The United Kingdom has always been a large pool of wealth. Its ever-growing economy supported by many industries has offered a huge set of opportunities for skilled workers. In today’s world, the United Kingdom is the most attractive country for everyone. Students are rushing to go to the UK for higher studies because of its quality of education. Founders and businessmen see the United Kingdom as a stepping stone to register a business and grow their business on the global level.
Beginners often find registering a business both exciting and overwhelming. If you have decided to set up a business, but have no idea where to start, legal registration should be the first step. Registering a business creates its legal identity and simplifies operations in the country. Apart from that it can also be your pass to avail financial services which are important for running a business such as loans and insurance policies. Without further ado, read on below to learn the essentials of how to register a business and the requirements needed.
Is it important to register a business in the United Kingdom?
Yes, registering a business is important as it allows companies to be in sync with the UK rules and regulations. Business registration also helps foreign companies build their credibility. This can help them with any tax obligations or safeguard them from penalties imposed on the business. When you decide to register a business, it can also open many financial facilities such as having business bank accounts, loans for expanding business, and insurance policies.
Registering a business also helps foreign companies to hire and pay employees. They no longer have to rely on recruitment agencies for their recruitment. Companies can save money by conducting their in-house recruitment. However, the size of the business is another important factor that determines whether a company should register a business or not.
Cost of registering a business in the UK
As we know, starting a business in the UK is rewarding but challenging at the same time. It requires every businessman to understand some of the essential registration processes involved including the cost of registration of a business. The cost of registering as a sole trader, partnership or a limited company requires a certain amount of fees to be paid to the company's house.
The cost of registering a business mainly depends on the type of organisation and also the process of registration which the owners choose. Registration costs can vary between 30 to 80 pounds depending on the method of registration. By understanding these initial costs and payments, aspiring business owners can then avoid financial problems. Highlighted below are the two common ways to register a business.
Online Registration
People often overestimate the cost of registering a business, but it’s more affordable in the online one. Online registration can somewhere cost between 50 to 70 pounds. It is usually done within 24 hours. To register the business, you will need a minimum of 3 personal information for identification. It can be a telephone number, NI number, or passport number. The best way to register a business online is by following the step-by-step guide of the Companies House.
Registration by Post
If you choose to register by post, you’ll spend more time and money compared to the online process. You must also complete the INO1 form and mail it to the Companies House. This can sometimes be a tiring process and takes around 8 to 10 days. Registering by post costs between 70 to 80 pounds, and business owners must file for corporation tax within the first three months of operation. You also need to consider some additional expenses that might come up when you register a business. Some of these additional fees are same-day registration fees, documentation fees, and agent fees.
Steps to register a business in the United Kingdom
Starting a business is so much more than just an idea. It requires a systematic approach to ensure the business operates abiding by the legal laws and with efficiency. Registering the business is the first and the most important step in the entire process. The United Kingdom has made a simplified registration process in order to help businesses set up and register their business with ease.
The registration process varies based on the company structure. However, it also requires some steps such as selecting a unique name, abiding by the tax regulations, and also proper paperwork with the HMRC. It is also very important to understand these steps to get a strong start for your business. The guide below will help you understand the key steps to register a business with the proper documentation required, and what you need to do to launch your business smoothly.
1. Identify your Company Type
The first to register a business is to decide what the type of your company is. Identifying the correct company structure can be a task sometimes. Since there are many company structures in the UK, choosing the correct one for your business will depend on the type of your industry, annual turnover, and number of employees. Let us understand in detail about the different types of company.
Limited Companies
Aspiring business owners usually register a business through the Companies House in the UK. They must also complete a separate registration for corporation taxes within the first three months of starting operations. Limited companies will usually have the “Ltd” or “limited” at the end of their names. These companies are also separate from their owners. The company does not use any personal assets to pay off debts or other financial obligations. Shareholders operate the company and keep profits from the earnings after paying taxes.
There are two types of limited companies. One is the private limited company which must have at least one director and a shareholder. They have their assets and debts and their shares are not easily available to the public. There is no amount of investment to become a shareholder in a private limited company. And the profits of every shareholder are decided based on their ownership in the company.
The other type is a public limited company. They are the same as private limited companies but the only difference is that their shares are made available to the public. The only advantage of setting this company type to register a business is they can easily raise funds and avail of loans. However, when it comes to financial and tax reporting, they have a complicated process.
Partnership Companies
This model is an easy way for two or more people to come together and register a business. The profits and dividends are shared equally amongst the partners. All the partners are equally liable for facing debts or losses faced by the company.
Sole Trader
This is the simplest type of a company. Being a sole trader doesn’t separate you from the business that you won. They are liable to register with the HMRC to pay taxes and national insurance. Sole traders have the choice to choose any name for their business. But it should follow certain rules such as not being a sensitive or abusive name.
2. Deciding on a UK company name
The next step to register a business in the UK is to decide on a company name. Once you know the name of your company it is time to register it with the Companies House. You also need to make sure that the name is exclusive and easy to remember. You also need to make sure that your name doesn’t break any rules from the legal conduct:
- It should not be similar to the name that is currently in use by other companies.
- The name should not have a curse word, or target any religion or a racial offence.
- Companies should abide by the list of sensitive words used by the UK government. For example, using words related to the royal family such as His Majesty, Her Majesty requires permission.
- It should not include names related to any other professional bodies.
3. Set the Official Business Address
Businesses in the United Kingdom need to have an official company address that can be mentioned in the public records. It can be any location such as a personal house or an office. Businesses must provide a physical address where they can receive documents and letters. Also, the address cannot be any local post box or a post office address.
4. Memorandum of Association & Article of Association
The primary shareholders must sign a Memorandum of Association as the first step to register a business. After signing, they cannot change or edit the MOA in any way. The system also generates this document during online registration.
Directors create the AOA to establish the company’s policies. You can create it from scratch or submit an online template when registering your business.
5. Getting your SIC Code
SIC code is a Standard Industrial Classification code. SIC codes identify businesses based on their industries. It is also helpful for analysing and reporting data based on different industries. The main aim of a SIC code is to help the government identify the niche and industry of your business.
6. Open a UK Business Bank Account
To register a business in the UK, you must open a UK business bank account. Opening a bank account requires one of the people connected to the business to be a UK resident. If you've already met that requirement, you'll also need the following documents:
- Identification documents: Passport, Biometric Residence Permit, or any National ID card for all the partners
- Proof of address of the business
- Company’s registration number
- Estimated annual turnover of the business
Conclusion
To register a business you need to plan each step with careful research and consideration. Without proper planning, it can sometimes be overwhelming. Starting from your business structure to setting up your bank account, every step is crucial in starting your dream business. You might also want to take some extra time and check out the useful material that the College of Contract Management is offering to make and build a strong business foundation.
The correct materials and information are the key to shortening the time duration of your entire process. It is always better to get extra information than to remain uninformed. The College focuses on providing relevant and quality material information to help you make the right decisions and register a business successfully.
