EVENT RECAP: TAKING CARE OF BUSINESS
Two of the most important areas to get right when you’re starting a business are the legal and accounting side of things, but knowing where to start can be pretty tricky – so I was delighted to host a Taking Care of Business masterclass at Vice UK’s London office a few weeks ago. Something of a ‘business 101 for creatives’, we were joined by experienced accountant Kate Levy (Head of Creative Businesses at Wilson Wright LLP) and intellectual property lawyer Amanda McDowall (Trademark Attorney at Olswang LLP), who each gave presentations on how to make sure your business is set up for success from the get-go, before hosting private one-on-one advice sessions. We covered everything from the importance of protecting your brand through trademarking (and how to do that), to how to put the right structures in place to make sure your business is ‘investor-friendly’, and of course, how to keep HMRC happy.
Huge thanks to my old stomping ground Vice UK for hosting us, and to Kate and Amanda for sharing their expertise with us. A heads-up for those of you who weren’t able to join us: I cover the basics of how to protect your creative work, and managing your finances extensively in Little Black Book: A Toolkit For Working Women, which you can pre-order here. In the meantime, I’ve summarised a few of their top tips below. Enjoy!
Boring but necessary disclaimer: these notes have been summarised to the best of my ability, and were correct as of March 21st. They are meant to give general guidance of the various legal and financial mechanisms referred to therein, and do not constitute formal legal or accounting advice either from myself, or from Kate Levy and Amanda McDowall. If in doubt – speak to a professional!
THE LEGAL STUFF
Choosing a trademark…
When choosing a brand name, make sure you pick something unique and interesting that one that no-one else has used before - You could even make it up! Don’t pick something that is descriptive of the goods or services to which the trademark relates. In laywoman's terms, that means if you're a sofa seller, don't expect to be able to trademark something like 'Sofas.com'
Do your research to make sure that there’s no-one else (ideally at all, but certainly within the same territory as you) using a similar trademark, that might be deemed as confusing to potential consumers. As a first step, you should conduct a search via the IPO (UK) and EUIPO (EU) trademark databases, as well as conducting a general Internet and social media search for anyone already operating under the name under an unregistered right.
If you’re on a budget…
It is possible to file a trademark yourself within the UK without assistance from a lawyer (the USA is a totally different kettle of fish..) and both the IPO/EUIPO offices offer a wealth of free information and guidance on their websites. The British Library Business and IP Centre also has a (very helpful!) resident IP expert who can give you pointers. If in doubt however – get a lawyer to do the application for you.
On commissioning work…
If you commission someone to do creative work on your behalf, there is no legal presumption that you automatically own the copyright to the work they create – even if you pay them – unless you have an ‘assignment’ (i.e. buy the rights from the person in question) and including wording to the effect of “I hereby assign…” as part of your contract. This is especially relevant if, for example, you’re getting a friend to do some work for you as a favour.
FYI – a license isn’t an assignment. It’s just a permission to use, which means you don’t own the work in question.
If you’re employed by someone else…
The presumption is that your employer owns the work you create ‘in the course of employment’. So if, for example, you work for a magazine and blog in your spare time – you need to make sure those two outputs are clearly delineated, and there’s no way that it could be assumed the magazine you work for owns the copyright to your blog content. Got it?
THE ACCOUNTING STUFF: A Q&A
Do I need a separate bank account for my business?
Which bank is the best?
High street banks are all pretty similar, so go to the bank you already hold personal accounts with – they’ll already have all your details on file, which will speed up the account opening process.
Should I form a limited company?
A complicated question! Generally if your main reason for setting up a company is the perceived tax advantage, setting up as limited company isn’t really worth it in light recent changes to the tax system by the government. Any tax savings you do make will, in most cases, be wiped out by the accountancy fees required to fulfil your obligations as a company director. That’s the short answer.
Having said that, there are other reasons you might want to consider forming a limited company, including the benefits of separating your personal assets, interests – and liabilities – from those of your company. Not to mention that being a limited company adds an air of professionalism when working with other companies and clients.
How do I pay myself, and how much do I pay myself?
As long as you leave enough money in your account to pay your tax bill, you can take the rest of it. How do you do that? You transfer the money from your business account to your personal account. Easy!
What taxes will I be liable for?
If you decide to operate as a sole trader, you’re liable for income tax on the profits of your business. For the unaware: profits = revenue – business expenses.
If you have a company, the company pays corporation tax, which is a flat 20% on company profits. What’s left over after company tax has been paid is called ‘company reserves’ and if you send those company reserves to yourself as a shareholder/director (i.e. draw a salary), you may well have to pay income tax on that as well.
How do I pay other people who work for me?
If the person in question is an employee (as defined by the rules issued by HMRC), they’ll need to be paid under PAYE, and you’ll need to set up a payroll scheme with HMRC. If they’re self-employed, they simply invoice you an agreed fee, and are responsible for their own tax and NI contributions.
Do I need to register for VAT?
If you have sales or turnover of £83,000 or more, you have to register for VAT under the law. Even if your sales fall below that threshold, if you’re a small creative business, there may still be some financial benefits to registering under the flat rate VAT scheme – ask your accountant to find out if those apply to you.
What paperwork do I need to keep?
By law you need to keep records – i.e. receipts, proof of your expenses, sales etc. for 6 years.
Is there software I can use to make my life easier?
Yes! Xero, Sage or Quickbooks. Xero is pretty user-friendly for those unfamiliar with book-keeping.
Can an accountant help me raise finance?
Again, yes! Get in touch with Kate if that’s something you’re interested in.
Finally - if you missed out on one of Kate's handouts breaking down the different tax structures for the self-employed, I've got ya. Download it here.