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Setting up an accounting practice

Hi all,

I am an ACCA and an ICAEW member working for a Tier 1 bank in the city of London as a Financial Controller. I have a couple of friends, relatives who have approached me to provide them with basic accountancy/taxation related services, eg: drafting financial statements, doing self-asessment returns, CT600 returns, etc. Prior to joining the bank I was working in a small practice in London where I gained all the experience of dealing with SMEs.

I am now seriously considering setting up my own practice (probably with a friend who is also an accountant) on a part-time basis and initially working from home. I hope I will be able to get my practicing certificates from either of the accountancy bodies relatively easily. Now the question I have is whether I should proceed with setting up a limited company or is partnership the best way forward ? Any tax gurus or people in a similar situation out there who can advise me as to which route is better for a business like an accountancy practice ?

Regards,

Malik

Replies

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Physician , Heel Thyself

Your question, is one that you will be asked frequently as a practicing accountant/tax advisor.

If you can't at least do the groundwork of answering this question yourself, then you have no business advising others.

 

 

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Well I think I am doing the homework here, I am sure some one would provide a sound advice related to my question and not telling me what not to do !!!

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Proviso

I agree with Roland, but only if he is referring to a podiatrist

To be constructive, I often used my own practice as a guinea-pig to the entent that I only started dealing with limited companies when I commenced trading from one. Training and researching in your own time and on your own business tends to focus the mind.

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Harsh

but I agree with Roland :(

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I agree with the others

Sorry but you can't just ask a question like that on here and use that as a basis for advising clients

If you can't answer the question for your own business how will you advise clients?

Check you can get a practising certificate before you go any further would be my advice.  Your friend will also probably need one

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Thanks but no thanks for your advice.....

I will not be advising clients from day 1 and definitely not advising them under any circumstances if I am not sure about the issues affecting them. All I would be doing is basic accounting work and yes you really don't have to worry about me getting a practising cert.

 

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Are you sure?

abzmalik1 wrote:

I will not be advising clients from day 1 and definitely not advising them under any circumstances if I am not sure about the issues affecting them. All I would be doing is basic accounting work and yes you really don't have to worry about me getting a practising cert.

Just two further points, if you want them or not:-

1. Neither the ACCA or ICAEW send their practicing certificates up with the rations. You can read a few posts here where people have been refused with more experience then you can claim.

2. In my experience, it is very difficult to have an accounting practice that does not do tax as most of the day to day work is tax driven. Clients could not care less that their accounts are fully compliant with all relevant accounting standards but want to know how much they owe HMRC and how to reduce it next year.

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Just out of interest..

What is a 'tier 1' bank?

and are we supposed to be impressed.....

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Well I will leave it upto you...to be or not to be impressed is entirely your decision !!! 

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What relevant up to date practice experience do you have?

"Prior to joining the bank I was working in a small practice in London where I gained all the experience of dealing with SMEs.".

How many years did you work in practice?  How long ago was it?  What position did you occupy in practice?

I'd worked in practice for 15 years then left for just 2 years in industry, and then came back into practice thinking I'd be up to the job and could pick up when I left off.  My new employer would only put me on to "senior" level (as opposed to manager at previous practice) saying I'd have to work my way up again.  I was annoyed at that but had to accept for various reasons.  Boy, was he right!  It was at least a year before I was anywhere near back where I was.  Just 2 years out of practice and so much had changed.  I had to re learn everything to do with PAYE, VAT and tax as I couldn't trust myself to know what had changed and what hadn't.  It was a really steep learning curve before I could get my own portfolio of clients again.

Now, 10 years on, and I'm still learning.  

Practice is a very challenging environment, especially if you're on your own.  Tax laws/rules are constantly changing and you need a very wide knowledge base, from VAT, PAYE, tax, through to accounting standards, not to mention basic business advice and how to deal with Co House and HMRC on a practical day to day basis and tax planning.  It's certainly not something that you can just pick up and make a bit of money on the side unless your potential clients are the smallest and simplest businesses.

 

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It depends

Like most things in the profession it depends.

Do you own lots of assets that you are prepared to put at risk without having limited liability?

Do you intend to to deal with or mainly with non VAT registered business/individuals? - you can have t/o of £73K as partnership and then same again if you incorporate in to a ltd.

Will you be a higher rate tax payer already?

Will you need to take out all of your money?

How fast do you intend to grow? - potential capitalising of goodwill later.

Will you need a car in the business? and if so what type will it be?

Plus so so many more scenarios need to explored to be able to answer the question.

 

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Thanks for your reply and very legitimate questions. Keeping into consideration the points you have raised, it will definitely help in deciding the next course of action. Much appreciated !

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A few points to consider

There are a few points you will need to consider when setting up :-

1. Practising certificate

2. PII

3. Software

 

You need to consider exactly what services you will offer.  You have said just small companies, but if you are preparing these then you should also be advising on tax implications and possible savings.  So the limited v sole trader / partnership is likely to be a key part of your job in this sector. 

Don't take offence to this but it sounds like you need to bring your training up to date for small companies before you start this venture.

 

 

 

 

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One practising certificate?

What about the other body?

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Trading vehicle

On the information provided (and subject to answers on bduncans very valid questions) I would suggest that a limited company would be the way to go.  I would assume that as you are working in the city then you are already a higher rate taxpayer so if you trade as a partnership then all of your profit will be taxed at higher rate regardless of whenn you extract it.  As a company, as you know (or should know) then you will only pay the CT at 20% which you can build up a profit reserve whilst you are running the practice as a sideline and then extract it as divis when you have ceased employment, timing it to make full use of you and your co shareholders annual allowances.

I would reiterate what some others have said in that you need to know the answer to your own question if you want to set up, even a part time practice servicing basic requirements.  We don't know about your business partners knowledge and experience though would assume that they knew the answer to this question then you wouldn't be asking it on here.  Even if you are only offering basic accountancy services - this is basic stuff that clients will expect you to know.  I hope that you take this in the spirit that it is intended - it's not a dig, just making you aware.

In your shoes I would make sure that I had good support in place, have a think about approaching a local firm to not only outsource work that you could not take on due to time, knowledge or expertise constraints, but also to have someone that you could approach in the event that you need an opinion on advice requested.

Also have a think about how you could properly service your clients whilst you are enagaged in full time employment.  I'm not saying that it can't work, it can and does for many, but can also fail spectaculary for those that don't do the required planning and put those plans into effect.

Regards, Jason

Seahorse (UK) Ltd - For Accountants and Bookkeepers

 

 

 

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again

I agree with Roland

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tax and accounts

I agree with Roland. Just to put things slightly differently, my experience when I started was that I wanted to focus on tax but not do accounts. In practice, this proved impossible when dealing with the bulk of clients. For the vast majority of clients dealt with by small practices, you won't be able to separate tax and accounts work unless you pitch yourself as a bookkeeper rather than accountant. Expect a lower £/hour for bookkeeping compared to tax and accounts. Not sure if I've answered the OP but just my thoughts. Good luck.

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Bad attitude

 

"Thanks but no thanks for your advice.....

I will not be advising clients from day 1 and definitely not advising them under any circumstances if I am not sure about the issues affecting them."

Clients expect their accountant to provide advice and tell them when they are doing things wrong. If you are not able to warn them of problems you should tell them that they need another accountant who can give them the required advice even if it is conjunction with you.

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.

What is a "Tier 1" bank?

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.

I think its better than tier 2.

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Might not be

It might just be a beginner bank.

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.

stop it, your hurting me - Im in tiers here.

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Boom-boom

blok wrote:

stop it, your hurting me - Im in tiers here.

I dont know if you were on here a few years ago, but there was a regular poster who would have referred to the OP as "A Nigel" for that comment. 

 

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@ Zara

zarathustra wrote:

blok wrote:

stop it, your hurting me - Im in tiers here.

I dont know if you were on here a few years ago, but there was a regular poster who would have referred to the OP as "A Nigel" for that comment. 

 

A Scottish chappie by the name of Ronald, I think. He did make me laugh. What happened to all the characters like him?

Tier 1 bank? This might help you, though I admit it didn't help me a lot. Very dry.

http://en.wikipedia.org/wiki/Tier_1_capital

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Tier 1 bank

Got it now. Lucky that information was included in the OP; I don't see how we could have responded otherwise.

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Tier one capital?

Isn't that money that banks lend to individuals called Maxwell or Maddoff which is so important that when it all dissapears, their governments re stock the coffers. So much more self important than mere 'liar loans' that I'm going to restucture my company's ordinary shares as tier one capital from now on....... 

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maybe move to Tier 1 accountancy practice

You could move to a Tier 1 accountancy practice for a few years. This will give you the necessary experience to set up your own Tier 5 practice.

I have only ever worked for Tier 2 and Tier 3 firms. I do consider that my own practice is a Tier 3, but next year we should be able to call ourselves a Tier 2.

 

 

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Tier 4?

What's a Tier 4 firm? How do you distinquish them from Tier 3 and Tier 5 firms?

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Tier 1, 2, 3, 4 Firms

petersaxton wrote:
What's a Tier 4 firm? How do you distinquish them from Tier 3 and Tier 5 firms?

I think he was joking wasn't he?

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He was joking

But does that mean I can't be serious?

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Hi Malik,

I have gone through all the 'responses' you ave received. I must tell you that not everybody has the ability to understand simple questions.

If you'd like my advice on this matter I would like to go on to tell you that opening a limited liability partnership is the best idea. It limits your liability as well as provides you the benefits of a partnership.

Hope I helped.

 

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