Step-by-Step Guide: How to Start a Business in the UK

If you are thinking about starting a business in the United Kingdom, this guide will explain step by step how to do it simply and effectively.

The UK is one of the most attractive countries for entrepreneurs due to its ease of business registration, clear legal framework, and business-friendly environment. Moreover, the support for starups is excellent.

Step 1: Choose the Type of Business

Firstly, before registering your business, you must decide which legal structure best suits your needs. For instance, you could chose between the three most common options:

Sole Trader: Ideal for individual businesses with low operating costs. As a sole trader, you are personally responsible for all debts and tax obligations.
Limited Company (LTD): The most popular option, as it offers limited liability, meaning the owner’s personal finances are separate from the business.
Partnership: Suitable for two or more people who want to share responsibilities and profits. It can be a General Partnership or a Limited Liability Partnership (LLP).

As a result, for most entrepreneurs, a Limited Company is the best option due to its tax advantages and credibility with clients and investors.

Step 2: Choose a Business Name

Your business name must be unique and must not already be in use by another company registered with Companies House. You can check name availability on their website.

For instance, some rules to keep in mind:

It must not be too similar to an existing company.
It must not contain offensive or restricted words without special authorization.
If you register a Limited Company, the name must end in “Ltd” or “Limited”.

Step 3: Register the Business with Companies House

Registering a Limited Company can be done easily online in less than 24 hours through the Companies House website. To complete the process, you will need:

A registered address in the UK (this can be your home or a business address service).
Details of the company director(s) (name, address, and nationality).
At least one shareholder and the number of shares issued.
Memorandum and Articles of Association (standard legal documents that can be downloaded online).

Step 4: Register the Business for Taxes

After registering your company, you must inform HM Revenue & Customs (HMRC) that you will be operating a business and register for the necessary taxes:

Corporation Tax: Mandatory for all Limited Companies and must be registered within three months of starting operations.
Value Added Tax (VAT): If your annual revenue exceeds £90,000, VAT registration is mandatory. If you do not reach this threshold, you can register voluntarily to enhance your business’s credibility.
PAYE (Pay As You Earn): If you plan to hire employees, you must register for PAYE to manage tax payments and national insurance contributions.

Step 5: Open a Business Bank Account

A Limited Company is legally required to have a separate bank account from the owner’s personal account. To open a business bank account in the UK, banks usually require:

Company registration details from Companies House.
Proof of identity for the director.
Business address.
Business details and commercial activity.

Step 6: Comply with Legal and Accounting Obligations

After registering your business, it is important to stay up to date with legal and accounting responsibilities:

Annual Confirmation Statement: Must be submitted yearly to confirm that company information remains accurate.
Annual Accounts: Depending on your company’s size, you must submit financial statements to Companies House and HMRC.
Tax Return: Submitted annually to calculate corporate taxes owed.

Thus, many entrepreneurs hire an accountant to ensure compliance with these obligations correctly.

Number 7: Obtain Licenses and Permits

Some businesses require additional licenses or permits. For example:

Restaurants and cafés need food hygiene licenses.
Financial businesses require authorization from the Financial Conduct Authority (FCA).
Shops selling alcohol need a liquor license.

Number 8: Protect Your Business with Insurance

Depending on the nature of your business, you may need mandatory insurance, such as:

Employers’ Liability Insurance.
Public Liability Insurance.
Professional Indemnity Insurance.