In 2021, there were 5.6 million private businesses in the UK. Most of them, around 5.5 million, were small businesses with fewer than 50 employees. Although there was a slight decrease in numbers from 2020, experts believe the numbers will rise again as the economy recovers from Brexit and the pandemic. This shows that many people in the UK still want to start their own businesses.
Here are 3 key references to help you register your business:
- Register as a Sole Trader – This link will guide you through setting up as a sole trader.
- Register a Limited Company – This link provides all the information you need to register a limited company.
- Register a Public Limited Company – Use this link to learn how to register a public limited company.
Starting a Business in the UK
Starting a business can be very exciting. Becoming an entrepreneur can be rewarding if you have a great idea and want to be your boss. However, before you can enjoy the benefits of having your own business, you must go through some important legal steps, starting with company registration. Every business has to register, and while the process depends on the type of business, each type has its own rules and steps.
Choosing the right type of business is important. It will affect your taxes, responsibilities, and even how much risk you take on personally. In this guide, we’ll explain how to register a business in the UK, the different types of companies you can set up, how much it costs, and what else you need to consider before starting your business.
Types of Businesses You Can Register in the UK
When registering your company in the UK, you must pick one of the main types of business structures. The type you choose will decide how much paperwork you must do, how you pay taxes, and what kind of personal risk you take. Below, we explain the four main types of businesses you can register with Companies House.
Sole Trader Business
Becoming a sole trader is the easiest way to start a business. This means you run the business by yourself and you are self-employed. You can use your name for the business or create a different company name. As a sole trader, you get to keep all the profits but also pay taxes on them. This type of business can become less attractive if you start making a lot of money because you will have to pay more taxes.
Being a sole trader also means you are responsible for any business debts. This means that your personal assets, like your house or car, could be used to pay off business debts. The registration process for a sole trader is simple, and you need to register with HM Revenue and Customs (HMRC). It is also a good idea to have a business bank account to keep your business money separate from your personal money.
Business Partnership
A Business Partnership is when two or more people share the profits and losses of a business. These partners can be individuals or companies. Like a sole trader business, each partner is responsible for paying taxes on their share of the profits. To set up a partnership, you must choose a business name, pick a partner to manage tax returns and records and register with HMRC.
The most important part of a partnership is choosing the right partner. This person will be a big part of your business for a long time, so you need to ensure you trust them and share the same business goals. You can also make a written agreement to decide who does what and how the profits are shared.
Limited Company
A Limited Company is a separate business from the people who run it. This means that if the company has problems or debts, your personal assets are protected. Registering a limited company requires a unique name ending with “Limited” or “Ltd”.
To complete the company registration with Companies House, you also need a registered office address in the UK, at least one shareholder, and some documents called articles of association. These documents explain how your company will operate. You must also register for corporation tax within three months of starting the business.
Once your company is registered, Companies House will send you a Certificate of Incorporation, which proves your company legally exists. Running a limited company means filing annual accounts and sending a yearly confirmation statement to keep Companies House updated.
Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) is similar to a regular partnership, but with less personal risk. In an LLP, each partner’s liability is limited to the amount they have invested in the business. You need to register an LLP with both Companies House and HMRC. Members of an LLP can be people or companies, and each of them needs to sign an LLP agreement that explains their responsibilities and share of profits.
Additional Business Types: Community Interest Company (CIC)
A Community Interest Company (CIC) is a type of company for people who want to run a business to help the community rather than to make a profit for themselves. These companies have special rules to make sure they are genuinely helping the community.
How much does it cost to register a company?
Many people wonder how much it costs to register a company. The good news is that the costs are pretty low. Depending on how you do it, registering a company in the UK can cost between £12 and £100.
Registering your business online with Companies House costs just £12. The registration process is quick, and most online applications are approved within 24 hours. Registering online is cheaper and faster than using traditional methods.
If you prefer, you can also register by post. This takes more time and effort because you need to fill out an IN01 form and send it with a cheque to Companies House. The postal method costs £40 and can take up to ten days to process or longer during busy periods. You can also pay £100 to complete it quickly on the same day.
If you don’t want to handle the registration yourself, you can hire someone to do it. However, this will cost more. Some third-party services can also help set up a business bank account or get a registered office address, making the process easier.
Registering Online vs By Post
Registering online saves money and produces faster results. It costs £12 and is completed within 24 hours. Registering by post costs more (£40) and takes longer, usually about ten days. Although you can still use the traditional method, online registration is now the most popular choice.
Steps to Register a Limited Company
To set up a private limited company in the UK, follow these steps:
- Choose a Company Name: Your company name must be unique and cannot copy any existing trademarks. It must end with “Limited” or “Ltd”.
- Registered Office Address: You need a publicly listed registered office address in the UK. This is where all official mail from Companies House and HMRC will be sent.
- Set Up Directors and Shareholders: Your company must have at least one company director and one shareholder. The director runs the company, while shareholders own parts of it.
- Prepare the Necessary Documents: You will need articles of association and a memorandum of association. These explain how your company will work.
- Register with Companies House: You can register online or by post to create your company. Once registered, you will receive a Certificate of Incorporation.
- Register for Corporation Tax: Every limited company has to register for corporation tax separately within three months of starting.
Post-Registration Requirements
After your company’s incorporation, some ongoing requirements exist to keep your company compliant. You must send annual accounts and a confirmation statement to Companies House and keep proper financial records. All businesses also need to report and pay taxes to HMRC.
Opening a business account is important for many businesses. A business bank account helps keep finances separate and makes things easier when it’s time to do taxes. Many UK banks offer special business accounts for small companies.
Corporation Tax and HMRC Compliance
For limited companies, registering for corporation tax is required by law, which can lead to fines. You must register with HMRC within three months of starting. Corporation tax is paid on your company’s profits, and you will also need to manage income tax and National Insurance for any employees.
You must also submit an annual confirmation statement to Companies House annually to confirm the correct information. This helps keep everything up to date and avoids penalties.
Company Formation for Overseas Entities
People from other countries can also start a company in the UK. Overseas entities that want to set up in the UK must follow the same steps, but a UK representative is needed to help handle legal and tax matters. They must follow all UK laws, including taxes and trading standards.
Benefits of Limited Liability
Starting a limited company or limited liability partnership can help protect your personal assets. Because the company is a separate legal entity, your liability is only up to the amount you put into the business. This makes it a safer choice for people who want to reduce their risk.
Conclusion
Registering a company in the UK might feel complicated, but breaking it into small steps makes it more accessible. Whether you want to be a sole trader, start a business partnership, create a limited company, or form a limited liability partnership, the key is choosing the type of business that fits your goals.
Using Companies House to register your business online is usually the easiest and cheapest way to start trading quickly. Each step, from picking your company name to understanding your taxes and responsibilities, is important to ensure your business starts off right.
With careful planning and dedication, your business can grow into something successful. The UK has a diverse business environment, and by following the proper steps for company formation, you will be ready to take on new opportunities and build a thriving business.
