If you’re thinking of making the plunge and launching your own business in the UK, there are plenty of resources available to help you along. It all starts, of course, with a great idea. A product or service that fills a need. If you already have that, you’re halfway home.
You’ll need the obvious stuff. An idea. A name for your company. A website. A lot of hard work. And, you need to take the required steps in terms of the formal legalities of starting a business.
Decide on a Business Structure
Companies in the UK can be either sole traders, limited companies, or partnerships, as well as a few other but less common configurations. If you’re the only employee so far, you’ll need to register as a self-employed sole trader.
- Sole trader - even if you eventually take on additional employees, sole trader designation means that you and you alone are responsible for the business. Your job includes paying income tax, paying National Insurance, and submitting a self-assessment tax return each tax year.
- Limited company - registering as a limited company offers some protection to you, as the business and your personal finances are kept separate. The company is responsible for its own taxes (Corporate taxes), after which all profit may be distributed to the owner(s) and/or shareholders. A limited company must register with the Companies House.
- Partnership - in a partnership, you and your partner(s) share any and all responsibilities related to their company. You may also choose to register as a limited partnership or limited liability partnership, with each offering its own protections and distinctions.
Register the Business
Once you select the right business structure, you need to get your company registered with the UK government. Depending on which structure you select, the steps involved will be slightly different.
- As a sole trader, you’ll need a National Insurance number, register for a self-assessment with HM Revenue & Customs, and operate either under your own name, or a business name.
- As a limited company, you’ll need to register with Companies House, sign up for Corporation Tax, and have at least one director (who runs the company) and one shareholder.
- As a business partnership, you’ll need to register for a self-assessment with HMRC, run the business as an individual, and share profits with partner(s).
Determine Whether You Need a Licence
Depending on the nature of your business, you may require a special license or permit in order to operate. The UK government provides a convenient Licence Finder online.
National Insurance and VAT
As a working individual (even if only working for yourself), you likely need to make National Insurance contributions each pay period (or make deductions for your employees, if any). Check to see if you fall into that category, and register for a National Insurance number. Your contribution, if any, depends on how much you make as either an employee or self-employed worker. Beyond NIC, you may also need to register for VAT (Value Added Tax) if your business turnover is more than £81,000 per year.
Register as an Employer
As soon as you hire your first employee (NOT partner), you need to notify the UK government of that. You are not just a business owner anymore. You’re now a proud member of the “employer community”, and that changes the game. You will now need to pay your employees, collect NIC deductions, provide benefits, and so on. Register as an employer as soon as possible to avoid delays in paying your staff.
Business Insurance Considerations
As an employer, you are required by UK law to have employer’s liability insurance for your business. And while you are not required, you should also consider both public liability insurance and product (if you make and sell a product) liability insurance, too. The British Insurance Brokers Association is a good place to start your search for comprehensive and affordable insurance.
Other Useful Links
Your legalities are now under control. Of course, that means nothing in terms of production, facilities, staff, marketing, distribution, or funding. But your business is now a legal entity in the eyes of the government. Kudos! Now, on to growing and expanding it...
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