Starting a company in the UK can be a daunting task, but with the right advice and preparation, it can be a smooth process. There are several things you need to do to set up your company, including deciding on its structure, registering with the appropriate authorities, appointing directors and shareholders, and setting up a company bank account.
Make sure you read up on all the relevant regulations and procedures before starting so that you know what to expect and have everything ready to go.
Encapsulating Your Business Structure
One of the first things to do when you are setting up a new business is to choose its structure. For example, if you wish to register a limited company, you should know that it has several advantages, but it does have some minimum requirements that must be met for it to operate legally. You need at least one director and one shareholder – both of whom must be individuals. This means that a sole trader cannot be a director or shareholder.
On the other hand, other business structures, like partnerships or companies, can be run by any number of people acting together. This means that you can even incorporate yourself. Many companies specialize in helping people to set up new businesses, and they will be able to offer further advice about the different business structures available if you have trouble making up your mind.
Each business structure has its advantages and disadvantages, so it’s important to consider these carefully before you choose how to register your company or limited liability partnership (LLP).
Selecting Company’s Name
Once you know what sort of business you want to start, it’s time to give it a name. One important thing to keep in mind is that your company name cannot be the same as that of another business already registered with Companies House (the UK’s official company registration body), or a similar name to a business that has already been registered.
You may be tempted to use your own name in the business name, but this is not recommended unless you are absolutely certain it cannot infringe on another company’s right. This is because any legal disputes will have to be resolved in court, and this will involve not only substantial legal fees and other expenses but also a lengthy process.
Registering a Company
To register a company, you have to complete several forms and supply certain documents as well. This is where agents or lawyers can help expedite the process, as they are familiar with all the necessary regulations. In some cases, the person filing for incorporation will also need to appear personally before an appointed official.
The application must be accompanied by the memorandum and articles of association and in most cases a phased budget (though this isn’t required in all cases). The company secretary must then approve the documents before they are sent to Companies House for processing.
Next, you’ll need to assign a registered address for correspondence with the company’s location. You don’t have to use this address as your business address, but you are required to have one. Additionally, you have to appoint a company director and at least one shareholder. The minimum number of shareholders for a company is two, although if the company has more than 50 employees, this number must increase to at least three. In addition to all of these requirements, you’ll need to pay the required fees, but again this can be arranged through your agent.
Fees and Taxes
Establishing a company in the UK involves spending some money on various legal procedures and processing fees, but it’s important to consider that doing this is often cheaper than operating as an unregistered business. There are also other benefits like using your limited company (if you decide on this business structure) to apply for loans which you wouldn’t be able to use if you chose another structure.
Most of the fees are fixed, although you will have to pay more if your company has more than ten employees. You may also be required to pay other small fees that are dependent on how much or what type of processing your documents require.
Once you have set up a company you’ll have to file an annual return with Companies House which is due on the last day of the month following your company’s anniversary. You don’t have to pay any fees if you file your returns online and there is no minimum amount.
You will also need to pay an annual tax called corporation tax, which applies to all limited and public companies and LLCs that are registered as companies. The corporate tax rate is currently set at 20%. If you register your company as a branch of a foreign business, or if your company is located in Gibraltar or another country that is part of the European Economic Area (EEA), then there are special rules and regulations to follow.
Registering with HM Revenue & Customs
Along with setting up a company, you’ll need to register your business for VAT (Value Added Tax) – a general consumption tax in the UK. You’ll also need to register with the Department of Work and Pensions, and pay any relevant taxes that apply to you, such as PAYE (Pay As You Earn), corporation tax, income tax, etc. Once again, hiring an agent will help you with all of these procedures.
Also, if you are required to pay any type of fee or tax, be sure to do this well in advance of the deadline. Otherwise, there might be a penalty for late payment, which could end up being costly.
You’ll also need to keep records. Make sure you have all the relevant documentation, including invoices, letters, bank statements, etc. You’ll need to produce these if your company is audited by HMRC or if you are selected for a random audit.
There are many things to consider when setting up a company in the UK, from registering with the appropriate authorities to appointing directors and shareholders. There are also various fees and taxes that you will need to pay, so it’s important to be aware of these beforehand. Make sure you have all the relevant documentation on hand and keep track of any deadlines for payments so as not to incur any costly penalties.