Setting up a formal business
You may need to register your business with Companies House or simply register for Self Assessment with HMRC. How you formally set up your business depends on the structure you have chosen.
Register as a sole trader for Self Assessment
To register as a sole trader you must register for Self Assessment with HMRC. This means telling HMRC that you will need to complete a tax return.
You must register for Self Assessment if your business earns over £1,000 in a tax year.
HMRC has strict deadlines for registering and for filing your tax return.
Separating business and personal finances
Having a dedicated bank account for your business makes it easier to separate personal and business finances, track your income and expenses and submit your tax return.
Having a dedicated bank account for your business makes it easier to separate personal and business finances, track your income and expenses and submit your tax return.
Register as a limited company
To register as a limited company, you must register with Companies House. You must pay a fee to register.
There are lots of tasks involved in setting up a limited company. You need to:
- choose your company name, which must meet Companies House rules
- open a separate bank account for the company
- decide on the company’s registered address – this will be published online
- choose shareholders and directors and identity people who have significant control over your company – this could be a majority shareholder or someone with influential voting rights
- get directors and any person with significant control of the company to verify their identity with Companies House
- prepare your memorandum of association and articles of association setting out how you’ll run the company
- find the Standard Industrial Classification codes that describe your business activities
Every director or person who has significant control of your company must verify their identity with Companies House before you can register.
Notify HMRC if you are not going to trade immediately
Notify HMRC and Companies House that your company is dormant if you are not going to trade immediately after setting up. Otherwise, you’ll have to file accounts and submit Corporation Tax returns.
Notify HMRC and Companies House that your company is dormant if you are not going to trade immediately after setting up. Otherwise, you’ll have to file accounts and submit Corporation Tax returns.
Register as a partnership
There are 3 types of business partnership in the UK.
General partnership
The most common type of business partnership. In a general partnership:
- two or more people run a business together and share responsibility for decisions and the business’s debts
- there is one nominated partner who is responsible for managing the partnership’s tax returns and for keeping accurate business records
- all partners must register individually with HMRC for Self Assessment
- the nominated partner must also register the partnership for Self Assessment
You do not register this type of partnership with Companies House.
Limited partnership
In a limited partnership:
- there is at least one general partner who manages the business and is responsible for its debts
- there is at least one limited partner who invests in the company but has no say in its running and whose debts are limited to the amount they invested
- you must register with Companies House and provide a registered address which will be published online
- all partners must register with HMRC for Self Assessment (or for Corporation Tax if the limited partner is a company)
- the general partner must register the partnership for Self Assessment
You must register a limited partnership with Companies House.
Limited liability partnership
A cross between a partnership and a limited company, in a limited liability partnership:
- partners, or members, are not personally liable for the business’s debts
- you must have at least 2 designated members who are responsible for registration and compliance with Companies House
- you must include LLP in your business name
- individual members must register with HMRC for Self Assessment (or for Corporation Tax if they are a company)
- a designated member must register the partnership with HMRC
- you must send accounts and a confirmation statement to Companies House each year
- you do not issue shares, have shareholders or directors
You must register a limited liability partnership with Companies House.
Partnership agreements
Create a partnership agreement that explains how you’ll deal with decision making, ownership changes, profits, financials, dispute resolution and dissolving the partnership.
Create a partnership agreement that explains how you’ll deal with decision making, ownership changes, profits, financials, dispute resolution and dissolving the partnership.
Social enterprise
A social enterprise is a business with a social, community or environmental mission. It is not a legal business structure.
They can be set up as:
- community interest companies (CICs)
- private companies, limited by guarantee
- co-operatives
- private companies, limited by shares (although this is less common)
