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