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How to Register a Business in the UK

When you start a business in the UK you need to register that business and there are a few ways to do so, but which route you choose will depend on the type of business you’re setting up.

We’re going to talk through the various options as well as what you need to do if you work from home selling items online.

Registering your business

There are three main ways you can set up a business but as mentioned above, what you choose will depend on your business type.

Sole Trader

If you’re setting up a business for the first time, registering as a Sole Trader is one of the easiest routes to take. You should only set up as a Sole Trader if any of the following apply to you:

  • You earned more than £1,000 from self-employment within the tax year (April to April)
  • You need to prove you’re self-employed in claim Tax-Free Childcare for example
  • You want to make voluntary Class 2 National Insurance contributions to help you qualify for other benefits

If any of these apply to you, then you can register for Self Assessment and file a tax return each year. To make sure you’re on top of everything you’re going to need to keep records of your business’ sales and expenses, send a Self Assessment tax return each year and pay Income Tax on your profits and Class 2 and Class 4 National Insurance.

Once your turnover reaches £85,000 within any tax year, you’ll also need to register for VAT. Some people choose to register voluntarily if it suits their business, and this will allow you to claim back the VAT on any sales to other businesses.

When it comes to naming your business you’ll need to make sure to not include ‘limited’,’Ltd’,’limited liability partnership’,’LLP’,’public limited company’ or ‘PLC’. If you’d like to protect your business name once you’ve chosen it, you’ll need to register your business name as a trademark.

But note that when operating as a Sole Trader, you are solely responsible for your business debts.

Limited Company

Limited companies work in a slightly different way than when you register as a sole trader. Ultimately, your business finances are separate from your personal finances which means you have more protection trading as a Limited Company. There are, however, more reporting and management responsibilities needed.

There are two ways to set up a Limited Company. The first being Limited by shares which is usually businesses that make a profit and means:

  • The company is legally separate from the people who run it
  • The company has separate finances from your personal ones
  • The company has shares and shareholders
  • The company can keep any profits it makes after paying tax

The second being Limited by guarantee which are businesses that are usually ‘not for profit’ and means:

  • The company is legally separate from the people who run it
  • The company has separate finances from your personal ones
  • The company has guarantors and a ‘guaranteed amount’
  • The company invests profits it makes back into the company

Once formed, you will become a Director of the Limited Company and as a Director, you must:

  • Follow the company’s rules
  • Keep company records and report changes
  • File your accounts and your Company Tax Return
  • Tell other shareholders if you might personally benefit from a transaction the company makes
  • Pay Corporation Tax

After you’ve set up a Private Limited Company you must register for Corporation Tax when you start doing business. Your accounting records and company Tax Return will help you to work out how much Corporation Tax to pay. The deadline to report on how much Corporation Tax you must pay is usually 9 months and 1 day after the end of your accounting period.

You must file your Company Tax Return by your deadline, which is usually 12 months after the end of your accounting period. You don’t just pay Corporation Tax on your business profits but also any profits derived from investments and selling any business assets for more than they cost. Read more from the Government’s guidance on running a Limited Company.

Partnerships

Setting up as a partnership is the best way to set up a business run by two or more people. Setting up in this way, you will share responsibility for your business’s debts and accounting responsibilities. All partners share the business’s profits and each partner pays tax on their share. A partner, however, does not have to be an actual person, i.e. a Limited Company counts as a ‘legal person’ and can also be a partner.

If you choose to set up a business this way, you’ll need to firstly, choose a name, choose a ‘nominated partner’ and register with HMRC (HM Revenue and Customs). The ‘nominated partner’ is responsible for managing the partnership’s tax returns and keeping business records. There are however a few rules for limited partnerships and limited liability partnerships that you should familiarise yourself with if you’re looking to choose this route.

Running a business from home

If you are also planning or already are running your business from home, you need to do a few things first.

You’ll need to seek permission from your mortgage provider or landlord firstly. If you’re planning on making major alterations to your home you’ll need to seek permission from your local planning office and finally you’ll need to seek permission from your local council if you’d like to advertise your business outside of your home, you’re going to receive lots of customers or deliveries, or if you need a licence to run your business.

Your insurance may change too or you may need additional insurance for your business. Your home insurance may not cover your business assets i.e. stock, computers, customers visiting your premises.

A benefit of working from your home is that you can claim a proportion of some of your bills such as your council tax, heating, lighting, phone calls and broadband. But you may need to pay Capital Gains Tax on the part of your property you use to conduct business.

You may also need to pay business rates on the part of your property that you use too. This will depend on whether the Valuation Office Agency (VOA) has given a rateable value to a part of your home and you will still have to pay council tax on the rest of your property.

Renting a business property

If you are renting a property to run your business from, your lease will state what responsibilities you have to uphold.

You must carry out health and safety risk assessments in the workplace and take action to remove any hazards. You will be responsible for the following unless stated otherwise:

  • Fire safety
  • Safety of electrical equipment
  • Gas safety
  • Managing asbestos
  • Providing a reasonable temperature
  • Enough space, ventilation and lighting
  • Toilets and washing facilities
  • Drinking water
  • Safe equipment

You will also need to take reasonable steps to ensure that your landlord fulfils the responsibility of health and safety in communal areas etc.

As mentioned at the beginning of this blog, what route you choose for setting up your business will entirely depend on your circumstance and what’s best for you and your business.

If you’d like to learn more about setting up your own online shop, you can speak to our ecommerce experts on 0333 004 0333 or request a callback here.

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