[HELP PLEASE] - Starting a Web Buisness

Hey, Im looking into starting a web buisness, but to be honest i know next to nothing (we all have to start somewhere eh).

I think it would be wise to register as a buisness, and i think i will register as "self employed". Anyway, I was just wondering if you could point me in the right direction.

Whats the difference between a company and a buisness (Do i have to be registered as both (or any))??

I also have a question about tax, If for example:

"I have this site....it costs £1 to register for the service it provides, if the user is still using the site after a week they can request to get their £1 back"

and say 1000 people register, I would have £1000 in the bank.

Would I get taxed on that £1000 seen as I would HAVE to have £1000 in order to potentially cover all of the people that request to have their £1 back?

any other information you think would aid me would be greatly appreciated.

thanks
dom

Let's say you are starting a business. First things first: get an accountant to answer these questions, you're going to need one! That is to say, advice you get here from a layman is likely to be a half-truth and only a professional will have the full details. Especially since tax laws vary greatly country to country and some laws apply locally. It is best to consult with an attorney and accountant first off, and keep their business card handy.

First, you definately need to learn the laws of your country and the advantages of different business structures (ie, sole- propietorship/partnership vs corporation).

I'm not going to go into that here, as I'm sure there are some major differences governed by the country you live in. Im sure if you search your goverment website, there are ample resources for starting a business (U.S and Canada at least...I havn't looked outside those domains).

As for tax, as in the previous post, its best to get a professional opinion on the matter. Of course depending on your status and how much money you have, you might have to do the ground work yourself. Again, there should be ample resources on your governments websites, if you are willing to do the research yourself.

Myself, I've even gone to the CCRA (Canada Customs and Revenue Agency) and just asked someone there what my responsibilities were tax wise. They were very helpful and sat down with me and discussed my situation, and provided me with appropriate reading material. It was with them that I had to register the business.

Now this is VERY general information, but from the sounds of your post you are a long way from where you think you want to be. You need to read about the advantages/disadvantages of incorporating or running sole-propietorship (should be lots of resources online, or in your local government office). Also, learn some basic accounting before you venture further with your business. Typically you only pay tax on profits. So for your simple example, you have $1000 of revenue - $1000 of returns = $0 profit.(ie you pay no tax).

Even before all that, I suggest (not sure if you have already) develop a solid business plan. A proper business plan will help you look at your proposal more objectively, and work through issues you might not have otherwise thought of (at least until they become big problems when you actually start your business). Again, look online if you are not sure what this entails.

From personal experience, all I can say is plan, plan, plan. Goodluck with your idea.

Thanks for replying, Ive taken your advice and looked into the different types of buisness structures. im from the UK and:

http://www.businesslink.gov.uk/bdotg/action/home?&domain=www.businesslink.gov.uk

that site seems to be very useful.

However I am still not sure if you understand what i was asking about tax probably due to my bad wording...

I think it would be better to put a working example to what i am trying to get an answer to:

Basically, users can sign up for free...when they have signed up to the site they can choose to purchase "online credits"

£1 = 1credit, so therefore if the user wanted to buy 20 credits it would cost them £20.

These credits can be used to buy items from the shop that I have got online where for example the user could spend 15 credits on a tshirt. (£15)

Basically the credits are used as an intermediate currency as I think its a lot safer (Is this legal).

Anyway....as a good incentive for people to sign up, I want to say to them "Any credits can be exchanged back at any time for real money"

so the user who bought 20 credits originally, and then bought a tshirt for 15 credits, could exchange back his remaining 5 credits to get £5 back.

So therefore, Everytime a user buys credits off me, this cannot be taxed as profit, as i need to retain ALL of this money so if for example a user buys 20 credits, and then for some reason requests to have those 20 credits back as £20, I need to have the money to do that and taxing of that money could push me into debt.

(i apologise for the bad wording im not best with english)

Am i therefore guarenteed to be exempt from paying tax on this?? Will the money be regarded as administrative costs etc?

If so, how do i inform the inland revenue (for the uk) that this money HAS to be kept to cover potential "refunds" and therefore shouldnt be taxed

Again, any help or advice would be appreciated

Thanks
Dom

I dont know the specific of UK LAW, but tax law normally works as this,, you sold it they tax it!!!!

You should get an accountant to look at this , atleast ask one for advise if you cant afford to hire one.

And stop the bumps!!

Hello,

KenPed is right. Taxes Laws everywhere are designed to tax you on what you get cash in your pocket. You will not get taxed on expected credit (It is called accounts recievable), someting you expect but you did not get it yet.

Wish you the best,

You may find great tutorials at webhostingtalk forums. There is a tutorial section.

Dom,

I think you are making a rod for your own back. You need to make the purchasing experience as simple as possible and your proposed system seems very complicated and will put a lot of customers off.

People have a lot more confidence in a merchant account system or even something like Paypal. It's very safe and they are insured against any loss.

I would use one of these if I was you.

Set yourself up as a limited company as it protects you as an individual against liability.

Get yourself a good accountant as they will save you more money than they will charge you.

As for your tax questions, the UK system is such that you don't pay any tax until the end of your trading year. VAT is paid and claimed differently as is National insurance contributions - all of which you will be liable for.

I strongly suggest you go down to WHSmiths and get yourself a 'starting your own business' book. I can recommend the one from 'Which' magazine.

Best of luck mate,

Pete
www.trade-secrets.org

Peter, welcome to the forum. You might want to take a look at the last post date next time you reply to a thread. This one is over a year old he's bound to have decided by now whether or not to set up the business.