What you need to do to set up depends on your structure of business. Most businesses register as a sole trader, private limited company or partnership.
If you’re a sole trader, you run your own business as an individual and are self-employed.
You can keep all your business’s profits after you’ve paid tax on them. You’re personally responsible for any losses your business makes. You must also follow certain rules on running and naming your business.
You’ll need to:
- keep records of your business’s sales and expenses,
- send a Self Assessment tax return every year,
- pay Income Tax on your profits and Class 2 and Class 4 National Insurance.
You’ll need to apply for a National Insurance number, if you’re moving to the UK to set up a business.
PRIVATE LIMITED COMPANY
If you run business as a private limited company, this means the business is a separate legal entity. You are a shareholder; you hold all or a proportion of the company's share capital. You serve the company as its officer as a director. You're not personally liable for the firm's debts as company finances are separate from your personal finances.
Setting up in business as a limited company involves a more complex formation process, and there are more reporting and management responsibilities.
- a suitable company name
- an address for the company
- at least one director
- details of the company’s shares - you need at least one shareholder
- to check what your SIC code is - this identifies what your company does
- details of people with significant control over your company, for example anyone with more than 25% shares or voting rights
Once you have these details, you can register your company with Companies House. Keep in mind there is a registration fee.
After you’ve registered your company with Companies House, you’ll need to register it for Corporation Tax. You’ll need to do this within 3 months of starting to do business.
As a director of a limited company, you are legally responsible for running the company and making sure company accounts and reports are properly prepared.
- follow the company’s rules, shown in its articles of association,
- keep company records and report changes,
- file your accounts and your Company Tax Return,
- pay Corporation Tax.
A partnership is the simplest way for 2 or more people to run a business together. You share responsibility for your business’s debts. You also have accounting responsibilities.
A partner doesn't have to be an actual person. For example, a limited company counts as a ‘legal person’ and can also be a partner.
When you set up a business partnership you need to:
- choose a name,
- choose a ‘nominated partner’,
- register with HMRC.
The ‘nominated partner’ is responsible for managing the partnership’s tax returns and keeping business records.
There are different rules for limited partnerships and limited liability partnerships (LLPs).
Things to consider
Other responsibilities for your type of business
You may have other responsibilities depending on what your business does for example, licences or permits, insurance. Also you need to check what your responsibilities are if you run your business from home or rent somewhere to run your business from.
Becoming an employer
There are things you’ll need to do if you take on your own employees. You have to register with HMRC for the PAYE Employer and run payroll.
You must register for VAT if your turnover is over £85,000. You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT.
Working in construction industry
Register with HMRC for the Construction Industry Scheme (CIS) if you’re working in the construction industry as a subcontractor or contractor.
More information you can find on GOV.UK website.
Remember, that choosing the right business structure is crucial and if you are not sure, speak to our business consultant now.
Before starting a business there are many things to consider. We can guide you through each of the key sections of the start up process.
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