How to start a business

Starting a business in the UK is an exciting venture, but it comes with its share of responsibilities and legal requirements. From choosing the right structure for your business to understanding the obligations of directors and the intricacies of tax and accountancy filing, there's a lot to consider. This article aims to demystify the process, providing you with a step-by-step guide on how to start a business in the UK, focusing on key areas such as company registration, documentation, directors' obligations, and ongoing compliance with tax and accounting requirements.

1. Choosing the Right Business Structure

The first step in starting a business is deciding on the most appropriate structure. The main types of business structures in the UK include sole trader, partnership, and limited company. Each has its benefits and limitations, affecting everything from the way you report your income to your personal liability and tax obligations. For many, a limited company is a preferred choice due to its financial security and professionalism.

2. Registering Your Company with Companies House

If you decide on a limited company structure, you'll need to register your business with Companies House. This process is also known as incorporation. Here’s how to go about it:

a. Choose a Company Name

Your company name must be unique and not too similar to another registered company's name. It also cannot contain any sensitive words or implications without the proper permissions.

b. Prepare the Necessary Documents

To register, you will need two key documents:

  • Memorandum of Association: This legal statement signed by all initial shareholders or guarantors agrees to form the company.

  • Articles of Association: This document sets out the rules for running the company and is agreed upon by the shareholders, directors, and the company secretary.

c. Identify Directors and a Company Secretary

You'll need at least one director to legally form your company. Directors are responsible for running the company and ensuring compliance with the law. While it's not mandatory for private companies to have a company secretary, having one can help manage some of the director's responsibilities.

d. Declare Shareholder or Guarantor Information

You must provide details about the company's shares and the rights attached to them (if applicable). This includes the number of shares, their value, and the shareholders' identities.

e. Provide the Registered Office Address

This address will be publicly available and used for all official communications.

f. Register with Companies House

You can register online for a fee of £12 (as of the latest information available in 2023). The process usually takes 24 hours. Alternatively, you can register by post using Form IN01, with a fee of £40.

3. Directors' Obligations

Directors have several legal responsibilities, including:

  • Ensuring the company’s records are accurate and reporting changes.

  • Filing the company’s accounts and tax returns.

  • Paying Corporation Tax.

  • Following the company’s rules, as shown in the Articles of Association.

  • Keeping company records and reporting changes.

  • Making sure the company can pay its debts.

4. Ongoing Tax and Accountancy Filing Requirements

Running a business in the UK involves several ongoing tax and accountancy responsibilities:

a. Register for Corporation Tax

You must register your company with HM Revenue & Customs (HMRC) for Corporation Tax within three months of starting to do business.

b. Annual Accounts

You need to prepare and file annual accounts with Companies House, giving a clear picture of the company’s financial activity and standing.

c. Annual Confirmation Statement

Each year, you must file a confirmation statement with Companies House. This confirms that the information they hold about your company is current and accurate.

d. VAT Registration

If your business’s VAT taxable turnover exceeds the threshold (currently £85,000), you must register for VAT.

e. Pay As You Earn (PAYE)

If your company employs staff, you'll need to register for PAYE with HMRC to withhold income tax and National Insurance contributions from their wages.

Conclusion

Starting a business in the UK requires careful planning and adherence to legal requirements. By following the steps outlined above, from choosing the right business structure to fulfilling your ongoing tax and accountancy obligations, you'll be well on your way to establishing a successful company. Remember, while this guide provides a solid foundation, seeking professional advice tailored to your specific circumstances is always recommended. Good luck on your entrepreneurial journey!