With a purring economy, the United Kingdom is an attractive destination for entrepreneurs looking to start new businesses and grow existing ones. According to the country’s Department for Business Innovation and Skills, the number of companies and public sector corporations has kept on rising, and they represent 66.8 per cent of all businesses. At the start of 2015, there were a record 5.4 million businesses in the private sector, with 99.8 per cent of these being small enterprises.
Although Brexit has no doubt dampened the appetite of people looking to start a business in the UK, the dust and the initial shock of the vote is quickly sinking in, and nothing has fundamentally changed in terms of economic stability. Well, the pound has taken a massive hit, but domestic trade rolls on largely uninterrupted.
Starting a business in the UK isn’t a complicated process. As long as you have done your research, and depending on the nature of your business, you can set up a company in as little as one day. Here is a complete step-by-step guide on how to get started:
Write a Sound Business Plan
The first step to starting any business is to craft a detailed startup plan. Rushing into opening a business without conducting sufficient market research is one of the surest ways to ensure the business doesn’t live to see its first birthday. You must analyze current market conditions, project the demand for your products or services, as well as assess the performance of established competitors in the industry you wish to penetrate.
With all the market information at hand, craft a business plan that details the outfit’s profile and goals, organizational structure, product and services lines, marketing and sales strategies, funding requests and financial projections. This business plan, besides being the blueprint that will help bring your business idea to birth, it can also help you easily attract potential investors.
Select a Suitable Business Structure
You must choose a legal business structure when you want to establish a business in the UK. There are four common structures:
Sole Trader
Sole proprietorship is the simplest of all business structures in the UK. You will be responsible for the daily activities of the business and you will be able to keep profits after paying income tax. If you expect your business to earn over £83,000, then you will be required to register for VAT with HM Revenue and Customs (HMRC). Other obligations include paying national insurance and filing an annual self-assessment tax return.
Limited Company
If you don’t want to run your business as an individual, then you can setup a company to run it. You will serve as the director of the company, and there are quite a number of responsibilities involved in holding such as role. For example, you must compile statutory accounts, file a company tax return with the HMRC and register for VAT if the company makes over £83,000.
To set up a limited company, you must get it registered by the Companies House and inform the HMRC when it starts to operate.
Depending on the specific needs of your business, you can set up a private limited company (limited by shares), a private unlimited company (directors and shareholders are fully liable if the business sinks), or a public unlimited company (a company whose shares can be sold or bought publicly at a stock market).
Business Partnership
Sometimes two or more people join hands to start a business. In this case, you and your partners can choose an ordinary partnership, a structure that requires all the partners to share in the profits and losses the business makes. Partners must also file income tax on their individual profits, pay national insurance and send in an annual self-assessment tax return.
If you don’t want to be personally responsible for the business’s losses, you can establish a limited partnership or a limited liability partnership (LLP). Regardless of the kind of partnership you choose, you and your partners must register it with the Companies House.
It is, therefore, important to note that the legal structure you choose for your business determines:
- The paperwork you will need to fill out in order to acquire the relevant permits and licenses
- The taxes you will pay in the course of running the enterprise
- The options available to you if the business runs into losses
- How profits will be shared among owners
So, how do you select a structure that perfectly suits your business? Is it prudent to settle on any structure just because it requires the least amount of paperwork, or because it takes the least number of days to get your business registered? Here are some factors that will influence your choice:
- Number of owners – Are you starting the business alone or with a partner?
- Growth potential of the business
- Future needs – Will you need to sell the business in the future? It’s far easier, for instance, to sell a sole trader business, than it is to sell the shares you hold in private unlimited company.
- Cost of formation and administration
- Legal liability – Do you want to be held responsible for any losses the business makes? If you don’t, then steer clear of sole trader and ordinary business partnership
Registering a UK Company From Overseas
If you don’t reside in the UK and you want to start a business, you can do so by filling out form OS IN01 and send it to the Companies House within one month of opening your doors for trade. As an overseas company, you can’t set up a partnership or unincorporated body.
To get more information on the UK’s business environment, or you need any kind of help starting an overseas company, contact the Department of International Trade
Secure Relevant Licenses or Permits
Securing a registration alone isn’t enough for your business to begin trading. Depending on the nature of the enterprise, you may need to secure relevant licenses and permits, as well as comply with other laws and regulations. For example, if you want to set up a limited company to run a chain of restaurants, you must not only ensure the company is properly registered by the Companies House, but also ensure the restaurants are approved or licensed by local authorities.
Other business operations that typically need a license or permit include:
- Amusement parks
- Theatrical productions
- Scrap metal dealings
- Street standing
- Cattle holdings
- Art therapy
Use the License Finder to determine if your business operation needs a permit or license.
Open a Bank Account
Although there no legal obligation to set up a bank account if you are a partnership or sole trader, it is a standard business practice to let a bank handle your money. With an active business account, you are able to keep your personal and business funds separate, and you can easily secure credit that you can use to expand your operations.
Opening a business bank account in the UK is similar to opening a personal account. You will typically need to provide basic details about your business, including its name, location (registered address) and nature of operations. Some banks may ask for your business plan, which will come in handy when applying for a loan.
What if you live overseas? This should not pose any major challenge, because your company will already have been registered in the UK and have a real (not virtual) office with the business being conducted within the UK.However, if for any reason you are unable to secure a UK bank account, you could opt for an offshore account offered by banks such as HSBC and Barclays, or open a sterling account with a bank in your home country, or even keep using your existing account in your country.
Get Workers on Board
It’s not necessary to hire workers if you are a sole trader or partnership with a small business, but you may need to bring more people on board as the business grows its operations. Hiring staff comes along with certain responsibilities, which you must meet to ensure the business stays within the confines of relevant employment regulations.
As an employer, you must draft a contract that stipulates your workers’ employment conditions, job duties and responsibilities. You must also pay them at least the national minimum wage and deduct national insurance contributions from their wages.
If you need to bring in foreign workers, you must verify that they are permitted to work in the UK. This usually involves checking the validity of their original identification documents. Some employers have faced civil penalties for hiring illegal workers.
Non-resident UK Companies
Even if you aren’t a UK resident, if you want to form a private limited company (plc) in the UK it is nothing but a simple and affordable procedure- all the legal requirements and the application process is exactly the same for everyone regardless of their residency. However, the easiest and quickest way to form a company in the UK is to use a formation agent. Usually, it only takes 3 working hours to approve applications as everything is done online.
You do not need to travel to the UK, or speak to anyone on the telephone, sign any paperwork in person or post any documents. All you have to do is upload and deliver your documents online, create a unique signature to authorize the registration and that’s it!
Find Business Support
Beyond designing and implementing laws that create a regulatory environment that encourages business growth, the UK provides additional support to ensure every business, particularly small businesses and startups, gets every chance to prosper. You can access government-sponsored grants, loans, overdrafts, invoice financing, equipment leases, mentoring and consultancy.
There you have it! The A to Z of how to establish a business in the UK. Although this information may not fit your business 100 per cent, it will sure give you a head start on how to maneuver through various registration requirements. Alternatively, you can always use the services of companies that specialize in setting up UK businesses such as StartingBusiness.