Starting a part-time business

You may want to start a part-time business if you need to balance work with family commitments or want to test the market for your business idea.

Overview

Before you take the plunge into full-time business ownership, you may want to consider doing it on a part-time basis, as a way of ensuring the business idea will work.

If you’re employed part-time or have young children and don’t want to, or aren’t 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.

Part-time businesses: tax and legal obligations

When you set up a part-time business you need to register it with RSK, unless you plan on trading from your personal kennitala and expect your annual income to be less than ISK 2,000,000.

You also need to maintain accurate financial records.

These requirements are the same whether you’re 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’re running your business, you have to decide whether to tell your employer. Your contract of employment may require you to tell your employer if you have another income source. 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.

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 RSK if appropriate. 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 RSK and VMST if necessary.

If you are working from home, you are likely to need to consider insurance and health and safety issues.

Part-time businesses: what to consider

There are a number of issues to consider when you start your own business, even if it is only on a part-time basis.

Are you ready to start up?

It can be very beneficial 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. It pays 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.

What about premises?

You may have decided to run your business from home; however, there may still be implications for this regarding tax, health, safety and security. You might find that separating your work area from your living area will maximize efficiency.

Money matters

Your business will start out small and will still need funding for both its set-up and development to help it grow. Creative thinking and planning your finances might make it less costly to start your own business.

Professional advice

Depending on the scale of your business, you may choose to consider professional advice or assistance, which can range from accountancy and bookkeeping through to marketing and IT support.

Support for part-time businesses

There are a number of organizations which can give you support and advice on starting a part-time business.

Mentoring can help you develop business skills.

Your local Chamber of Commerce offers support and advice and may organize networking meetings for businesses of a similar size and in similar business sectors.

You might find it helpful to join the trade associations for your business sector, where you will be able to interact with peer businesses for advice and information.

Part-time businesses: pros and cons

Pros:

- - you can 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 to start and build 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

Cons:

- - 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