Starting a business, although highly exciting, is a big step to take. Sometimes before you take the plunge into full-time business ownership, it might be better and easier to think about doing it on a part-time basis, as a way of ensuring the business idea will work.
If you are employed part-time, or have young children and do not want, or are not in a position, to give up the time necessary to run a full-time business, a part-time business may be a good option for you.
This guide looks at the practical issues you will face when you run a part-time business. It also tells you where you can find support and useful sources of further information.
2. What to consider when starting your part-time business
You should consider a number of issues when you start your own business, even if it is only on a part-time basis.
Are you ready to start up?
There are lots of reasons to consider starting a business but you need to be sure that you are ready. You'll need to assess your own skills and where you might need some extra development or support - for example, looking after the business' finances. You should also think carefully about the product or service that you want to sell, the audience you're selling to and what you have that makes you stand out from the crowd. You'll also have to be ready to face the challenges and pressures on yourself and your finances.
What legal structure?
You will need a formal legal structure for your business. This can take the form of anything from a sole trader to a limited company. When you have decided the structure, you will need to register with HM Revenue & Customs and (if it is a limited company) with Companies House.
What about premises?
You may have decided to run your business from home but you need to be aware of the implications of this as there are tax, health, safety and security issues. You might find that separating your work area from your living area will maximise efficiency. For more information, see our guide on starting a business from home.
Your business will start out small and you will still need to fund both the set-up and the development of your business to help it grow. Creative thinking and planning your finances might save you money and make it less costly than you think to start your own business.
Depending on the scale of your business, you may need professional advice or assistance, which can range from accountancy and bookkeeping through to marketing and IT support.
3. Tax and legal implications of a part-time business
When you set up a part-time business you need to inform HM Revenue & Customs (HMRC) and if it is a limited company you'll need to register it as well.
You also have an obligation to maintain accurate financial records.
These requirements are the same whether you are starting a full or part-time business but there are other issues to consider which are specific to part-time businesses.
Continuing in paid work?
If you continue in paid work when you are not running your business, you have to decide whether to tell your employer. You should look at your contract of employment, as this may require you to tell your employer if you have another source of income. In addition, if your new venture is likely to compete with your employer, you have a conflict of interest which could cause problems.
You must be very careful about separating your personal business activities from those of your employer. Taking phone calls, sending emails, and writing letters that relate to your business may constitute a breach of contract, unless you have permission to do so. You should also not make use of your employer's supplies, materials or intellectual property. For example, taking copies of proprietary software to use in your business is a criminal offence.
If you discuss your plans with your employer, they could become a source of encouragement or work, especially if you are a valued employee.
Just running the business?
If you don't have other paid employment - eg you might be a parent or carer with family responsibilities - you still need to tell HMRC and, if appropriate, register with Companies House. If you were previously unwaged and had been receiving benefits, you will need to check whether your new venture affects that income, and report it to HMRC if necessary.
If you are working from home, you need to take into account insurance, health and safety issues.
4. Advantages and disadvantages of starting a part-time business
There are advantages and disadvantages to running a business on a part-time basis.
- you are able to stay in paid work and have the security of a regular income until the business is up and running
- you can use skills you have learned working for an employer in starting and building your own business
- if you have obligations such as caring for dependents, it is a way of having an income
- you can test whether there is a market for your products or services without a major financial commitment
- if you have a hobby that you would spend time on outside work anyway, you may be able to make money from your interests
However, disadvantages include:
- finding the time to run a business can be difficult and it may take up more time than you have available
- you may find it hard to concentrate on paid work if the business has a problem
- you may have to put in long hours, which can cause stress
- it might take a long time for the new business to develop and become viable
- if you stay in work, you'll have to pay tax on both sets of income, which may mean the business is not financially viable
5. Help and support for part-time businesses
A wide range of help is available to you if you're starting a business - through government agencies or business mentoring. You can get help from a variety of sources online, while other forms of support can be obtained from events such as networking meetings.
business.wales.gov.uk is the official government website for businesses of all sizes and provides free business advice and support. You can access information, guidance and support for your business needs and your online dealings with government.
Mentoring can help you develop business skills. Find out more on our Mentoring website.
Your local Chamber of Commerce offers support and advice and may organise networking meetings for businesses of a similar size and in similar business sectors. You can find contact details for your local Chamber of Commerce on the British Chambers of Commerce website.
You might find it helpful to join the trade association for your business sector, where you will be able to interact with peer businesses for advice and information. Find contact details for trade associations on the Trade Association Forum website.