With the planning stage complete, the next step is to put the practical measures in place. That includes everything that’s necessary to turn your idea into a business that can trade legally in the UK and meet all of its tax and accounting obligations along the way.
There are a number of important decisions that must be made, from the legal structure your business will take to the business’s name and finding a suitable place for it to be based.
Depending on the type of work you’re planning to do, there may also be certain licenses or permits to apply for or insurance cover that’s a legal requirement in your industry.
Limited Company, Partnership or Sole Trader
One of the first decisions that has to be made is to choose the legal structure of the business. There are a number of options open to you, all of which have their own legal, taxation and accounting requirements you must be aware of. Your four key options include:
- Sole trader
- Limited liability partnership (LLP)
- Limited liability company (LTD)
Sole traders and partnerships are very similar business structures with one important difference. Sole traders are businesses with one owner, whereas partnerships can have anything from 2-50 co-owners.
Both sole traders and partnerships are easy to set up and run. The business has to be VAT-compliant, you must pay PAYE and National Insurance to HMRC if you have any employees and you also have to file a self-assessment tax return every year – but that’s where your obligations end.
There are also far fewer financial restrictions. You and the business are considered to be one and the same. That means you can take money out of the business’s bank account and pay it into your personal account (and vice versa) whenever you like.
Limited liability partnerships (LLP) tend to be used by businesses that provide professional services such as accountants and legal firms. They have some of the characteristics of a conventional partnership, such as the distribution of profits and the tax liabilities, but also benefit from limited liability just like a private limited company. Limited liability ensures that the liability of the co-owners for financial losses or company debts is limited to the amount they originally invested in the firm.
Private limited companies (LTD) are separate legal entities in their own right. That means your personal finances and the finances of the business must be kept apart. The company is owned and controlled by its shareholders and you can choose who to allocate the shares to when you incorporate (register) the business.
A private limited company must be registered at Companies House and certain standard legal documents that govern how the business operates must be created. Annual accounts must also be filed and corporation tax has to be paid. This brings additionally complexity and cost. However, private limited companies are more tax efficient and you are not financially liable if things go wrong.
Registering Your Business
Starting a business from scratch is hard work, so it’s essential you take the necessary steps to protect everything you create along the way. If you fail to register important details such as your business name, web domains and trademarks, it makes it much easier for your rivals to imitate everything you’ve done so far.
Do You Have to Register Your Business With Companies House?
Registering your company is one of the first procedural steps you will need to take. Sole traders are not legally required to register with Companies House. However, if you fail to register your business, there’s nothing to stop someone else registering a business with your chosen trading name.
Limited companies are legally required to register with Companies House. The process is relatively simple and can be completed yourself, although there are third-party registrars who will handle the registration process for a fee. To register, you will have to provide your company name, address and details of the company directors. You’ll also have to create and submit the memorandum and articles of association.
These days, a website is an essential part of almost every business. The first step in creating your online presence is to register a domain name. A domain name is the [yourbusinessname].co.uk, .com or .net address that customers use to find you online.
Purchasing a domain name is simple and relatively cheap in most cases, but it’s important you get one that’s memorable, short and easily identifiable. To buy a domain name, visit a registrar such as GoDaddy or 123-Reg, key in your domain and pay a fee. The domain has to be renewed every year.
Registering a Trademark
You can also register a trademark to protect your business’s name, brand and products or services. You can trademark:
- Domain names
- Any combination of the above
You should first search the trademarks database to see if anyone has registered a similar or identical trademark for similar goods or services. Once registered, you can take legal action against anyone who uses your brand without permission and display the ® symbol next to your brand.
Business Licenses and Permits
Some types of business require a permit or licence in order to operate legally. That commonly includes businesses that engage in the sale of tobacco or alcohol products, but other forms of licence are necessary for businesses that include:
- Taxi firms
- Driving instructors
- Security businesses
- Sports coaches
- Importers and exporters
- Child care providers
- Food preparation businesses
- Manufacturing firms
- And many more…
The business owner has to apply for the necessary licence or permit from the local authority that governs the area the business is located in or the trade body for the sector concerned.
Serious responsibilities are associated with running a business that requires a permit or licence and breaches of the law can lead to fines and even the closing down of the business. For that reason, accredited qualifications are usually required before permits or licences are granted. You can use this licence finder to find out what licences you need for different trades and sectors.
Here’s the whole series:
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