bizSimple

The simple way to start a business.

Sunday 7 September

“Customers that pay on time are worth keeping”

Home office, or office away from home?

The location of your business premises is crucial and in many cases it can be the difference between success or failure of your venture. As well as being pleasant to work in; it needs to be affordable and easy for your customers to find, if they need to.

FAQs

If I was in a position to buy commercial premises what do I need to consider?

Firstly, if you need to borrow money you will need a commercial mortgage, which is more expensive than a personal mortgage (generally 2% above bank base rate, but can be higher). You will also need at least 15% as a deposit – some lenders ask for more, so you will need to shop around.

Ownership of the freehold means that you own the property, which can be advantageous but there are a number of implications to consider carefully.

We strongly advise you to speak to an accountant before buying a property for your business.

How do I find somewhere suitable?

Firstly, you need to decide what type of premises you need and then decide on the space you need and if this will be sufficient for future requirements (say, the first 2 years).

Try to find a place that is within easy reach of your clients and/or suppliers if they need to visit you. Also think about how far it is from home, as you cannot claim travelling to work as a business expense.

Think carefully about what services you will need in terms of gas, electricity (standard or three-phase), water, etc.

Don't forget to add rates if they are not included in the quoted rent (approximately a third on top of your rent).

Be wary about renting or leasing something cheap that needs remedial work before you move in. Unless the landlord is willing to pay for this it may not be the bargain you first thought! Also check who pays the maintenance and running costs.

Add 20% to your office set up budget – it's always more expensive than you think!

A brief chat to the local Crime Prevention Office about security might save you time and trouble later (in some areas, grants for security may be available through the local council's Economic Development unit, or equivalent).

Also make sure you check out parking, access for deliveries and weekend or after hours access.

Think about sound, ventilation, services, secure storage, heating, and natural light.

What about planning permission?

You will need to make sure that the premises has appropriate planning consent. If not you will need to change this. You can apply for planning permission on a building that you do not own – speak to your local planning office about this.

Useful sources of information and property lists include:

Local press
Dalton's Business
Estate agents and business transfer agents
Local Authorities

Can I set up my business from home?

Yes, in fact, for many people setting up a home office for their business is the best option and will certainly cost less than renting or leasing an office elsewhere.

A lot of people run party-plan style or mail order businesses from home, too, but once you get into more serious retailing, especially when you need customers to visit you, you really do need to consider a shop or warehouse premises. It is unlikely that you will be allowed to undertake this type of activity at your home.

Can I charge my business for my home office?

Yes, this is normally done by claiming part of your home bills as business expenses through your accounts and tax returns, but be warned against trying to claim a percentage of your mortgage as you could run into problems with capital gains tax should you decide to sell up at a later date.

Will anyone mind if I set up at home?

Generally, No, unless you are going to have lots of visitors parking outside, or articulated lorries delivering regularly!

However, other points you might need to consider are:-

If you rent your home check your rent agreement to make sure there are no restrictions for running your own business
You may be contravening local planning regulations if you are having lots of deliveries or visitors who cause parking problems or noise nuisance for your neighbours
If you are planning to convert an out-building into an office or workshop you should check with your local planning office to see if you need to apply for planning permission
You should take out business insurance to cover your office equipment. There are insurances available for home-run businesses as well as mainstream business insurance

If setting up an office at home is not practical what options do I have?

You can take a premises owned by someone else under a licence or lease arrangement, or you can buy a business premises – it all depends on cost and practicality.

What is the difference between a licence and a lease?

A licence agreement is one of the simplest forms of legal commitment used when renting premises. Licences are quick to agree and sort out. They are normally for one year and require one month's notice from either side. The licensor can remove you from the premises at short notice (although this is not as easy as it sounds!). A licence is ideal for short-term property requirements of a couple of years or less and gives you the flexibility to move quickly if you need to. Business centres and serviced offices will often operate under licence arrangements.

Leasehold is a common way to acquire property for business.

It is a formal document that once signed gives you the right to occupy a premises for an agreed period of time (you usually also have first option to renew this lease when the term expires). Leases take time to settle properly, allow up to three months for this process. Sometimes a lease is granted at no cost, other than legal expenses, and rent is agreed from the outset, usually with a clause included to allow for rent increases. In popular areas the lease itself will come at a price, which can sometimes be considerable, particularly for premium retail sites. A lease can be as short as 1 year and as long as 999 years and is therefore a serious undertaking.

For either new or re-assigned leases we strongly recommend that you use a solicitor to inspect the lease and to carry out the legal formalities in its execution.

You will need to consider the following points:-

The length of the lease, as you will be tied to this and any break clauses
Your ability to insure and repair the building if required to do so by the lease
Use – beware of restricted clauses
Assignment, or sub-letting – some leases will not allow this
Legal costs – the landlord will expect you to pay his costs
Personal guarantees – can be negotiated out.