The Upside

• If you start a business and it really takes off, you can end up with a massive salary, much more than you can earn in a regular job. Growing a company and making money from it can be lots of fun, and you get to do your own thing.
• There can be a real sense of personal freedom. If it all goes well, there is a great sense of achievement that you can't get anywhere else.

Young entrepreneurs get help from business mentors to help develop their own business ideas.

The Downside

• Many businesses fail in their first year. If you have run your own business, having to go back to a corporate job can be miserable and you might never feel like you fit in there again. It is financially risky setting up on your own - you could lose everything you have, including your friends.
• This is not for somebody who likes working a regular nine-to-five job; expect to be working evenings and weekends most of the time. A seventy-hour working week is not unusual.

What type of business?

So you want to start your own business. What sort?

Sole Trading

The simplest and most common way to set up in business on your own is to set up as a sole trader. You need to notify HM Revenue and Customs (HMRC). Tax is rarely simple, but if you are going to set up in business, being a sole trader is probably the most straightforward route for income tax, and it is relatively easy to set up and shut down. Financing it on your own can be difficult, and you are liable for everything if you get into debt, so your personal assets can be at risk.

Partnership

Partnerships can have full partners (who work in the business) or sleeping partners (no hanky panky, they just put in money and take a share of any profits). Working this way means that you can have more start-up money, more skills, and there is usually shared responsibility - if you are sick someone should be able to take over your work temporarily. The downside is that if the business fails and one partner runs off, the other partner has to pay all the creditors back on their own, although these days there is the option of a Limited Liability Partnership (LLP) which could help reduce some of the risk.

Limited Company

These are the businesses with 'plc' and 'ltd' after their names. Setting one of these up means there is limited liability, so your personal assets can be separate from your business assets in most cases. You need at least one director in order to register the company. Then you have to provide the following details to the Registrar of Companies: your company name, registered office, shareholders, directors, and company secretary. It is more legally complicated than sole trading or partnership, taxation is different, and there is public access to accounts.

Gillian describes what it's like to work for yourself.

Cooperative

All workers in this set-up are entitled to a vote in decision-making, and profits are shared out equally. The amount of discussion in meetings often makes it difficult to have clear-cut plans or quick changes of direction, and group ideology may mean that the most financially rewarding options are not chosen.

Going Concern

Instead of starting a business by yourself, you can buy one that is already up and running. The assets, employees and customers are already in place, and a track record often makes it easier to raise finance. Don't believe everything the business seller and broker tell you, get all the facts checked independently, and make sure the business will pay you a living wage.

Franchise

This is where you buy the right to market a company's goods or services. A good franchise gives an instant market position, a well-known name, long-term support and a proven way of doing business. To check out a franchise opportunity, speak to franchisees in other areas about the business and the income - it may not match up with the figures you were originally quoted.

Updated: 20/02/2013