Setting up a business in the UK
16 November 2009by Ina Dimireva -- last modified 17 November 2009
No permission is required to establish a business presence in the UK, although there are regulations on the use of business names and certain business sectors which may require licences or authorisation (such as finance, defence and oil exploration).
Legal requirements
The legal basis for setting up a business in the UK is the Companies Act 2006, which provides a comprehensive code of company law.
Legal forms for businesses
The legal structure under which a business is registered will affect the way it is taxed and the accounting records it should keep:
Sole trader
The advantages include independence, ease of set up and running, and all the profits go to you.
The disadvantages include a lack of support, unlimited liability and the fact that you are personally responsible for any debts run up by your business.
Partnership
The advantages of a partnership include its ease of set up and running, and the range of skills and experience that the partners can bring to the business.
There is unlimited liability and, as a partner, you are personally responsible for any debts that the business runs up, and problems can occur when there are disagreements between partners.
Limited liability partnership
LLPs retain the flexibility of a partnership and your personal liability is limited. There is no restriction on the number of members, but at least two must be "designated members" - the law places extra responsibilities on them.
The formation of an LLP is more complex and costly than that of a partnership. If the number of partners is reduced, and there are fewer than two designated members, then every member is deemed to be a designated member.
Limited liability partnerships
Limited liability company
In a limited liability company, personal financial risk is restricted to how much you invest in the business and any guarantees you have given in order to obtain financing.
However, there are extra legal duties, including the maintenance of the company's public records, e.g. for the purpose of the filing of accounts.
Franchise
The major advantage of a franchise is that it takes advantage of the success of an established business and support networks.
However, freedom to manage the business is limited by the terms of the franchise agreement. Also franchisees often pay a share of their turnover to the franchiser, which reduces overall profits.
Social enterprise
Social enterprises are businesses that trade for a social purpose.
Business plans and evaluation
When setting up a business, it is essential to have a business plan setting out the objectives of the business, its target market, financial forecasts etc.
To succeed, a new business needs a sound commercial strategy and secure financing.
Access to finance — United Kingdom
Some standard requirements to be completed when setting up a business are the same as when opening a branch.
Administrative procedures
One-stop shop
The one-stop shop for new business start-ups is Business Link. It has branches throughout England and also works in partnership with Flexible Support for Business (Wales), Invest Northern Ireland, and Highlands and Islands Enterprise and Business Gateway (both in Scotland).
They provide information and guidance on the whole business lifecycle, from setting up a business to selling it.
Highlands and Islands Enterprise
Registering a company
Currently, the procedures for England, Scotland and Wales are different to those in Northern Ireland. However, Companies Registry Northern Ireland (CRNI) will integrate fully with Companies House on 1 October 2009, to become a single system for the whole of the UK.
Business registration
Company names need to comply with certain regulations, one of which is that it should not already exist on the Companies House Index.
Company names - Companies House
Business names - Companies House
Next, complete the registration documents (e.g. articles of association) and send these along with the registration fee (about £20) to Companies House.
Businesses in England, Scotland and Wales can download the necessary forms from the Companies House website. For businesses in Northern Ireland, forms are available from the Department of Enterprise, Trade and Investment (DETI) website.
eRegistration forms - England, Scotland and Wales
eRegistration forms - Northern Ireland
File documents online - Companies House WebFiling service
All new businesses will have to register for business rates for any premises they occupy.
A limited company must be registered with the Registrar of Companies - Companies House (in Northern Ireland, the Companies Registry ). Its registration becomes official once the Registrar of Companies has issued a certificate of incorporation.
Limited liability partnerships (LLPs) must be registered with Companies House (form LLP2). Once the certificate of incorporation has been received you must notify HM Revenue & Customs (HMRC), who will set up a register for the annual tax return.
Social Security and Tax registration
Business Link provides information on taxes, returns and payroll as well as the obligations of employers in terms of pensions, national insurance contributions etc.
Several of the procedures involved can be completed online.
Resources
Companies House coordinates the administration of businesses in the UK (Companies Registry in Northern Ireland), providing detailed guidance on the requirements for forming a company:
Forming a company in Northern Ireland
Business Link provides detailed information on setting up new businesses in England and Wales. For businesses in Scotland useful information is available on the Business Gateway website, and for Northern Ireland on the Invest Northern Ireland and the Enterprise Northern Ireland websites.
Business Gateway - starting up
Invest Northern Ireland - starting a business
Enterprise Northern Ireland - local enterprise agencies
Personalised help and advice
The British Chambers of Commerce (BCC) and the Accredited Chamber Network recently introduced a new Business Start-Up Pack. Benefits include three years' free business banking, tender alerts, half-price BCC membership, and free legal advice.
The National Federation of Enterprise Agencies (NFEA) provides a range of services to new and emerging businesses, including independent and impartial advice, training and mentoring.
National Federation of Enterprise Agencies
The Enterprise Europe Network provides businesses with information and advice through its local partners.
Enterprise Europe Network – contact points – United Kingdom
SOLVIT helps businesses deal with problems that arise when national authorities wrongly apply EU market rules.
SOLVIT – contact points – United Kingdom
Source: European Commission
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