Welcome to the world of entrepreneurship! Starting your own business (eCommerce or not) is a very exciting endeavor, whether you are opening a small ecommerce site or planning to conquer the world with a large corporation. Either way, you can’t do much of anything until you register a business in the UK.
Some European Union nationals do not need any special permission to register an official business in the UK, but if you are not a citizen you should first look into whether or not you need a special visa or other permissions in order to start your company. Once you’ve got that squared away, read on for 7 simple steps to registering your business in the UK. You can also use this as a guide as you go through the company registration process online.
Do I Need to Register my Business in the UK?
First things first, is it even necessary to officially register a business in the UK? The answer depends on the type of business you are starting. Legally, you would not be required to register as a sole trader, although you would eventually still need to notify HMRC to ensure that you are paying the appropriate taxes.
Bottom line, if you are intending to make a profit from your business idea (as you should if you are starting a business!), you should register your business.
Do I Need to Register my Online Business in the UK?
Online businesses follow the same rules as brick and mortar businesses and therefore an online business would need to be registered. Of course an online business can have customers all over the world, so if you are headquartered and registered in the UK that does not limit you from selling in other locations. Just make sure you have a top-notch payment infrastructure like Pay.com’s that can handle payments in different currencies.
Once you have decided that it’s time to register your company, here are the 7 simple steps to follow:
Steps to Follow when Registering a Business in the UK
1. Choose your Company Type
There are a few different entities or business structures in the UK that you can choose from when you register a business. The one that’s right for you depends on what industry you are in, whether you have or plan to have employees, how big you expect the company to be, and more. The first step in the company registration process is to choose from one of the following types of companies:
Most companies in the UK are registered as Limited Companies, which mean that both the ownership and liabilities are split equally and there is less personal risk against your own assets should the company run into trouble.
Limited companies by definition are either “limited by shares” or “limited by guarantee.” Limited by shares means that it’s a for-profit company that is legally separate from its owners. The company has shares and shareholders and can keep the profits it makes after paying taxes. A company that is limited by guarantee, on the other hand, is what’s more commonly known as a not-for-profit. This type of company is also legally separate from the owners but instead of shareholders it has guarantors and any profits earned are reinvested into the company.
Limited Companies of any type must be registered with Companies House and include the suffix “Ltd” or the word “Limited” at the end of their name. There is a cost involved with business registration, which can vary depending on whether you register online or via the post or whether you request same-day service. Limited companies must register for corporation tax within three months of starting the business and this can only be done after first completing the company registration with Companies House. Within the category of Limited Companies, there are two sub-categories:
- Private Limited Company (Ltd.) - A private limited company is registered at Companies House and must have at least one director and one shareholder. It is a separate legal entity that has its own assets, profits and debts. Company shares are not publicly traded and there is no minimum investment necessary for someone to become a shareholder. Each shareholder’s liability is limited to their percentage of ownership in the company.
- Public Limited Company (PLC) - Most companies start out as private limited companies and then may become a public limited company after experiencing some growth. A public limited company is similar to a private limited company in that it has directors and shareholders, but the biggest difference is that the shares can be publicly traded. That gives the company the ability to more easily raise funds, but it also comes with more complicated tax and financial reporting requirements. In order to become a public limited company, the company must have a capital value of at least £50,000.
In a partnership company, two or more people join forces to start a business together. The partners share the profits and company dividends, but also have equal responsibility for any debts or losses as well as national insurance. Many small businesses are run this way, under one of the following categories:
- General Partnership - In a general partnership, all profits and liabilities are shared equally among the partners. General partnerships must register with HMRC. One partner is designated as the “nominated partner” who is responsible for filing the company’s taxes, while all of the partners also file their own individual tax returns.
- Limited Partnership - In a limited partnership, there is one (or more) general partner who is both responsible for the day-to-day management and is liable for any losses or debts of the company. In addition, the partnership has one or more limited partners who provide financial support but are not involved in the management of the company. Limited partners are only personally liable for the amount they invested in the company.
- Limited Liability Partnership (LLP) - If none of the partners want to be personally responsible for company debts, then a limited liability partnership could be the way to go. In this type of partnership, which requires a written agreement, the partners are each responsible for paying income taxes on their share of the company’s profits, but they are not liable for debts at the personal level. In contrast to other partnerships, if you start an LLP, you must register the business with Companies House.
The simplest type of business is a sole trader, in which there is no legal separation between you as an individual and your business. A sole trader is not required to register the business with Companies House, but must register with HMRC for self-assessment tax returns to ensure that you pay tax and national insurance. As a sole trader, you can choose to operate your business using your name or to designate a company name.
Proposed company names are not allowed to include the words “limited, Ltd, limited liability partnership, LLP, public limited company, or PLC” neither can they be offensive (i.e. curse words) or imply a connection to any government authority. You would need to check local databases and make sure that the name you choose is not already trademarked and in use by another business.
In addition to the most common company types described above, it’s also possible to register a business as an overseas company or a corporation. If you already own and operate a company in another country and would like to open a branch in the UK, you can register with Companies House as an overseas company. This is a simple form to fill out at a low cost (£20) and is only necessary if you plan to have a physical location in the UK.
2. Register a UK Business Name
When setting up a Limited Company or an LLP, your next step is to register the business name with Companies House. Before doing this, you must check and make sure that the name you wish to use is not already taken. Companies House has a convenient website that you can use to search for your proposed company name. You also need to make sure that your company name does not violate any of the guidelines about using offensive words. In addition, once you are sure that your name isn’t already taken, you should trademark it so that no one else can use it.
When choosing a name, there are things to consider, like making sure it’s something catchy and memorable and also aligns with your niche and messaging. It’s also important to keep in mind the following issues that may come up once you start checking to see if your name is usable:
- Same As - If you search Companies House and discover that your suggested name is the same as another registered company, it either means the exact same name is in use or it’s only got very slight differences, like using a “+” or “&” instead of the word “and.” Either way, you can’t register a business with a name that is so close to an existing company unless you get written permission from the other company.
- Too Like - A company name that is very similar to an existing registered company will also be rejected. HMRC gives the example of “Easy Electrics For You Ltd” and “EZ Electrix 4U Ltd.” Despite the different spellings, the names are too similar and whoever got their first would be granted the permission to use the name.
- Offensive Language - Most people are unlikely to choose a business name that includes a swear word or racial or religious slur. But, people do like a good pun, and you may want to inject some humor into your company name. Just make sure it’s humor that’s in good taste-once you start to cross the line into adult humor, your name will probably be rejected.
- Sensitive Words - The UK Government maintains a list of sensitive words that require special permission in order to use in your business name. This list includes words like “insurance” for which you need permission from the Financial Conduct Authority. Words related to the royal family such as His or Her Majesty, Prince, Queen, Windsor, etc. all also require special permission.
- Other Regulated Words - In addition to the sensitive words, there’s another list of regulated words which also require permission from specific professional bodies in order to include them in your company name. If, for example, you want to use the words Olympic or Olympian you would need permission from the British Olympic Association.
3. Choose Location to Register Business
Every business in the UK must have an official company address that will be a part of the public record. You can choose whether this will be your:
- home address,
- an office or some other location.
It has to be a physical location (not a P.O. box) and somewhere that documents can be delivered and proven to have been received, but it does not need to be the address of the location from which you actually operate the business.
For example, if you plan to work from home but do not want to make your home address public, you can easily find an accountant or other professional who offers the use of their business addresses for a fee.
4. Memorandum and Articles of Association
Most businesses registered in the UK need to have two documents - a Memorandum of Association and Articles of Association. Before you register a business in the UK, the company director(s) and shareholder(s) need to sign these documents. Despite their fancy-sounding names, these documents are actually fairly simple.
A Memorandum of Association is automatically generated when you register your business online and must be signed by the initial shareholders and directors indicating their agreement to create the business. Once this memorandum has been registered, it cannot be edited or changed.
Articles of Association are essentially the company’s operating policies as determined by the directors, shareholders and secretary (if there is one). Templates are available online, or you can use your own preferred format. When you register your business with Companies House, you also must send them your Articles of Association.
5. Get Your SIC Code
As part of the company registration process in the UK, you must also assign yourself a Standard Industrial Classification of Economic Activities (SIC) code. You choose this code from a provided list, the goal of which is to help Companies House identified the category of business you are operating. SIC codes are used to classify businesses based on their industry and serve as the basis for analyzing and reporting statistical data on various industries.
6. Register your UK Business Bank Account
If your business is a limited company, you are required to open a business bank account. While partnerships and sole traders do not legally need to do so, it’s highly recommended to open a separate business account to simplify accounting processes and to keep business finances separate from personal ones.
To open a business bank account, you will need to provide:
- passports or IDs for all directors and partners, along with
- proof of address.
If you have a limited company, you will also need to show your Companies House registration number and estimated annual turnover. While you don’t need a director or shareholder to be a UK resident in order to register a business in the UK, it may be difficult to open a bank account if no one connected to the business is a UK resident. You can discuss this with your particular bank should this be relevant to your situation.
7. Manage Your Intellectual Property
Depending on the type of company you are running, you may have some valuable intellectual property that you will want to ensure you protect.
- Trademark - Trademarking your registered company name is something you will have done as part of the registration process, but if you develop product names or other design elements that you want to ensure remain proprietary to your company, make sure you trademark those as well. It generally takes around 4 months for the trademark process to be complete.
- Copyright - Copyrights are applicable to any original written work, software, web content, film and other sound recordings. You don’t have to apply for a copyright as it’s automatically granted as soon as you create something new. It’s your responsibility to make sure that no one is violating your copyrights and stealing your material.
- Patent - If you invent a new product or piece of machinery, you will definitely want to patent it so that no one else can take the credit and you will reap the financial benefits. The patent process is extensive and can take up to 5 years, so make sure you start the process early.
Mandatory Documents for all Businesses
Now you know the basic steps you need to take in order to register a business in the UK. Some of what you are required to do is dependent on the type of business you will register, but all are required to have the following:
- Business name
- A registered office location where mail will be sent from Companies House and HMRC. This address must be in the UK and able to accept physical mail.
- Personal information about each of the directors, including names, birthdays, residential addresses.
- Personal information about shareholders, including names, birthdays and residential addresses.
Documents Needed According to Business Structure
How Much Does it Cost to Register a UK Business?
Registering a business in the UK is not a very costly endeavor. Most people choose the online registration process, which costs £12 and takes up to 24 hours. For an additional £100 fee, you can get the registration on the same day. For those who prefer to send hard copies through the post, the cost is £40, and it can take up to 8-10 days for the registration to be complete.
There are also a number of formation agencies that you can hire to do the registration process for you for an additional fee.
Changes in Business Registration after Brexit
While Brexit has impacted the way UK companies trade with European Union companies, there should not be any undue impact on companies that are registering in the UK itself. Most of the changes listed by Companies House are only relevant to European-based entities.
It may seem overwhelming to think about the idea of registering a brand-new business. But, truth be told, it’s just a bit of bureaucracy in exchange for a lifetime of entrepreneurial creativity and freedom! Just follow the simple steps laid out for you in this guide, and you’ll be on your way. Once you are all set up and ready to go, you will also want to be sure that your customers have the best possible experience when purchasing from your business.
Pay.com offers you to keep track of everything going in your business with a customized dashboard where you can watch your business grow.