When you’ve settled on your business idea and are ready to make your vision a reality the business and legal bureaucracy can also make the process feel more overwhelming than expected. With an abundance of legalese and different business terminology, it can be difficult to navigate from concept to registered business. If you’re struggling with how to incorporate your startup in the U.K., look no further. The first thing to note is that the U.K. is a complex legal space that actually comprises three separate legal jurisdictions: England and Wales, Scotland and Northern Ireland. This blog walks you through how to register a startup in England and Wales, outlining each step you’ll need to take to set up your company.

When and why you should register your startup

Before you register a business startup, you need to have a good understanding of your current and projected business setup. This will impact which legal business structure will be most suitable for your startup, because some structures have certain tax benefits or more scope for growth than others. You’ll need to consider factors such as personal liability, tax implications, and management structure.

Read about the different business structures and their different characteristics, advantages and disadvantages in our guide to Types of Business Structure in the U.K.

Once you’ve made your decision about which business structure is best for you, you can embark on the startup company registration process. 

How to register your startup in England and Wales

The process for registering a startup company will look a little different depending on which business structure you decide on. In this next section, we walk you through the steps for sole traders, limited companies, and different business partnerships.

How to Register as a Sole Trader

If you choose to operate your business startup as a sole trader you need to bear in mind that your business does not exist as a ‘legal’ entity separate to you. This means that you are personally liable for the business’ debts. In addition, your business’ income will be taxed on an ‘income tax’ basis rather than benefiting from the corporation tax rate, which beyond a certain threshold could be disadvantageous. However, the registration process is comparatively simpler than other business structures.

To register as a sole trader:

  1. Register with HMRC by registering for Self-Assessment
  2. You can choose to operate your startup under your own name or choose a separate name for your startup, but you don’t need to register your name.
  3. Be aware of your administrative responsibilities to keep and retain records of your business’ sales and expenses, and to file your tax returns and pay income tax.
  4. Note that if your annual turnover exceeds £85,000 (correct at time of writing), you’ll have to register for VAT.

How to Register as a Limited Company

Registering your startup as a limited company creates a separate, standalone legal entity for your business that is separate from you. This means that any shareholders’ personal liability is limited. Often, limited companies are perceived to be more ‘credible’ or ‘professional’ because, for example, investors won’t lose more than their initial investment. There are also certain tax benefits associated with operating as a limited company, such as payment through dividends to reduce the amount of income tax owed.

To register as a limited company:

  1. Check your startup’s name is still available. You should ensure that your name isn’t offensive and you will have to include ‘limited’ or ‘ltd’ at the end.
  2. Be prepared to change or slightly amend your business name if there is a pre-existing company with the same or similar name.
  3. Issue capital, this means issuing shares in your company. Your company must have at least one shareholder when it is registered. Most companies will issue shares at a value of £1 to each shareholder when starting out.
  4. Finalise your business’ memorandum of understanding and articles of association and get them signed by your startup’s director, shareholder(s) and secretary.
  5. Register your startup with Companies House. You’ll need to provide your company’s address (this doesn’t have to be an official office, but must be somewhere that you can receive post). Name your company’s director(s) and fill out their personal information including name, DOB and address. Finally, you’ll need to disclose your shareholders alongside their personal information.
  6. You’ll have to pay the company incorporation and registration fee, which is currently (at time of writing) £40 for paper incorporation and £12 if you do it online (this can be paid by debit or credit card) and your company is usually registered within 24 hours. Same-day incorporation costs £100 on paper and £30 online.
  7. Most businesses register with HMRC for corporation tax and PAYE (as an employer) at the same time as registering with Companies House. The deadline for registering with HMRC is within three months of when you start trading.
  8. You can register with HMRC by signing into your business’ tax account and following the guidance. Note, you’ll need your startup’s 10 digit Unique Taxpayer Reference that will be posted to your listed address by HMRC within 14 days of your registration with Companies House.

How to Register as a Business Partnership

In a business partnership, all the partners personally share the liability in the business. This means that you and your partner(s) will be personally responsible for any debts, losses, and bills relating to the business. You will also all share the business’ profits and be taxed on it personally.

To register as a business partnership:

  1. Choose a name.
  2. Choose a nominated partner (the person who will be responsible for managing your tax returns and business records).
  3. Register with HMRC for Self-Assessment (if you’re the nominated partner). All the other partners need to register individually.
  4. You should also register for VAT if your annual turnover is over £85,000.

Limited Partnership

For a limited partnership, you need a minimum of one ‘general partner’ and one ‘limited partner’. The general partner and limited partner have different responsibilities and levels of liability for debts in the event that your startup is unable to pay any of its bills.

A general partner:

  • Is liable for any debts that your startup is unable to pay
  • Controls and manages your startup on a day-to-day basis
  • Can make ‘binding’ decisions for your startup

A limited partner:

  • Contributes money or property to your startup when it’s first set up
  • Is only liable for debts equal to the amount they’ve contributed
  • Does not manage the business
  • Is unable to withdraw their original contribution

To register as a limited partnership:

  1. Choose a name for your startup.
  2. Have a registered address (this needs to be an address where you can receive post).
  3. Name your general partners and limited partners.
  4. Register with Companies House and separately register the business for self-assessment with HMRC. Partners also need to register individually.
  5. If your annual turnover exceeds the current threshold of £85,000, you will also need to register for VAT.

Limited Liability Partnerships

To incorporate your startup as a limited liability partnership (LLP), you need to have two or more members. A member doesn’t have to be a person, it can be a company or ‘corporate member’. Each member will pay tax on their share of the profits but won’t have any personal liability for debts that your startup is unable to pay.

To register as a limited liability partnership:

  1. Choose a name for your startup.
  2. Have a registered address where you can receive post.
  3. Have a minimum of two ‘designated members’.
  4. Draft and finalise a Limited Liability Partnership Agreement that outlines how your LLP will be managed. This will set out how you will share your startup’s profits between members, who is needed to agree decisions pertaining to the business, what each member’s responsibilities are and how members can join or leave your LLP.
  5. Register with Companies House.

Registering your startup should be quick and easy

Though it can seem like an overwhelming bureaucratic process, registering your startup doesn’t need to be difficult or time-consuming. When you have familiarised yourself with the necessary documents and requirements, it’s a matter of checking everything off the list. That being said, when it comes to business, it’s always good practice to seek professional guidance. That’s why our business lawyers offer expert guidance and advice on setting up your startup for a clear and transparent price.

Get in touch today to find out how we can help.

FAQs about setting up a startup in the U.K.

1. Can you start a business without registering UK?

All businesses need to register with HMRC, regardless of structure. Even if you’re a sole trader, you will need to register for self-assessment. You only have to register with Companies House if you opt for a Limited Company or Partnership structure.

2. Does a startup need to be registered?

Your startup needs to be registered with HMRC at the very least. Depending on your business structure you may also have to register with Companies House. In addition, if your annual turnover exceeds the current threshold of £85,000, you need to register for VAT.

3. Is the UK a good place for startups?

The U.K. is generally recognised as a good place to do business. There are various financial schemes available to startups as well as other programmes that aim to help new companies in the U.K. Indeed, the World Bank ranks the U.K. as one of the easiest places to do business in the world.

4. Where are the most startups in the UK?

According to Statista, the leading cities for startups in the U.K. in 2021 were London, Manchester and Cambridge.

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