You have a vision, you’ve identified your aims, market and USP, you’ve thought of a name and secured funding, and now you’re ready to register your business. In the UK, this is done at Companies House. The legal term for this is incorporating your business. It’s a fairly simple procedure which can be done online, and all of the information you need can be found at www.companieshouse.gov.uk. If you’ve already appointed an accountant, it may be worth asking them to incorporate your business for you as this is usually a service that’s offered by accountants for a small fee.
Registering the business name
Although you may have chosen a name you like, you must also check that it’s not already being used by a registered company. There are websites and organizations that will offer to check your chosen name for you for a fee, and in the UK you can do your own search for free using the Companies House web checker facility. It’s worth remembering that registering a company name does not automatically give you trademark protection on that name. Further information on registering a trademark can be found in Step 2.
Company structures in the UK
When setting up a business in the UK, you need to decide on the legal structure, which will depend on how you will be running the company. Talk to other business owners to understand why they opted for a certain structure and ask them about the pros and cons. The table below outlines the most common types of companies registered.
| Company type | What does this mean? |
| Sole trader | The business is owned entirely by you, although you may decide to employ other people. As a sole trader you have unlimited liability, which means that you are personally liable for any debts or losses. One benefit of this structure is that there is less paperwork and fewer formality requirements involved in setting up. This type of business often works well for freelancers or independent consultants. |
| Limited company (Ltd) | The most common version of a limited company is a private company limited by shares. The business is a separate legal entity to its directors. All profits are owned by the company. Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong. Limited companies benefit from a lower tax rate than sole traders. Many businesses fall into this category, from builders to restaurants, and shops to marketing agencies. |
| Limited Liability Partnership (LLP) | LLPs are most commonly set up by professional services firms, for example, solicitors or accountants. In a LLP, the partners do not bear legal or financial responsibility for the business, unlike ordinary partnerships or limited partnerships, where partners may be responsible for debts or losses. |
Tax
Corporation tax
So, you now have an incorporated company, which means you must also register for corporation tax. This can be done as a joint procedure with the business incorporation process if you chose the Companies House web incorporation process. Either way, in the UK, you must by law tell Her Majesty’s Revenue and Customs (HMRC) that your company or organization is ‘active’ within three months of starting business activity. HMRC offer an online registration process at www.hmrc.gov.uk, where they also explain how and when to complete tax returns.
Value added tax
As well as corporation tax, you may need to register for value added tax (VAT). In the UK, legally you don’t need to register for VAT until your business has made taxable sales of over £79,000 in the previous twelve months (this is true at the time of writing) but there might be benefits to registering for VAT voluntarily even if your sales are lower than this amount. For example, if you purchase a reasonably large amount of goods or services for the business, you will be able to claim back the VAT on these purchases.
It’s worth considering your options and discussing the pros and cons with an accountant. In addition, the VAT thresholds change yearly and have some exceptions, such as (but not exclusively) businesses which are distance selling, either online or by mail order.
Setting up a business bank account
It’s worth setting up a bank account as soon as you register your business as it can take a lot longer to set up than a personal bank account and may well involve a face-to-face meeting with a business, bank manager.
In the UK, banks usually make monthly charges to businesses in order to operate their account and charge for specific services. Which bank you decide to use is your choice but when researching the marketplace, these are the main things to consider.
Do they offer a period of discounted or free banking for start-ups?
Do you need an account that allows you to accept or send payments in different currencies?
Is it important that your business uses a bank with an ‘ethical’ reputation or one which works in ‘charitable’ ways?
Do you need local branches to pay in cash or cheques?
Will your business require an overdraft facility?
Most banks now offer online and telephone banking, which are a must for most businesses these days. If you have decided not to use one of the big high street banks, do check what the smaller banks offer in terms of online and telephone banking.
Key take-aways
Think about the things you will take away from Step 1 and how you will implement them.
| Topic | Take-away | Implementation |
| Deciding what kind of business to run | Understanding my passions, skills and experience will help me to decide what my business will do.Think about the practicalities of running a business. | Draw up a list of my skills, experience and passions.Make a list of the pros and cons for my business idea. |
| Identifying your USP | ||
| Creating a vision and aims for your business | ||
| Choosing a suitable name for your business | ||
| Deciding on a location for your business | ||
| Using networking to help your business | ||
| Financing the start-up of your business |