Steps to Setting Up an Online Shop from Home - Legal Issues
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If are you new to setting up your own online shop, please click here to read our 5 steps to selling online article.
With more and more working professionals, full time parents, retired folk and students working from home either as a full time business or to suppliment their income, there is growing confusion over the relevance of out-dated legal requirements relating to your property and other statutory obligations.
This article explores some of the issues we are obliged to consider when working from home. Please read our earlier article for advice on how to open your own eCommerce shop.
Council Tax and Business Rates Liability
If you are planning on setting up an online shop from home, one of the steps in your planning is to consider the impact on your Council Tax. Strictly speaking, any room in a residential property used solely for business purposes will be subject to business rates set by your local Council.
If you only use one room dedicated for running your online shop from home, the rest of the property will be charged at the usual Council Tax rates.
Further reading on the effects upon Council tax and business rate liability.
What Type of Business Are you?
One of the most important steps to setting up a shop from home is to decide what type of business is most appropriate to run your online shop through.
You can choose between becoming a sole trader, work as a partnership, or set up a Limited Company. Each is a different type of legal entity in its own right and come with their own set of legal requirements in terms of annual reporting and paying taxes.
The majority of our shop owners declare themselves as self-employed but for the best advice we recommend reading Business Link's practical advice for business help pages.
Should I Register for VAT?
Value Added Tax is the Government's levy on a wide range of products. Rather than collect the Tax directly, the Government allow traders to register for VAT and add the tax to the purchase price of their products.
Every 3 months the business then totals up the amount of VAT they have charged and the amount of VAT they have had to pay on business supplies and expenses.
If they have charged more VAT than they have paid out in business expenses, the business has to return the excess VAT amount back to Customs & Excise, the Government department responsible for VAT.
If the business has had to pay out more VAT than they have collected through sales, they can ask for a VAT rebate which is typically paid to the business bank account directly or as a cheque.
If you are expecting to invest a lot of money in setting up your online shop, it can make sense to register for VAT from the outset in order to reclaim the VAT on your business start-up costs and expenses.
For more advice, please read Business Link's When to Register for VAT help page.
Practical Considerations for Working from Home
Working from home running your own web shops requires more than just setting up your online shop and addressing the various legal obligations.
Of equal importance is how you manage your time and work to a basic plan of action, all losely bundled together under time management.
When setting up your own online shop, you may need space to store stock (products bought from wholesale suppliers at trade price), quiet time perhaps a few times a week each day to work on your shop and most importantly, know from the outset how much money you can afford to invest in your business and make it last!
With Internet Retailer's easy to use eCommerce shops we provide guidance on all aspects of setting up your own online shop from home, guiding you (as required) through all the steps to getting ready to accept your first orders and ongoing advice when needed.