Even if it only takes a couple of minutes to start a business in the UK, you still need to be aware of your obligations which will vary based on the type of business you set up and operate. This brief article will provide a framework for determining which insurance, permit or licences you might need to operate your business in the UK.
How to register your business
In the UK, you can register your business as a:
- Sole trader: you are personally responsible for your business’s debts.
- Partnership: you and your partner are equally responsible for your business’s debts.
- Limited company: the limited company is responsible for its debts.
Registering as a sole trader or a business partnership requires informing HMRC whereas setting up a limited company requires registering with Companies house and paying a £12 online incorporation fee.
The accounting and reporting requirements of each business vary and the option you choose will depend on your situation and the type of business you are looking to set up. For example, businesses whose activities which require significant capital investments like for example a biotechnology startup are likely to be launched via a limited company. In this scenario, capital will be raised through the sale of shares in the company to external investors. Businesses whose activities don’t require significant capital investments such as consulting services can be set up as a sole trader. However, if you are not sure which option is best for your business, please seek specialist advice.
All 3 business types must register for VAT if they have a turnover greater than £85,000 but can also register voluntarily if the turnover is lower.
Which insurance do you need for your business?
The nature of your business and activities will determine which insurance you need. For example, if you want to employ someone you will need employer’s liability insurance. If you use vehicles you will need commercial motor insurance. If your profession is regulated you will need professional indemnity insurance. If you have opted for the limited company route and have appointed a director, it is recommended the company takes director’s insurance as it will cover the cost of potential compensation claims made against them.
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Which permits do you need for your business?
Certain activities require permits or licences and your business should have one before conducting such activities. For example, you need to register with the ICO in order to process personal information in a digital form. Specific activities such as construction for example will require their own licences. You can use the government’s tool to determine if your business needs a licence based on your activities and sector.
Where should I base my business?
You can usually run your business from home but you should first check with your landlord, mortgage provider, local planning office or local council. Renting or buying space to run your business will incur business rates you will have to pay to your local council. If you run your business from home, you might have to pay business rates for the part of your home you use to run your business. Where you choose to base your business will depend on the amount of space you need, the nature of your business activities and whether the space plays a key role in securing employees and customers.
How do I open a business bank account?
You should apply for a business bank account as soon as you incorporate your business. Opening a bank account can take time and can therefore delay your investment or hiring plans which is why you should start as soon as possible. You should choose a bank based on your needs, in particular if they have experience with your type of business. This specialised support can be useful for growing your business more effectively.
When should I employ someone?
Employers need to register with PAYE and set up a company pension in order to employ someone. Employers are required to make PAYE, national insurance and pension contributions which is why it is important to determine if you can afford to employ someone before hiring them. Someone can still work for you as a consultant or help you as a volunteer if you can’t afford to employ them. No matter which approach you choose, it is important to have the right contracts in place to protect your intellectual property and keep your confidential information secure.
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Are you ready to start a business?
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