BUSINESSES DON’T PLAN TO FAIL – THEY FAIL TO PLAN

seanSean O’Flaherty, Director, Rosscot Chartered Accountants, gives his advice on starting a business in Jersey and the pitfalls to avoid during those vital early days.

Every business begins with an idea and even the good ones can fail. Your idea is as individual as you are but no matter what it is, it’s vital that you research your market if you’re thinking of starting your own business.

Additionally, you need to check that you are eligible to set up a business in Jersey. The answer is ‘yes’ if you have lived in Jersey continuously for five years, or are Entitled, Licenced, or Entitled to Work. You are also eligible if you are the spouse of someone who is Entitled, Licenced, or Entitled to Work.

You have to identify whether you should be a sole trader, partnership or limited company. They all have their own attributes:

Sole Trader: it’s just you

  • Set up can be cheaper and simpler
  • You can produce simple accounts
  • You can form a limited company later
  • You are personally liable for all your business debts
  • Your ability to raise money is limited
  • An application for a business licence is required via the Population Office
  • You can register a trading name with the Jersey Financial Services Commission for a small fee

Partnership: you are going into business with at least one other

  • Two or more self-employed people work together as partners
  • Setting up can be simpler and cheaper than a limited company
  • You can produce simple accounts
  • You can form a limited company later
  • You may be able to raise money by introducing new partners
  • You are liable for all the partnership business debts even if the other partner was responsible for incurring them
  • An application for a business licence is required via the Population Office
  • You can use your own names or register a trading name with the Jersey Financial Services Commission for a small fee

Limited Company:

  • This is a separate legal entity, distinct from its shareholders, directors and employees
  • Increases credibility
  • Your liability is limited to the amount you agree to invest in the company by buying its shares. Except for personal guarantees
  • Does not eliminate liability for ‘wrongfully’ or ‘fraudulently’ trading: you would be personally liable as a director in these circumstances
  • Can be easier to raise large sums of money, or to sell part of the business
  • Can be easier to deal with succession issues as ownership is passed on to family members / others
  • Tax advantages
  • It’s more costly to set up than a sole trader or partnership
  • Annual costs will be higher requiring the completion of an annual return
  • There will be some costs in winding up the company when ceasing to trade
  • An application for a business licence is required via the Population Office

If you are going to be self-employed you must register with the Social Security Department and contact the Taxes Office. Sole traders will also need to produce self-employed trading accounts. If you set up a limited company, your director’s fees and dividends will impact your personal tax liability.
You will need adequate insurance to protect against any claim made by a member of the public (public liability insurance) or a client (professional indemnity insurance). If you are employing staff you also need to have employer’s liability insurance in place. If you are holding data on clients and even your employees you will need to notify and register your business with the Data Protection Office.

It’s vital to seek guidance from an accountant early on to ensure you have the correct advice and structure in place. This will save you time and money and offer an extra supportive network to your business that you will need from time to time.