Here’s how to register your UK based business

This year has seen the rise of more and more businesses due to numerous people opting for all modes of self-employment. There eventually comes a phase, either when you’re starting out or in one of the later initiation stages when you might ask yourself, “Should I register my business?” 

Registering a business has many benefits, including obtaining the legal right to carry out your practice, having added certifications and licenses for legitimacy and your business having a recorded legal identity of its own. The UK offers attractive capital schemes for small and medium-scale enterprises to promote their expansion. You may refer to Venture Capital Trusts and Enterprise Investment Schemes for further information.

Registering Your Business – What You’ll Need First:

Before registering your business, make sure you have the following essential elements in order:

• Business structure – it is vital to have a set business structure first, so you have a clear concept of the ownership, assets and liabilities and which tax benefits you may avail.

• Business plan – the idea of having a business plan is becoming increasingly popular. Starting a business is a journey; it’s essential to know how far you’d like to expand it and what kind of exit you’d like to take in the end.   

• Name – essential for establishing your trademark, associating it with your bank account and utilising it as your unique identity for all external parties.  

• Legal documents – there are varying legal papers that are mandatory for registering your business which we will mention later. 

• Financing and Insurance – find a ground source of capital for your business, either through your means, start-up loans, equity investments, business grants, or crowdfunding. Insurance helps you secure your business to a large extent from accidents, lawsuits, or natural disasters. 

• Tax Laws – be aware of your country’s tax regulations. This helps you reduce the number of potential errors you might make while deterring what you tax and to which extent. Tax laws give you a sense of security as you plan your budgets accordingly. Find the updates on the official government website here.

Here are some guidelines for the primary and popular types of businesses currently trending in the United Kingdom:

1.  SOLE TRADER:

As of April 2021, FSB has reported that 56% of the private sector businesses consist of sole traders. Sole trading is a mode of business where an individual operates on their own and is self-employed. There is no legal differentiation between the proprietor and their business. 

Sole traders do not need to register with the Companies House. Instead, they are required to register with the HRMC(Her Majesty’s Revenue and Customs) and maintain books of accounts and self-assessment returns. 

The HRMC has a detailed list that dictates whether you qualify to register or not. You can fill in your required information by Income Tax for sole traders is determined based on their self-employment income. There are additional services you may avail of as well. 

It’s important to note that the best time to register for HMRC is before 5th October as the tax year runs from 6th April one year to the next ending on 5th April. 

For the HMRC registration, they will request you to provide personal data like your name, nature of the business conducted, postal address, contact information and National Insurance(NI) number. 

2. PARTNERSHIP:

A traditional business partnership is a formal agreement between two or more people to jointly conduct their trade and share profits, losses and risks. 

You have three options for registering a partnership on HRMC:

• Registering online. For doing so, you’ll need to sign in using a Government Gateway ID. 
• Register a partnership by post if you’ve employed an agent.
• Printing the form, filling it and uploading the PDF version. 

The Government has instructed that you cannot file online for self-assessment tax returns for a partnership on their official website. Partners are required to create separate self-assessment tax returns where each will be taxed individually.

3. LIMITED LIABILITY PARTNERSHIP (LLP): 

Unlike a conventional partnership, a Limited Liability Partnership is one where partner’s bear no consequences of each other’s deeds and have a separate legal identity from their business.

An LLP is to be registered by two or more people under the Companies House, which has three respective Registrars for England, Wales and Northern Ireland. The official website has dictated the following compulsory initial steps to finish before doing so:

• A set Business Name for the LPP. There are rigid laws on the Naming of an LLP. Click here to refer and learn more.
• A minimum of 2 members. There is no upper limit to the number of members in an LLP.
• A registered office address for incorporation.
• Supply sufficient information about its PSCs(People with Significant Control).

Note that the Government has instructed that this business structure strictly does not apply to Non-profit organisations.

Two ways to incorporate an LLP are through:

1. Electronic Software Filing – documents can be submitted electronically and stored in a digital database. There is a standard fee that is charged for the electronic web-based service.
2. Paper Filing – it’s a longer process than e-filing and a cheque is to be made payable to the Companies House. 

There are also specific guidelines regarding statutory register information if it is being made public. It is recommended to use an agent when incorporating an LLP. 

You can find out more about how to register an LLP on the official website here.

 4. LIMITED LIABILITY COMPANY (LLC):

Limited Liability companies are private companies that bear a separate legal identity from their owners. This means that their profits, losses, assets, liabilities and debts only affect the amount of capital they’ve invested in the business. 

The two types of companies are:

• Companies limited by shares – the owners are shareholders who reap profits according to their shares invested in the company after they pay tax.
• Companies limited by Guarantee – often referred to as “Charitable Companies”, are companies headed by guarantors who agree to pay a fixed sum of money in the event that the business is dissolved. 

Both of which are segregated into public and private companies. 

The significant differences between public limited companies and private limited companies are listed below:

• In a Public Limited Company(PLC), owners are required to invest a minimum of £50,000, whereas, in a private company, there is no minimum amount of capital.
• A PLC is listed on and legally allowed to trade its shares publicly on a stock exchange, while a private company cannot. 
• The minimum number of people required to start a PLC is two and to start a private company is one.

Before drafting your LLC for registration, companies of both natures must have a physical registered office location as either HRMC or Companies house will utilise that location for statutory mailing. 

Check the rules for company addresses here.

General steps to setting up an LLC:

(There are three ways to register:

• Through an agent
• Through post – typically takes around a week
• Through third-party software – which takes only a day to register and apply online.)

1. Registration with the Companies House is mandatory for both public and private companies. In the process, you must obtain a Government Gateway ID.
2. Hand in information on the appointed Directors, shareholders and PSCs such as their full names, registered addresses, birth date, occupancies and nature of control. 
3. Providing information on the nature of business being conducted.
4. At the time of registration, it is advised to simultaneously register with Corporation Tax, at least within three months.

If you cannot do so, the alternative is to register with HRMC after registering with the Companies House.

For the complete official government guide to setting up an LLC, click here.

5. OVERSEAS COMPANY:

It becomes compulsory to register an overseas company in the UK, especially if it has a physical location for its business or a growing presence in the UK.

The process of registering an overseas company is similar to that of registering an LLC. Therefore, they are required to register with the Companies House. Companies that do not have their base office in the UK are not subjected to doing so. Instead, they must contact HRMC to register for Corporation Tax, particularly if they dispose of interests on UK property or land.

For additional help, companies may contact the Department of International Trade.