
  • Date and value of your assets being disposed for cash, if any.

The net book value of your fixed asset is to be included in the company account under fixed assets heading. Further disclosure required in the notes to your company accounts is the breakdown of your fixed asset cost, depreciation charge for the year and net book value of the total fixed assets.

Basic accounting principles

Basic accounting principles

Basic accounting principles that every limited company must adopt when preparing their company accounts are explained below.

Going Concern

You company accounts must be prepared on the assumption that the business will continue to trade in the future and therefore a going concern.

Where a company ceases to trade and your company may incur a number of costs which it would not normally face, such as redundancy payments to employees or early termination of contracts penalty and so on.

The value of your company assets have to be marked down to their actual realizable value in the open market. For example, unfinished products may have to be completely written off the profit and loss account.

Should your company is going to prepared the accounts not on a going concern basis, this fact has to be disclosed in your director report and notes to the accounts so that the readers (suppliers, bankers, creditors, shareholders, staff and other interested parties) of your financial statements understand your company financial and trading position clearly.

Consistency

The directors must select suitable accounting policies for depreciation of business assets, foreign exchange translation and accounting for stock valuation and applied them consistently within the same accounts so as to make the accounts easy to read and comparable from year to year.

Prudence

Your company accounts should be prepared prudently. This means only profits that have been realized should be included in your profit and loss account. In other words, sales should not be recognized in the profit and loss account until the goods or services have been supplied and normally the invoice raised.

Losses should be recognized in your company account as soon as possible by providing for the costs or writing down any asset whose value has been impaired as soon as appropriate. So you should recognize bad debt or write off obsolete stock as soon as you become aware of the problem.

Accruals Concept

All income and expenses for the period to which your accounts relate must be included in those accounts. Prepayments, accruals, capitalization of long term assets are examples of accruals concept being applied. The introduction of the accruals concept is to match costs against revenue so as to achieve accurate profitability for the relevant accounting year.

Historical Cost Convention

The revenue, costs and assets bought by your company are recognized in your accounts at the original cost regardless of present value.

Netting Off

Items should not be netted off in the accounts.

Departure from accounting principles

Your company director is responsible to ensure your company accounts are prepared in compliant to Companies Act 2006, a departure from any of these basic accounting principles would require a disclosure notes in your accounts together with the reasons for the departure.

Overall, the accounts must always give a true and fair view.

non-deductible business expenses

non-deductible business expenses

Non-deductible business expenses are expenses disallowed to be used for the purpose of reducing your business tax bill.

Generally, a business expense must be incurred necessarily and exclusively for your business under the UK tax law.

Where expenditure incurred relates to both business and private use, the amount related to personal use is not tax deductible for your company and the private expense must be added back to your business accounting profit.

Motor expenses

If a motor car is used for both business and private purposes, then the capital allowances and the total car running expenses will be split in proportion to the business and private mileage. You will need to keep records of your total mileage and the number of miles traveled on business to calculate the correct amount of motor car expenses for the business.

Entertaining customers

Entertaining expenses usually are not tax deductible but there are exceptions you may want to seek professional accountant advice on other entertaining expenses such as staff entertaining and gifts to employees.

Bribes, kickbacks. fines, penalties and lobbying costs.

These expenses are self explanatory of why they are not tax deductible.

Start-up costs.

If you have just started a new business, you may be wise to consult a professional tax accountant on this question, especially if your start-up costs are rather large.

Working from home

If you are working from home, you will need to keep sufficient records to back up the proportion of heating and lighting costs that relate to your business and your private use.

Life insurance premiums

A business may buy life insurance coverage on key officers and executives, but if your business is the beneficiary, the premiums are not deductible. The proceeds from a life insurance policy are not taxable income to your business if the insured person dies, because the cost of the premiums was not deductible. In short, premiums are not deductible, and proceeds upon death are excluded from tax.

Travel and convention attendance expenses

Some businesses pay for rather lavish conventions for their managers and spend rather freely for special meetings at attractive locations that their customers attend for free. The UK tax office takes a dim view of such extravagant expenditures and may not allow a full deduction for these types of expenses. The HM Revenue and Customs (HMRC) holds that such conventions and meetings could have been just as effective for a much more reasonable cost. In short, a business may not get a full deduction for its travel and convention expenses if the HMRC audits these expenses.

Transactions with related parties

The HMRC takes a special interest in transactions where two parties are related in some way. For example, a business may rent space in a building owned by the same people who have money invested in the business; the rent may be artificially high or low in an attempt to shift income and expenses between the two tax companies or individuals. The transactions may not be at arm’s length basis. A business that deals with a related party must be ready to show that the price paid or received is consistent with what the price would be for an unrelated party.

Seek advice from tax accountants if you have incurred business expenses that you are not sure whether they can be claimed against your business profit fully or partially.

Sensitive words in a company or business name

Sensitive words in a company or business name

Sensitive words in your company or business name that may imply your company is pre-eminent in the field or has a particular status or a specific function is not allowed unless you were given approval in writing by the relevant authority.

If your company name contact the following sensitive words, please obtain a letter or email of non-objection from the relevant governing body before you submit your incorporation documents with Companies House.

No.Sensitive words Require approval from
1Accounts Commission for ScotlandAudit Scotland
4th Floor
102 West Port
Edinburgh
EH3 9DN
info@audit-scotland.gov.uk
2Accredit
Accreditation
Accredited
Accrediting
Department for Business, Energy & Industrial Strategy (BEIS)
Standards and Accreditation Team
Regulatory Delivery Directorate
1 Victoria Street
London SW1H 0ET
enquiries@beis.gov.uk
3Archwilydd Cyffredinol CymruArchwilydd Cyffredinol Cymru
Swyddfa Archwilio Cymru
24 Heol y Gadeirlan
Caerdydd
CF11 9LJ

Auditor General for Wales
Wales Audit Office
24 Cathedral Road
Cardiff
CF11 9LJ
info@wao.gov.uk
4Assurance
Assurer
Sensitive Business Names Team
Financial Conduct Authority (FCA)
25 The North Colonnade
Canary Wharf
London
E14 5HS
SensitiveBusinessN@fca.org.uk
5Auditor General
Audit Office
England
enquiries@nao.gsi.gov.uk
National Audit Office
157-197 Buckingham Palace Road
London
SW1W 9SP

Scotland
info@audit-scotland.gov.uk
Audit Scotland
4th Floor
102 West Port
Edinburgh
EH3 9DN

Northern Ireland
info@niauditoffice.gov.uk
Northern Ireland Audit Office
106 University Street
Belfast
BT7 1EU

Wales
info@wao.gov.uk
Wales Audit Office
24 Cathedral Road
Cardiff
CF11 9LJ
6Auditor General for Northern IrelandNorthern Ireland Audit Office
106 University Street
Belfast
BT7 1EU
info@niauditoffice.gov.uk
7Auditor General for Scotland
Audit Scotland
Audit Scotland
4th Floor
102 West Port
Edinburgh
EH3 9DN
info@audit-scotland.gov.uk
8Auditor General for WalesAuditor General for Wales
Wales Audit Office
24 Cathedral Road
Cardiff
CF11 9LJ
info@wao.gov.uk
9Banc
Bank
Banking
Sensitive Business Names Team
Financial Conduct Authority (FCA)
25 the North Colonnade
Canary Wharf
London
E14 5HS
SensitiveBusinessN@fca.org.uk
10Brenin
Brenhines
Branding Manager
Communications Division
Welsh Government
Cathays Park
CF10 3NQ
brandingqueries@wales.gsi.gov.uk
11Brenhinol
Brenhiniaeth
Branding Manager
Communications Division
Welsh Government
Cathays Park
CF10 3NQ
brandingqueries@wales.gsi.gov.uk
12Chamber of Commerce/
Business/ Enterprise/ Industry / Trade / Training
England and Wales
enquiries@britishchambers.org.uk
British Chambers of Commerce
65 Petty France
London
SW1H 9EU

Northern Ireland
mail@northernirelandchamber.com
Northern Ireland Chamber of Commerce
22 Great Victoria Street
Belfast
BT2 7BJ

Scotland
admin@scottishchambers.org.uk
Scottish Chambers of Commerce
30 George Square
Glasgow
G2 1EQ
13Chartered AccountantEngland and Wales
generalenquiries@icaew.com
The Institute of Chartered Accountants in England and Wales
Chartered Accountants’ Hall
Moorgate Place
London
EC2R 6EA

Northern Ireland
hello@accountancyireland.ie
Chartered Accountants Ireland
The Linenhall
32-38 Linenhall Street
Belfast
BT2 8BG

Scotland
enquiries@icas.org.uk
The Institute of Chartered Accountants of Scotland
CA House
21 Haymarket Yards
Edinburgh
EH12 5BH
14Chartered SecretaryThe Institute of Chartered Secretaries and Administrators (ICSA)
Saffron House
6-10 Kirby Street
London
EC1N 8TS
memberssupport@icsa.org
15Chartered SurveyorRoyal Institution of Chartered Surveyors (RICS)
RICS Headquarters
Parliament Square
London
SW1P 3AD
contactrics@rics.org
16Community Benefit SocietyFinancial Conduct Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
consumer.queries@fca.org.uk
17Comptroller and Auditor GeneralNational Audit Office
Elizabeth 2
151 Buckingham Palace Road
London
SW1W 9SS
enquiries@nao.gsi.gov.uk

Other sensitive words require approval before incorporation are

Sensitive wordsSensitive wordsSensitive words
ComhairleCoimiseanComisiwn
Comisiwn Cynulliad Cenedlaethol CymruCommissionComptroller and Auditor General for Northern IrelandCo-operative
Co-operative Society
Council
Cymru
Cymreig
Cymraeg
CyngorCynulliad Cenedlaethol Cymru
Dental
Dentistry
Dentist
Dental Surgeon
Dental Practitioner
Diùc
Ban-diùc
Dug
Duges
Duke
Duchess
Ei Fawrhydi
Ei Mawrhydi
England
of England
English
FederationFinancial Conduct AuthorityFinancial Reporting Council
Financial Reporting Review Panel
FoundationFriendly SocietyFund
GovernmentThe Governor and Company of the Bank of EnglandGwasanaeth iechyd
Health and Safety ExecutiveHealth and Social Care BoardHealth centre
Health service
Health visitorHis Majesty
Her Majesty
House of Commons
House of Lords
HPSS
HSC
InspectorateInstitute
Institution
Insurance
Insurer
Judicial appointment
King
Law CommissionLicensingLlywodraeth
Medical centreMidwife
Midwifery
Mòrachd
Mutual
National Assembly for Wales
National Assembly for Wales Commission
National Audit OfficeNHS
Northern Ireland
Northern Irish
Northern Ireland Assembly
Northern Ireland Assembly Commission
Northern Ireland Executive
Northern Ireland Audit Office
Nurse
Nursing
Office for Nuclear RegulationOifis sgrùdaidhOilthigh
Ombudsman
Ombwdsmon
ParlamaidParliament
Parliamentarian
Parliamentary
Patent
Patentee
The Pensions Advisory ServicePolicePolytechnic
Post OfficePrifysgolPrince
Princess
Prionnsa
Bana-phrionnsa
Prudential Regulation AuthorityPrydain
Prydeinig
Public Health Agency
Queen
Reassurance
Reassurer
Regional Agency for Public Health and Social WellbeingRegional Health and Social Care Board
RegistrarRegistered SocietyRegulator
Reinsurance
Reinsurer
RiaghaltasRìgh Banrigh
Rìoghachd AonaichteRìoghail RìoghalachdRoyal
Royalty
Scotland
of Scotland
Scottish
Scottish Law CommissionScottish Parliament
Scottish Parliamentary Corporate Body
SeneddSheffieldSiambr Fasnach
Social ServiceSocietySpecial School
StandardsStock exchangeSwyddfa Archwilio Cymru
Teyrnas Gyfunol
Teyrnas Unedig
Trade UnionTribunal
TrustCharitable TrustFamily Trust
Investment TrustPension TrustSchool Trust
Trust companyTrust corporationUnit Trust
Tywysog
Tywysoges
Underwrite
Underwriting
University
Wales
Welsh
Wales Audit OfficeWelsh Government
Welsh Assembly Government
Windsor
Superseded Companies House forms

Superseded Companies House forms

Superseded Companies House listed below are for your reference only and would only be valid for filing of your company information before 1 October 2009.

For your company filings beginning or after 1 October 2009, you must use the new Companies House forms for filing. The new forms have different sets of referencing to that of the superseded companies house forms.

Form referencePurpose of the form
Form 288aAppointment of director or company secretary
Form 288bDirector or company secretary resignation
Form 288cChange of particulars for director or company secretary
Form 225Change of accounting reference date
DCA formDormant Company Account if your company has not traded during the year
Form 363aAnnual Return to be filed every anniversary since incorporation
Form 190Location of debenture holders
Form190aLocation of register of debenture holders in a non-legible format
Form 287Change your Registered office address
Form 353Location of register of members
Form 353aLocation of register of members in a non-legible form
Form 88(2)Return of allotments of shares
Form 123Increase in nominal capital (with resolution)
Authentication code

Authentication code

Authentication code is required when come to filing your company’s documents online. The code issued by Companies House. Your authentication code is the electronic equivalent of your limited company director’s/sectary’s signature. The code is made up of 6 digits or mixture with numbers and alphabets.

You may find your authentication code in your company’s incorporation emails sent to you by your company formation accountants.

Companies House will also send your authentication code by letter to your company’s registered office address.

Misplaced your authentication code

You may request your code from Companies House again. They will re-send your code by post to your company’s registered office.

Change your authentication code

You may request Companies House to change or reset your company’s authentication code to your preferred or easy for you to remember password. You must put your request in writing and the letter must be signed by your company director.

No access to mails at your company’s Registered Office address

In situation where you no longer able to access mails send to your company’s registered office address for whatever reasons, you may write to Companies House explaining your situation.

Send in the form AD01 to give your new registered office address together with the explanation letter. Companies House will update your registered office address and then re-send the authentication code to your new company’s registered office address. This is a very lengthy process and it could take weeks. Companies House would not send your authentication code to anywhere else except your company’s registered office. They do not accept any excuse.

If your confirmation statement or company account is overdue and Companies House already proposing to strike off your company, our accountants would be able to help you to stop the striking off process and get your authentication code quickly.

Types of company shares

Types of company shares

There are four main types of company shares as defined by the Companies Act.

When forming your limited company, it is important to give a good thought about the types of company shares you are going to create and issue to your shareholders.

Your company may have as many different types of company shares as you wish, all with different legal right and conditions attached to them.

Typically limited company shares types:

Ordinary share

This type of share has no special rights or restrictions. Your limited company may divide the ordinary shares into classes of different values.

Preference share

This type of share carries a right that gives priority when come to annual dividends distribution before other classes of shares.

Cumulative preference

This type of share carries a right that if your limited company cannot pay the dividend in one year, it will carry it forward to successive years.

Redeemable share

This type of share is issued with agreement that it will buy them back at the option of either your company or your shareholder after a certain period or on a fixed date. However, your limited company cannot only have redeemable shares.

Once you decided the types of company shares your limited company are going to issue, you are to complete your statement of capital giving details of your company shares types.

At every anniversary of your company incorporation, you are to update your statement of share capital whether there is any changes, as part of your Confirmation statement filing.

Update share capital

Update share capital

Update share capital must be registered with Companies House by submitting appropriate Companies House forms.

It is common for a limited company registered in the United Kingdom to change its share capital structure to suit its business needs and shareholders requirements.

The changes in your share capital must also be included in your confirmation statement.

Below are list of Companies House forms to update share capital.

Form reference Purpose of the form
SH01Return of allotment of shares
SH02Consolidate, sub-divide, redeem shares or re-convert stock into shares
SH03Notify a purchase of own shares
SH04Notify a sale or transfer of treasury shares
SH05Notify a cancellation treasury shares
SH06Notify a cancellation of shares
SH07Notify a cancellation of shares: Public company
SH08Notify a name or other designation of class of shares
SH09Allotting a new class of shares by an unlimited company
SH10Give notice of particulars of variation of rights attached to shares
SH11Give notice of a new class of members
SH12Give notice of particulars of variation of class rights
SH13Give notice of name or other designation of class of members
SH14Notify a redenomination of shares
SH15Notify a reduction of capital following redenomination
SH16Give notice of application to court to cancel special resolution
SH17Give notice by the company of application to cancel special resolution
SH19Statement of capital when reducing capital in a company
SH19Statementof capital when re-registering from unlimited to limited
SH50Apply for a trading certificate for a public company
980(1)Notice of takeover offer to non-assenting shareholders
980(dec)Give notice of declaration to non-assenting shareholders
984Give notice of takeover to non-assenting shareholders
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