4 Considerations When Starting An Online Business

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The rise of the web and e-commerce has become a driving force to lower the barrier for fledgeling entrepreneurs. All you need to do is buy a domain, make a website, and off you go, right? It may sound very simple, but an online company is still a business, after all. You still have to deal with taxes, customer service, liabilities, and the security of your investment.

So, don’t be discouraged as you already have an advantage against your competitors—the Internet. Not all businesses have an online presence. If you’ll use it to gain more customers, you could reap the benefits that firms like www.packagingworld.co.uk and countless others are enjoying. 

business digital online is small business a new start up in the present for online shop. By woman and man owner have a warehouse used to send to customer. SME entrepreneur concept

Here are four considerations you should think about before setting up shop in the online world:

  1. Decide on Your Business Structure

For all businesses, owners should decide if they want to incorporate or not. Although incorporation isn’t required, especially for small companies and some partnerships, incorporation does help in shielding the owner from liability concerning the business. So, in deciding to incorporate your business, your assets, such as your bank accounts, house, and investments, aren’t at risk if your business goes under.

Many people think corporations should employ hundreds or thousands of employees, but this only applies to the more traditional ‘C-corps.’ This type of corporation allows you and your shareholders to be taxed separately from your firm. C-corps are also the most common type of corporation, and it will make your organisation subject to corporate income tax.

But your choice is not limited to C-corps. Here are the other types of companies you can form:

  • Private Company Limited by Shares (LTD): This is a type of corporation that can only be owned by a small number of shareholders. But it will still give you protection from the business’ liabilities if you have invested in the firm.
  • Limited Liability Partnership: The UK doesn’t recognise LLPs as partnerships but as incorporated entities, which makes them closer to C-corps. If you decide to form an LLP, you and your shareholders would be responsible for your negligence or misconduct. But unlike other types of incorporation, partners can run and manage the business.

2.  Learn How to Deal with Taxes

If you don’t have other sources of income like a salary from a day job, you need to pay a sole trader tax on the profits made by your business. But this also depends on what products and services you offer. If you qualify for the said tax due, you’ll only start paying income tax for the profits made by your business if it exceeds GBP£12,500 and you’re under 75.

If your business still hasn’t made GBP£12,500, you’re over 75 years old, or you have another source of income, you might need to pay your income tax sooner.


3.  Decide Where to Locate Your Office

Since you’ll be setting up a business, you should take advantage of as many tax perks as you can. So, home office deductions should make a lot of sense for your online business, right?

Not really. The HM Revenues and Customs or HMRC has set some guidelines if you plan to use your home as an office. They can claim a flat rate deduction or claim a reasonable amount based on your actual expenses. These might cover your bills for electricity, heating, water, and rent or mortgage.

Thus, you must keep track of bills or other evidence to the amounts you’ve paid and the basis of how you calculated the proportion. This will come in handy when your business undergoes tax audits.

These factors can also affect the amount you’ll receive from the HMRC:

  • The size of your home office compared to your whole property
  • The number of years or months you’ve spent working from home
  • The equipment you’re using and your average power consumption
  • If you use a room only for business or for both business and domestic purposes
  • How many people currently reside on the property


4.  IT Security

Your business is very reliant upon the Internet, and it’ll cause a lot of headaches if you don’t prioritise your website’s security. Your credibility with your customers can also be gravely damaged if their data is leaked. Also, your business operations, such as inventory management systems, accounts receivable and payable, and customer service systems must be secure at all times. You must invest heavily to secure the IT systems you’re planning to use. 

Aside from online security, you should also learn about online marketing requirements and laws. If you rely on communicating with your customers through email, you should be extra careful. The Anti-Spam law prohibits businesses from sending unsolicited or spam emails to their customers. But you can still send unsolicited emails to corporate clients if they’re relevant to their industry.

This law is enforced by the Information Commissioner, and the penalties can reach up to GBP£500,000. A small business usually doesn’t have enough funds to cover the possible fines, so it pays to be careful.


Final Thoughts

Although some of these steps might be difficult to follow, especially for first-time business owners, it could help you set it up the right way. Being meticulous when it comes to planning can allow you to see what you need to adjust, such as the financial aspects of opening a business.

But once you get all of these things right, the real work has just begun. It’s now time to start putting your plans into action and start selling to your first batch of customers.