We get many enquiries on a weekly basis from potential new start up recruitment agencies and all of them have various questions they need answers to before they feel comfortable taking the plunge into setting up their own business.

Many of these potentials will have picked up misconceptions from family, friends, business owners and their research from the internet about starting their own agency, and may be unaware of the potential pitfalls they can encounter when setting up their new business.

We have selected 8 of the most common misconceptions we have heard from new start-up recruitment agencies:-

  1. “I can buy a limited company for £15 from the internet”

There are companies on the internet who you can buy your first limited company from but our advice is the more you spend the better quality the paperwork you get as company records.  If you buy a company from the internet for £15 you may only get the Certificate of Incorporation but this will be missing key documents such as Articles of Association, Memorandum or Incorporation and Share Certificates.

  1. “The bank are offering me free banking for a year”

Banks are always offering introduction rates to new bank accounts such as free banking for a year or longer.  However the charges they are giving away for free are often old school processes, such writing or paying in cheques, telephone banking and basic online banking systems.  The free banking however doesn’t often cover the full online banking systems where you may want a number of different users, to make multiple faster or international payments, or manage multiple accounts.

  1. “I have some contracts from my last agency”

This statement is the most heard by our industry and is also the most dangerous.  Using a previous agency’s set of contracts is theft and can put an agency at risk should the contracts not be fully compliant or up to date.  Buying a fresh set of contracts from a reputable provider should be seen as an investment for an agency to start on the right footing.

  1. “I don’t think I need any kind of insurance”

Assuming that an agency doesn’t need insurance can put it at risk and jeopardise any deal that requires minimum cover.  Speaking to an insurance broker to discuss what cover is required can ensure all boxes are ticked.  Also, do not automatically buy the highest level of insurance from the start as this can be increased as required.

  1. “I need my agency to be a member of an association“

Being a member with an association can be very effective for an agency that makes the most of their services, however this can also be an unnecessary cost for a new start up agency.  It is not a requirement for an agency to be a member of an association for them to trade so considering if the cost is necessary is something to weigh up.

  1. “I don’t see why I should be VAT registered”

Although a company does not need to be registered for VAT purposes until they reach £82,000 of turnover, it is advisable for any new start up recruitment agency to register from day one.  Being able to reclaim the VAT on start-up costs can help the cash-flow and profitability of the agency.  Also, a VAT registered agency appears larger to a client than a non-VAT registered business.

  1. “I can claim my home as an office expense”

Many new start-up agencies will begin life working from home to keep the costs down at the beginning.  The preconception is that many believe that if they work from home they can claim portions of their rent/mortgage or utility bills against the company.  However, the allowance given by HMRC is only £4 per week/£18 per month to cover any additional costs above your normal living expenses.

  1. “I have heard I can take money from my company as dividends”

Any company owner will tell you that the most tax efficient way of taking money from a company is via dividends and this also applies to recruitment agencies.  However dividends can only be taken if a company is profitable, or these amounts will be classed as Directors Loans which can incur additional taxes if not paid back within 9 months of the year end.  Also the government is introducing further taxation on dividends from April 2015 which means that the gap between being on PAYE and taking dividends is getting closer.

TBOS works with many new start-up recruitment agencies to ensure they get the best possible start and ensure they are set up correctly.  We take the time to ensure that every new agency gets the best possible advice and understands the risks when starting out in the hope that by avoiding the pitfalls we can create some growing and profitable agencies.

If you want TBOS to help start your very own new start-up recruitment agency then please contact the TBOS offices on 0845 881 1112 or email us at enquiries@tbos.co.uk


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