OUGD502 Business Types

Following todays first Life's a Pitch session we were set research into four different types of business.

1. What is a sole trader?

Definition: A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.

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'A sole trader is a person who sets up and owns their own business. They may decide to employ other people but they are the only owner. A sole trader has unlimited liability'

As a sole trader, your business is owned entirely by you, grown by you and ultimately succeeds or fails by you. This also means you are entitled to all profit that the business makes.

Becoming a sole trader is simple. All you have to do is register your business name and you can start trading.

There are huge incentives to becoming a sole trader but with them come terrifying or - depending on your personality - gratifying, side effects.

Some of the most famous entrepreneurs in the UK started out as sole traders. From Lord Sugar, who launched his first business with £100 selling aerials out of the back of a van, to Duncan Bannatyne, who started his entrepreneurial career with an ice cream van back in the eighties.

The benefits of being a sole trader

• Any profit after tax that the business makes is yours to keep

That's right. You are the sole owner and any money you make whether it's £10m or 10p will land squarely in your pocket.

• You have full control over your business

Forget pushy investors. As a sole trader, no one can tell you what to do. Your business and your future are in your hands. This not only makes decision making faster but also means if it goes wrong there'll be no one breathing fire down your neck. Plus you set your own targets for growth.

• Improved customer service

Sole traders can offer a more personalised approach to their customers. You are the only person the customer interacts with. This can result in strong relationships that can turn one-off customers into loyal repeat buyers of your products or services.

• Less red tape

To register yourself as a sole trader all you need to do is inform HRMC that you intend to be self-employed and you can start trading straight away.

• Accountants charge less

Accountants generally charge lower rates for sole trader accounts as there is less work for them to do. As a sole trader all you're required to complete is a profit and loss account.

• If you feel like taking a day off, you can

PR consultant Michelle Bayliss has been a sole trader for 19 years. She believes that, "Having the freedom to strike a perfect balance between work and social life is the best thing about being a sole trader."

The challenges of being a sole trader

• Liability is all yours

As a sole trader the law sees you and your business as one. This means should your business fall on hard times and find itself in debt, you as the business owner will be liable. If the business is declared bankrupt, your personal assets are on the line. This also applies if a customer sues your business. In the eyes of the law, they're suing you.

• Pressure adds up

As a sole trader responsibility for everything comes down to you. You make the decisions. The success or failure of the business rests on one person's shoulders: yours.

• You must be a self-starter

You have to do every job required from sales to web development. There's no one there to help you out when you're busy. It's down to you to stay on top of everything, which inevitably means working longer hours to make sure everything's in order.

Sole trader Jane Lee owns Dexterity.com and is a technology pr consultant. She confesses, " I can get lonely and it's hard to maintain morale when work isn't going smoothly."

• If you don't work, you don't get paid

Although you can book holidays or have a day off sick without anyone having to seek approval, it also means that your business is shut down when you do so.

How to get a grant as a sole trader

There are over 6,000 grants available for UK businesses and many of them specifically target sole traders. Grants are a great way of funding your business as they can provide capital for specific projects. Most importantly, the money doesn't have to be paid back.

Qualifying for a grant can also give banks confidence in you and your business, which could lead to extra funding.

The sole trader small print

• Remember, as a sole trader, your profits are taxed as income you must keep records showing your business income and expenses.
• You have to pay fixed-rate Class 2 National Insurance Contributions (NICs) regardless of any profits you make.
• Although, if your earnings are below £5,315 per year (2011-2012) you might not nee to pay.
• You will pay Class 4 NICs (7% on annual profits between £7,225 and £42,475 (2011-12) and 2 per cent on any profit over that amount) on any profits.
• You need to register for Self Assessment and complete a tax return each year (link to the register for self-assessment article.

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2. What is a limited company?

Definition: 

1. a private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested.

What a limited company is

A limited company is an organisation that you can set up to run your business.

It’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

Ownership

Every limited company has ‘members’ - people or organisations who own shares in the company.

Directors are responsible for running the company. Directors often own shares, but they don’t have to.

Legal responsibilities

There are many legal responsibilities involved with being a director and running a limited company.

Most limited companies are ‘limited by shares’.

This means that the shareholders’ responsibilities for the company’s financial liabilities are limited to the value of shares that they own but haven’t paid for.

Example
A company limited by shares issues 100 shares valued at £1 each when it’s set up. Its 2 shareholders own 50 shares each and have both paid in full for 25 of these.

If the company goes bust, the maximum the shareholders have to pay towards its outstanding bills is £50 - the value of the remaining 25 shares that they’ve each not paid for.

Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.

Other types of company

Most companies are private companies limited by shares. There are 3 other types.

Private company limited by guarantee

Directors or shareholders financially back the organisation up to a specific amount if things go wrong.

Private unlimited company

Directors or shareholders are liable for all debts if things go wrong.

Public limited company

Companies where shares are traded publicly on a market, like the London Stock Exchange.

How to set up a limited company

You must set up the company with Companies House and let HM Revenue and Customs (HMRC) know when the company starts business activities.

Every financial year, the company must:

• put together statutory accounts
• send Companies House an annual return
• send HMRC a Company Tax Return

The company must register for VAT if you expect its takings to be more than £81,000 a year.

If you’re a director of a limited company, you must:

• fill in a Self Assessment tax return every year
• pay tax and National Insurance through the PAYE system if the company pays you a salary

3. What is an 'ordinary' business partnership?

In a business partnership, you and your business partner (or partners) personally share responsibility for your business.

You can share all your business’ profits between the partners. Each partner pays tax on their share of the profits.

Legal responsibilities

You’re personally responsible for your share of:

• any losses your business makes
• bills for things you buy for your business, like stock or equipment
• If you don’t want to be personally responsible for a business’ losses, you can set up a limited partnership or limited liability partnership.

A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’, and can also be a partner in a partnership.

How to set up as a business partnership

You must choose a ‘nominated partner’. This is the partner who will be responsible for keeping business records and managing tax returns.

Registration for the nominated partner

The nominated partner must register the partnership with HM Revenue and Customs. When they do this, they will automatically register personally for Self Assessment.

Registration for other partners

You must register for Self Assessment to pay your personal tax and National Insurance on your share of the partnership’s profit as soon as possible after you start trading.

If you register the partnership or individual partners later than 5 October in your business’ second tax year, you could be charged a penalty.

Example
If you start a partnership or become a partner during tax year 2013 to 2014, you must register before 5 October 2014.

Partnerships’ tax responsibilities

The nominated partner must:

• send a partnership Self Assessment tax return every year

All the partners must:

• send a personal Self Assessment tax return every year
• pay Income Tax on their share of the partnership’s profits
• pay National Insurance

The partnership will also have to register for VAT if you expect its takings to be more than £81,000 a year.

4. Limited partnership and limited liability partnership

Limited liability partnerships

The partners in a limited liability partnership aren’t personally liable for debts the business can’t pay. Their liability is limited to the amount of money they invest in the business.

Limited liability partnerships are most often set up by professional services firms, like solicitors or accountants.

The Companies House website has information about how to set up a limited liability partnership.

Limited partnerships

The liability for debts that can’t be paid in a limited partnerships is unequally shared by its partners. This means:

• ‘general’ partners can be personally liable for all the partnerships’ debts
• ‘limited’ partners are only liable up to the amount they initially invest in the business

The Companies House website has information about how to set up a limited partnership.

Tax for limited liability and limited partnerships

Every year, the partnership must send a partnership Self Assessment tax return to HM Revenue and Customs (HMRC).

All the partners must:

• send a personal Self Assessment tax return every year
• pay Income Tax on their share of the partnership’s profits
• pay National Insurance

You must also register the partnership for VAT if you expect your business’ takings to be more than £81,000 a year.

OUGD502 Contacting Studios

I wanted to ensure that I got plenty of work experience over the summer to make sure I was in a good standing when returning for 3rd year. I sent my CV, cover letter and examples of work that I feel best exhibit my personal approach to designing, to a selection of design studios all over the country, mainly to ones situated in London where I would be living for the summer, but some others to places that I knew I would be able to stay with a friend or family member.

After sending them out, I heard back from a handful but was able to cement two internships to take place over July, two weeks at a studio called Holy Cow in Suffolk, and another two weeks at Nucleus in Thames Ditton.

Holy Cow:

We’re here to help you make your business grow. To help people understand what you do, or to persuade them to buy more of your products or services. We do this by understanding where you’re coming from, and where you want to go.

We’ve made our home in a former dairy surrounded by farmland and a stones throw from Martlesham Creek. Our studio is relaxing, airy and inspiring, an ideal creative space, where original features sit alongside the latest design technology.

We believe that creative excellence is the cornerstone of any successful branding, packaging, literature or digital project; that practical can still be beautiful; that design thinking should always be rigorous, relevant and refreshing. If we specialise in anything, it’s in giving brands an individual and appropriate voice. A voice that rings true and clear and resonates with personality. We help you communicate your messages so that audiences will remember and respond to them. All of this is underpinned with a friendly down to earth team approach.

Examples of work:

Nucleus:

About us

Nucleus is a brand consultancy with a difference. Not only do we create and capture value for our consulting clients, we also practise what we preach: combining our brand, technology and intellectual property know-how in unconventional risk-reward relationships; or backing our ideas by launching our own ventures.

Founded in 1979, Nucleus has long been an innovator, continuously at the forefront of brand, internet and now intellectual property consulting. We have combined organic growth with strategic acquisitions, such as internet services specialist, Equire in 2004 and intellectual property experts Hallmark IP in 2005 (now operating as Nucleus IP), to create a unique and highly talented 50-man team.

Today, Nucleus is unique in offering a seamlessly integrated Brand + Digital + IP service, which enables us to deliver new brand and product names and brand proposition projects quickly, seamlessly and cost effectively. We approach even digital projects from a brand perspective to ensure that all the brand assets we create are available, registerable and can be protected in all the markets and media our clients operate in. 

At the end of the day, every project is a brand project and if your business really is your brand, every investment should yield a tangible return.

Examples of work:

Dunhill

A global distribution strategy for a luxury brand

Brief

In 2005, Alfred Dunhill’s then CEO, Simon Critchell, commissioned Nucleus to assess global e-commerce opportunities for the Dunhill brand against a background of Richmont board scepticism of e-commerce in the luxury sector.

Solution

We conducted a detailed review of Dunhill’s global distribution strategy and assessed their product range for suitability for e-commerce. This research included an online survey of customers pre-disposition to e-commerce, brand recognition in markets not served by retail distribution and channel conflicts and global pricing policy. From this research we proved that there was huge latent demand for the Dunhill brand in markets where retail distribution was thin or non-existent – which e-commerce could cost-effectively satisfy.

We then created an e-commerce business plan based on our own model which proved compelling, even for those members of Richmont’s board who, at the time, didn't believe e-commerce was suited to luxury brand marketing.

Following approval to proceed we advised Dunhill on all aspects of e-commerce, including product ranging and fulfilment options, content architecture and website design and operations.

Results

Online sales were an immediate success, exceeding even our most ambitious modelling. In markets like Korea, where no retail presence existed, e-commerce allowed customers to acquire the brand for the first time and in the US, where distribution was sparse, the brand became available to all.

By 2010 Richmont had become strong advocates of e-commerce in the luxury sector, launching e-commerce websites for many of its brands and acquiring Net-a-Porter for £225m.

Ede & Ravenscroft

An unrivalled heritage brand, updated

Brief
As robe makers to every British monarch since 1689, Ede & Ravenscroft has an unrivalled heritage of quality and craftsmanship in tailoring. In more recent years, E&R has rapidly diversified its services to include menswear, graduate gown-hire and photography. The company is one of very few organisations with permission to use all three royal warrants.

E&R, however, was concerned that its brand had been diluted over time, and was being used inconsistently across the organisation. Nucleus was asked to review the whole brand strategy, including the definition of a brand proposition, and to assess its brand architecture, website and marketing communications.

Solution
We assessed E&R's business requirements, interviewing all senior employees, including board members, customers and influencers. We subsequently recommended that the brand required evolution rather than revolution in order to effectively articulate its heritage and enhance its reputation for excellence and innovation. We created a proposition that engaged their demanding and diverse audiences over each of their business units, and then designed detailed guidelines that brought the brand up-to-date – giving it full credibility within its peer group.

Results
E&R’s reputation continues to grow: the company has consolidated its near monopoly in graduate gown-hire (96% of the UK market), and their brand proudly stands alongside other heritage London tailors such as Gieves & Hawkes.

First Direct

A pioneering example of online banking

Brief
During 1996 the UK's first telephone banking service wanted to become the first online bank and asked Nucleus and ICL Fujitsu to develop a distinctive, on-brand experience for its First Direct PC Bank service.

Solution
Nucleus ensured that First Direct’s distinctive brand identity was migrated effectively to a digital environment, with simple, fast, functional and easy-to-use interfaces that downloaded quickly, even in the era of dial-up. We worked with Fujitsu to build the back-end and integrate the server architecture into the client's systems, ensuring that the site was also robust and secure.

In order to ensure the best service experience, only a certain number of customers were allowed to use the service until the platform was proved to be scalable. Once this testing was complete the full service was launched to all First Direct account holders.

Results
When the site launched in 1997 there were 20,000 customers on the waiting list. Within two years, more than one million customers used the service and the cost of customer transactions fell from around 30 pence (via the telephone) to just 2 pence.

Henriques & Henriques

Everyone needs revitalising once in a while

BriefMadeira is a drink with a problem. An image problem. So consumers don't buy it in the quantities they used to. Since the 15th Century Henriques & Henriques has made Madeira wines of outstanding quality, planting its first vines in 1425, following orders from Prince Henry the Navigator. However, following Madeira wines falling from favour, it has come to be seen as an unfashionable and somewhat “fuddy duddy” drink. Time for a little revitalisation.

SolutionTo change these perceptions and revitalise this brand of fine quality of H&H's Madeira wines, Henriques & Henriques majority owner, John Cossart, commissioned Nucleus to painstakingly re-invent the brand in a soup-to-nuts process. A new Henriques and Henriques brand identity was created with a new and elegant expression of the Henriques & Henriques brand name and a double-H monogram. Then a distinctive new bottle was designed, prototyped, tested and manufactured, with new labels to distinguish between grape varieties and 3, 5, 10, 15 and 20-year-old wines.

ResultsWhere distributors and retailers had been reluctant to order, post re-launch whole new markets opened up for H&H. The commercial effect of the re-brand has been considerable, helping to secure the future of this venerable fine wine producer.

InLuxury

An upmarket brand for Teletext Holidays

Brief
As part of a major market segmentation exercise, in 2007 Teletext Holidays selected Nucleus to create a new luxury brand that they could use to target the growing long-haul, 4 and 5 star luxury market.

Solution
Over a period of six months we delivered a seamlessly integrated programme including: the brand name and proposition ‘InLuxury – the only way to holiday’, trade mark applications and registrations, domain name acquisition, technical architecture and website design, build and technical integration. Much of the technical integration was undertaken by our offshore development team, based in Lucknow – under our partnership with Tata Consultancy Services (TCS) working under the direction of our UK technical team. The solution is based around Ektron 400 CMS content management system, which allows easy editing of content. Analytics are by Omniture.

Results
The new brand and website was launched in July 2007. It quickly established itself as a premium showcase for luxury holidays within the Teletext group, achieving initial financial targets as customers were attracted to the new proposition.

Lajkonik

Branding a leader in Poland and Eastern Europe

Brief

Bahlsen acquired one of the leading state-owned Polish biscuit manufacturing companies in 1993, and appointed Nucleus to create a completely revised range of product packaging for the established ‘Lajkonik’ brand. It was an intriguing brief: an opportunity to consider the impact of ‘Western’ European standards of consumer packaging within a fast-changing Eastern European market.

Solution

We proposed a range of design solutions that enhanced Lajkonik’s reputation for good quality produce within the Polish baking tradition. However, we were careful to ensure that the brand and packaging still looked Polish: yet inspired and highly attractive to local consumers. We used straightforward, unfussy graphics and illustrations with strong typography and colours that communicated value for money. Our designs – which included an evolution of the brand mark – were applied to the whole product range.

Results

The Lajkonik brand is one of the success stories of Polish food manufacturing. Our new product packaging coincided with the modernisation of the plant and increased production volumes – supporting rapid growth throughout the whole country. The company has extended its product range and enjoyed sustained popularity, winning numerous awards for product quality and celebrating its 100 year anniversary in 2010.

OUGD502 Potential Studio Visits

I knew that getting to see the inside of a professional design studio, it's facilities and how the employees work would aid me in choosing a more specialist path. I did some research into some local design studios that would be easily accessible for a visit.