The UK is a great place to start a business. With plenty of opportunities and growing markets in a wide variety of business areas, it's a fantastic time to launch that business idea you've been dreaming of making a reality.
However, starting a business in the UK isn't quite as simple as just filing paperwork. There are a few important things you need to consider before you dive in. In this article, we'll provide you with a handy checklist for starting a business in the UK. It goes over the main things you should consider before beginning to launch your venture.
Setting up a business requires having adequate support behind yourself and your idea. It would help if you considered the following aspects before taking the plunge. Ask yourself if you have sufficient:
Legal support is vital in setting up a business. You will need help from various legal bodies to ensure that any contracts you sign for properties, deals, and even employee contracts are up to UK legal standards. If you're not from the UK, having a lawyer may also be important for visa purposes. A local expert lawyer can ensure your business stays above the law and avoid fines or prosecutions.
You will need to ensure you have enough money to launch your business. Depending on the size and type of your business, this amount may vary. However, you must have enough to cover the initial costs until you make profits. Getting an accountant to help you balance your books, payroll and loans can be a massive help. Especially, when it comes to ensuring nothing goes amiss with your finances.
Business support refers to the network of fellow business owners you build. Though this may seem less important than the financial aspects, having a community will help you turn your project into a business. Learn from fellow entrepreneurs and channel their best qualities into what you want to create.
Additionally, obtain accurate UK business data from reputable sources by industry, region, or more. This way, you can find more business opportunities and receive proper support for your startup. Business data search platforms allow you to review company and professional profiles to find financial reports, job roles, contact details, and other relevant information.
If you have answered yes to these points, you're ready to move on to setting up your business!
An attention-grabbing and unique name is your next step. Brainstorm some ideas and narrow down your shortlist until you have come up with a moniker that fits your brand and you are happy with. Here are some suggestions of names for your business if you are stuck for ideas. Once you know what you want to call your business, it's essential to register the name with the UK Government. This is an integral part of defining your brand's identity. Therefore, you must make sure to take the time to come up with something you really like!
If you're not selling a product, you can skip this one.
However, if you are selling something that can be classed as an 'invention', it's incredibly important to apply for a patent before you take it to market. This can be done through the UK Government and will ensure you maintain the intellectual property rights to your creation. This means nobody can claim your idea as their own. You'll also be able to take legal action against anyone who does.
You will need to consider what legal structure your business will take. In the UK, there are three main types of business:
A sole trader is when there is no legal distinction between yourself and your business. For example, if you are a self-employed accountant, and you are offering your services for a fee, you may be able to class yourself as a 'sole trader' as nobody else profits from your trade. In other words, you are your business.
There are various types of partnerships, but a general business partnership means coming together with other entrepreneurs to start a business or merge businesses. Unlike a limited company, which has its own legal identity outside of its owners, you will share the legal responsibilities with your partners in a partnership.
A limited company is the most traditional business structure, and it is a company with its legal identity separate from its owners and directors. Most larger companies are limited companies.
Once you have defined the type of company that you wish to start, you should apply for a business license from the UK Government. This is the only way to ensure that your business is legally registered and that you are allowed to operate it.
But how can you choose the best structure for your startup? In a sole trader setup, personal responsibility for business aspects, including debts, entails personal asset risk. A general partnership similarly holds partners personally responsible for business liabilities, potentially risking personal assets. On the other hand, a limited company operates as a separate legal entity, safeguarding shareholders' personal assets with liability limited to their investment.
Tax implications differ among structures, with sole traders and partnerships taxed on personal income, while limited companies face corporate tax on profits. Control and decision-making dynamics vary, ranging from sole traders having complete control to partnerships and limited companies sharing decisions among partners or shareholders.
Regulatory and administrative requirements increase from sole trader to partnership and further to limited company structures. Considerations for scalability and funding highlight potential limitations for sole traders and partnerships in attracting investment compared to limited companies, which offer easier access to capital through share issuance. Limited companies also often convey greater credibility in business dealings. Seeking professional advice is advisable to tailor the choice to your specific business needs, growth plans, and risk tolerance.
UK Tax Law can be tricky to navigate, especially when different types of businesses pay different types of tax. For example, limited companies will pay corporation tax on their profits, but sole traders will pay income tax. This can often make limited companies more financially efficient, as they can use various tax amenities to gain back money or pay less overall on their profits.
Understanding the tax you will have to pay can help you to make smart choices when setting up your business. It will also help you avoid fines and penalties from HMRC, the board that governs UK tax.
If you've made your way through this checklist for starting a UK business and are confident that you're ready to get the ball rolling, there's no time like the present to make it happen! The biggest risk you take is getting started; once that's out of the way, the rest of your goals will seem much more reachable.
