It’s an understandable fact that many would be concerned about establishing a business. But what if we told you that more than 90% of small enterprises survive the first year?
That being said, many businesses may struggle more after the initial year. Globally, entrepreneurs find the UK a desirable location. Strong administration, well-equipped infrastructure, first-rate facilities, and richly enforced laws make it the best place to kickstart a firm.
In the United Kingdom, however, forming a company is quite seamless and straightforward. The sole benefit of registering your business is that entrepreneurs are exempt from possessing UK citizenship. As a consequence, there are no limitations on the directors’ or shareholders’ or nationalities.
As a result, this blog will act as an intricate guide on setting up and running a business in the United Kingdom. Being a part and parcel, you might simply ‘wing it’ when starting a business.
However, if you want to see results, it would be ideal to develop a clear business plan.
1. Select An Appropriate Company Structure
You must choose between operating as a limited company, a partnership, or a sole trader when you first launch your business. That being said, let’s understand how different company structures affect registrations and taxes.
· Sole Trader
People who work for themselves are known as sole traders. They pay regular income tax and submit an annual self-assessment to report taxes, but their national insurance contributions differ from those of regular employees.
· Partnership
Although they involve two or more people, partnerships function similarly to lone merchants. You and your business partner or partners share full responsibility for the company when you are in a partnership.
· Limited Company
Limited companies are the ideal structures to adhere to. That’s because a limited company structure protects you in the event that the business is unable to pay its debts by allowing you to distance yourself from its obligations.
Corporation tax, which is often lower (19–25%) than income tax (20–40%–45%), is also paid by limited corporations.
Most business owners, along with new businesses, tend to choose to form a private limited company as it offers legal protection, a professional image, and an opportunity to expand. However, it’s up to you how to set up a company.
2. Represent Your Business With A Suitable Name
Naming your business isn’t just a branding exercise—it’s a legal requirement. The company name must be:
- Unique and not already registered in the Companies House database.
- Free from restricted words unless proper approval has been obtained (e.g., “Royal” or “British”).
- Compliant with UK naming conventions and not misleading.
3. Enter A Registered Address For Your Office
Every UK company must designate a registered office address, which will be publicly listed on Companies House. This is the official location for receiving statutory mail and legal documents.
Important points to note:
- The address must be of a physical location in the United Kingdom.
- You can use a registered office address service if you don’t have physical office space.
- The address doesn’t have to be the same as where your business trades.
4. Company Directors and Shareholders
You need at least one director to register a business. This person is in charge of running the business and making sure it follows the law.
You will also require at least one shareholder, who may or may not be the same person as the director. The shareholder(s) will own shares in the company and have a say in how it operates, based on the percentage of ownership they hold.
5. Draft Articles of Association & Memorandum
These are two critical legal documents that set the foundation of your company’s governance:
- Memorandum of Association: A legal document that all of the original shareholders signed, stating that they would start the business.
- Articles of Association: These set the guidelines for how the business will be conducted, including the duties of the directors, how decisions are made, and more.
6. Register The Business with Companies House
Once you’ve finalized your structure, name, registered address, and director/shareholder details, proceed to formally register the company with Companies House.
You’ll need to submit the following:
- Company name and address
- Details of directors and shareholders
- Share capital structure
- SIC code (which identifies your business activity)
- Memorandum and Articles of Association
This process can be done online and typically takes 3–24 hours for approval.
7. Register The Business for Corporation Tax and VAT
Within three months of your business’s incorporation, register for Corporation Tax with HMRC. This covers purchasing, selling, promoting, hiring employees, and even leasing real estate. You must also register for VAT if, as of 2024, your taxable turnover exceeds £90,000.
To avoid penalties, timely registration is paramount. As part of a business setup package, a professional formation agency can help with this process.
8. Set Up a Business Bank Account
For tax and accounting purposes, it’s important to have a separate company bank account to keep track of your finances and keep your records clear.
To open a business account in the UK, you usually need:
- Directors must show proof of identification and address
- Incorporation documents, such as the Certificate of Incorporation and Articles of Association.
- Information about the company from Companies House
9. Acquire Vital Business Permits & Licenses
You might need more licenses, permissions, or certifications, depending on your area and industry. Typical instances consist of:
- Licenses for food businesses
- Certificates of health and safety
- Permits for properties from the local council
- Registering with the ICO for data protection (if handling customer data)
Closure or fines could result from not obtaining the required permissions. Conducting a compliance evaluation according to your industry is advised, and if in doubt, professional counsel should be sought.
Why Would You Require Assistance To Set Up Your Company In The UK?
Even if it’s easier than ever to start a business in the UK, the legal and administrative procedures still need to be handled with the utmost diligence. As a consequence, a lot of business owners use experts to help them set up their organizations the right way from the start.
A professional formation service makes sure your business is registered swiftly and correctly, often in as little as three to six working hours. These services don’t just fill out forms; they help you with every step of the process, from picking the correct business structure to dealing with legal documents and compliance responsibilities. You also get more assistance, like setting up a business bank account, registering for VAT and PAYE, and using a registered office address. This can be pretty helpful if you’re starting a business from a distance or don’t have a set location in the UK.
Final Thoughts
In the past, starting a business in the UK may have felt like a long, complicated process laden with endless paperwork. Now that there are clear rules and access to professional services, the procedure is straightforward to follow, even for individuals who have never run a business before.
Remember, the United Kingdom is a stable, scalable place to grow your business, whether commencing from scratch or moving into one of the most business-friendly places on the globe.