Starting Up a Couriers Business - The Boxby Tips for Survival during a Credit Crunch.
Things to do Before Starting your Courier Business
There are a few things that you need to get in place before starting your courier or delivery business. Many of these things are the same as if you were starting up any kind of new business, and aren't specific to couriers. There are lots of websites offering advice on business start ups. For the purposes of this article, advice here is addressed at anyone wanting to start their own courier company.
Registering a Courier or Delivery Business with the Inland Revenue.
If you are setiing up a new business there are 3 main types of business that you can start; Sole Trader, Partnership or Limited Company
(1)Sole Trader Courier Businesses
This is the most common, particularly for the "man & van" or "white van man" type of courier companies. As a sole trader the business is an extension of you, you are taxed on the profits that your delivery business makes, rather than the amount of income that you take out of the business in the form of drawings. You don't pay PAYE, instead you pay tax at twice a year, in the form of Self Assessment, and this will also include an annual bill for National Insurance.
As a sole trader, the assets, debts and liabilities of the business remain yours. Any contracts, or bank accounts, or lease or finance agreements for van etc, will all continue in your own name (may with a trading name such as A. N. Other, trading as Busy Couriers). Your courier business is not a company, so it does not pay corporation tax, or need registering with companies house.
A sole trader business is usually the best way to start, particularly because if your revenues or profits for the first year or so are quite low, the inland revenue will accept a shortened tax return, which is quicker and easier for everyone involved.
You can register a sole trader courier business with the Inland Revenue with one easy form, or telephone call. Follow this link to the Inland Revenue's site for more information.
(2) Parnerships
A Partnership is similar to a sole trader business, but it involves more than one owner. This would be good if perhaps you wanted to join up with another person looking to start a courier business. Partners share the total profits of the business based on set percentages, not on income or profit generated from particular courier customers. Both partners own the assets, liabilities and debts of the business, in the percentages agreed in the partnership agreement.
If you are thinking about setting up a new courier business in the form of a partnership then we would recommend that you get your partnership agreement properly worked out, and drawn up by a solicitor. It is a very common document so the expense will not be huge. However it does protect both partners, and gives a set of rules, for the partnership to trade by.
One common use of a partnership agreement for a courier business, is when a husband and wife run a courier business together. The husban maybe doing the day to day delivery jobs, the wife doing the invoicing, answering the calls, booking the delivery jobs in etc.
(3) Courier Companies - Limited Companies
Limited companies can be set up quickly and easily, and relatively cheaply. However, there are hidden costs of operating as a courier company. Companies must submit annual returns and accounts to Companies House, failure to do so will result in fines, and the annual return costs £30 a year to submit.
A courier company will need an accountant to prepare the final accounts, this is because the accounts need to be produced in accordance with set formats, and accounting rules & regulations.
If you operate as limited Courier Company, then the company will own the assets, debts and liabilities, the bank account will be in your courier company's name, and the same with all of the lease and finance and ownership details for your delivery vans. Limited liability means that your personal responsibility for the debts of the business is restricted to the amount you have invested in the company.
One word of warning though, regarding limited liability for couriers, and banks. The bank will normally always take a personal guarantee from the shareholders/directors of the company. This means that your own personal assets will still be at risk from the bank, should your courier company fail. Don't set up a limited Courier Company and expect this to protect you from any defaults with the bank.
If you are considering setting up your courier business as a limited company, then we would recommend you talk to an advisor at Business Link, just to make sure this really is your best option.
