Exploring the Steps in Registering a Business in the UK - Peter Boolkah

Congratulations on taking the first step toward shaping your entrepreneurial dream! It’s an exciting and challenging journey, filled with ups and downs. Now, let’s talk about an essential step in that journey: registering your business in the UK. It can seem like navigating a complex maze, but don’t worry! With a bit of guidance, you’ll realize that setting up a business in the UK is straightforward!

In this article, we’re sharing everything you need to know about registering a new business in the UK. We’ve broken down the process to register your business into manageable steps for you to follow.

What is Registering a New Business?

Registering a company is like obtaining your passport to the business world. It’s the official process of setting up your company in the eyes of the law, declaring your intentions to trade, and establishing your unique identity. By listing your company with the Companies House – the official registrar of companies in the UK – you provide key details such as your business name, address, and the nature of your operations.

Once registered, you receive a Certificate of Incorporation, which serves as a written acknowledgment that your company legally exists. This procedure is essential for legality purposes and opens doors to potential funders and customers, helping you establish credibility in the market.

Do I Need to Register My UK Business?

You might be thinking, “Do I need to register my UK business?” Well, the answer largely depends on your business structure. If you register as a sole trader or self-employed, technically speaking, you don’t need to register your business with Companies House. However, you’ll still need to notify HMRC that you’re self-employed to pay tax and National Insurance contributions correctly.

On the other hand, if you’re planning to set up a private limited company or partnership, registration with Companies House is mandatory. It helps your business gain a separate legal identity, protecting your personal assets from your business liabilities and offering you a layer of security. This step also makes your business more credible and trustworthy to potential investors, clients, and partners.

how to register a business uk - Peter Boolkah

7 Steps to Register a Business in the UK

Let’s take a closer look at the seven fundamental steps to effectively register and set up your business in the UK:

1. Select Your Type of Business

Choosing a business structure is like laying the foundation stone for your enterprise. It’s a decision that not only affects how your business operates but also has significant implications for your financial and legal responsibilities.

In this section, we’ll explore the different types of business entities that you can choose from. We’ll explain the advantages and possible downsides of the different business structures, to help you make an informed decision.

Limited Company

A limited company is a widely popular business structure in the UK. It forms a separate legal entity offering the advantage of limited liability, which means, as a business owner, you’re not personally responsible for the company’s debts. Additionally, registering a business as a limited company can lend a professional edge to your business, enhance your credibility, and potentially make it easier to secure funding.

Partnership

A partnership is a simple and flexible business structure, where two or more people share the ownership. Each partner in the business contributes resources, such as capital, skills, or property, and shares in the profits and losses of the business. It’s an excellent option for those seeking shared responsibility, but do bear in mind that you’re jointly and severally liable for the partnership’s debts.

Sole Trader

As a sole trader, you’re running your business as an individual. It’s the simplest form of business structure, with minimal paperwork, and you have sole control over your small business. However, unlike partnerships and limited companies in the UK, sole traders are personally responsible for their company debts, which means your personal assets could be at risk.

Overseas Company

For businesses based outside the UK but looking to set up a place of business or branch within the UK, they must register as an overseas company. This allows foreign businesses to operate under UK law and provides a footprint in the UK market. Remember, specific additional legal obligations and disclosures may apply to overseas companies.

2. Register Your UK Company Name

Registering your business name is an exciting moment in your journey, like giving an identity to your business dream. The name you choose will not only represent your brand in the market, but it will also be the one that customers remember and engage with. The process involves checking the availability of your chosen name on the Companies House register using a company name availability checker and ensuring it’s not infringing on any existing trademarks.

Choose a business name that’s unique, not offensive, and shouldn’t imply a connection with the UK government or local authorities unless it’s accurate. Once you’ve chosen a name that ticks all these boxes, it’s time to officially register it. This can be done online or by post and comes with a small fee. Post-registration, your company name is protected by law, which means no one else can use it.

3. Find a Location and Choose Your Company’s Official Address

Choosing the right location for your business can be a strategic move that has a big impact on your brand image, accessibility to customers, and even your costs. It’s a decision that should consider not only your current needs but also your plans for future growth and expansion. Whether it’s in the heart of a busy city, a calm suburban area, or even your own home, the location should match your business model and target audience.

Once you’ve picked the location, the next step is to provide your official company address. This is a crucial detail because it’s the main point of contact for Companies House and HM Revenue and Customs (HMRC). Any official mail from these authorities will be sent to this address.

legal documents

4. Memorandum and Articles of Association

The memorandum and articles of association are important legal documents that play a crucial role in incorporating your company. The memorandum represents your agreement to form the company and become a member of it upon formation. It’s a fairly straightforward document that includes your name, signature, and the number of company shares you hold.

On the other hand, the articles of association can be seen as the rulebook for your company. It outlines how the company is managed, governed, and owned, including the powers of the directors, decision-making processes, and the issuance of shares. It sets out the rights and responsibilities of the directors, the types of business activities you can engage in, and how financial business records are maintained and reported.

You have the option to adopt model articles or customize your own articles of association to suit your company’s specific needs. If you’re uncertain, it’s recommended to seek professional legal advice to ensure these important legal documents are accurately prepared and effectively serve their purpose. Once these documents are completed, they must be registered with Companies House as part of the incorporation process.

5. Get Your SIC Code

Every business in the UK must obtain the Standard Industrial Classification (SIC) code. This code is basically a five-digit code that identifies the main nature of your business. The SIC code ensures that Companies House can accurately classify your business in its records.

You can find a comprehensive list of SIC codes on the Companies House website. It’s important to choose a code that closely aligns with your business activities, but don’t worry if it’s not exactly perfect. Many businesses have diverse operations, and the SIC code just needs to reflect your main source of income. Once you’ve found the code that best represents your business, include it in your application to Companies House.

6. Register a UK Business Bank Account

Registering a UK business bank account is an important step in establishing your company’s financial identity. Unlike personal accounts, business bank accounts are specifically designed to effectively manage your company’s finances, offering features such as invoicing, payroll services, and business loans. To open a business bank account in the UK, you’ll need to provide specific documents, including your Certificate of Incorporation, business details, identification, and proof of address.

It’s a good idea to explore different banks and compare their fees, interest rates, and additional services to find the best fit for your business. Also, consider the bank’s reputation, customer service, and the convenience of their banking facilities. Once you’ve chosen a bank, you can usually apply online, over the phone, or by visiting a branch in person.

7. Submit Everything to Companies House

Submitting your company registration to Companies House is the final, yet crucial step in your business setup journey. This involves sending all the necessary documents you’ve prepared, including the filled application form (Form IN01), the Memorandum of Association, the Articles of Association, and details of your company’s directors and secretary, if applicable. Similarly, remember to include your statement of capital and initial shareholdings, statement of guarantee or statement of compliance, and the payment for your business registration fee.

The registration fee varies depending on how you apply, with online applications generally being the quickest and cheapest option. Once you’ve submitted everything, Companies House will check your application, and if it’s accepted, they will send your Certificate of Incorporation. This certificate confirms that your company legally exists and displays your company number and date of incorporation. It’s worth noting that the process can be completed online, by post, or using an agent or third party. The online method is usually faster, with companies typically being registered within 24 hours.

VAT Taxes

Other Tasks to Consider After Registering a New Company

Now that your company is officially registered, you might be wondering, “what comes next?” It’s time to lay a strong foundation for your operation and make your mark in the business world. While registering your company with Companies House is a big step, it’s just the beginning. There are several important tasks you need to consider to ensure your business is up and running smoothly and in compliance with UK regulations. Let’s dive deeper into them.

Register with HMRC for VAT

Once your company is officially recognized, you’ll need to register your company for VAT (Value Added Tax) with HM Revenue and Customs (HMRC). This is especially important if your business’s VAT taxable turnover exceeds £85,000. In such a case, it is a legal requirement to register for VAT.

However, even if your turnover is below this threshold, you may still choose to voluntarily register. VAT registration can bring benefits, as it enables you to reclaim VAT on eligible business expenses.

Register with HMRC for Tax

As a new business owner, you’re required to register your business for Corporation Tax with HMRC within three months of starting to do business. This includes buying, selling, advertising, renting a property, and employing someone. All profitable companies need to be registered for corporation tax which is calculated on your company’s annual profit. After registering, you’ll receive a unique tax reference number which you will need for your tax returns.

Register with HMRC for PAYE if You Employ People

If your new business employs people, you need to register as an employer with HMRC for PAYE (Pay As You Earn) purposes. PAYE is a way of paying income tax and national insurance contributions, where the employer deducts tax and national insurance contributions from the wages or pension before paying the employee or pensioner. It’s important to note that it is recommended to register for PAYE up to four weeks before paying your new staff.

Registering a Trademark

Lastly, it’s crucial to protect your business brand. Registering a trademark is an effective way to achieve this. A trademark is a distinctive sign or mark that sets your goods or services apart from your competitors.

By registering it, you gain exclusive rights to use the trademark, helping safeguard your brand and prevent others from using it. The process involves applying to the Intellectual Property Office (IPO), and it’s worth noting that registered trademarks are valuable assets that can be bought, sold, franchised, or licensed.

How Long Does it Take to Register Your Business in UK?

Registering your business in the UK can take varying lengths of time depending on how you apply and the accuracy of your information. If you apply online with no errors or omissions, Companies House can process your application within 24 hours. However, if you choose to send your application by post, it can take 8 to 10 days.

If there are mistakes or missing information, it may take longer to register your business as Companies House will need to return your application for corrections. So, it’s important to double-check all forms to avoid delays. After registering your business, remember to allocate time for other important registrations like VAT, Corporation Tax, PAYE, and Trademark registration.

Average Cost to Start a Business in the UK

Starting a business in the UK comes with various costs. According to a recent study by HP, these costs average around £22,756 in the first year. Let’s break it down: legal costs make up a significant chunk, with new businesses spending an average of £6,259. Accountancy fees, important for financial management and compliance, come to about £3,937. HR costs, which cover aspects like recruitment, training, and payroll management, average at £4,518.

Lastly, costs associated with the formation of the company itself amount to approximately £5,518. Keep in mind that these figures serve as a guide, and actual costs can vary based on the nature of the business, industry, and other specific circumstances. It’s crucial for prospective business owners to carefully consider these costs when planning their start-up budget.

FAQs

Do I need to copyright my business name UK?

You don’t necessarily need to copyright your business name in the UK. Copyright law protects literary, dramatic, musical and artistic works, but it does not extend to names or titles. Instead, businesses typically protect their name by registering it as a trademark.

This provides the exclusive right to use that name in relation to goods or services covered by the registration. It’s worth noting that while registering your business with Companies House provides some protection, it doesn’t prevent others from using similar names for their products or services.

Can a foreigner open a company in the UK?

Yes, a foreigner can indeed open a company in the UK. There are no restrictions placed on foreign nationals regarding company formation in the UK. A foreign national can be a director or shareholder, and a company can also be wholly owned by foreign shareholders.

However, every UK company must have a registered office address within the UK. This address is a physical location where official communications and notices can be sent. It is also worth mentioning that the business must comply with the UK laws and regulations, irrespective of the nationality of the business owner.

Does an online company must follow the same rules as brick-and-mortar businesses in UK?

Yes, an online company must follow the same rules as brick-and-mortar businesses in the UK. This encompasses several areas including, but not limited to, company registration, data protection, copyright and intellectual property rights, consumer rights, and tax obligations.

It’s crucial to note that online businesses also need to adhere to specific digital regulations like the UK’s digital service tax and eCommerce regulations. Compliance with these rules ensures a level playing field for all businesses, promotes trust, and protects consumer rights while maintaining a healthy business environment in the UK.

Can a non UK company register for VAT?

Yes, a non-UK company can register for VAT in the UK. However, the process differs slightly compared to UK-based companies. If the foreign company makes taxable supplies in the UK and exceeds the VAT threshold, it must register for VAT with HMRC (Her Majesty’s Revenue and Customs). It’s important to note that there is no threshold for businesses that are not established in the UK.

Therefore, even if they only make a small amount of taxable supplies, they must still register for VAT. Also, they may choose to voluntarily register for VAT if they wish to reclaim the VAT they have paid on business-related goods or services in the UK. Non-UK companies must remember to comply with the UK VAT laws and regulations, including making regular VAT returns.

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