January 13, 2022
Welcome to the world of entrepreneurship! Starting your own business 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 a 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.
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 (as you should if you are starting a business!), you should register your business.
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:
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. Following is a brief description of the types of companies:
The majority of 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. Within the category of Limited Companies, there are two sub-categories:
In a partnership company, two or more people join forces to start a business together. The partners share the profits, but also have equal responsibility for any debts or losses. Many small businesses are run this way, under one of the following categories:
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. As a sole trader, you can choose to operate your business using your name or to designate a company name. 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.
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 the name you plan to use. 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:
Every business in the UK must have an official 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.
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.
When you register a business 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 identify 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.
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 passport 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.
Depending on the type of company you are running, you may have some valuable intellectual property that you will want to ensure you protect.
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:
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.
It may seem overwhelming to think about the idea of registering a brand new business. But, truth be told, it’s just a little 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.