The Guide to Registering Your Business

Registering your business may seem like a daunting task at first, but you’ve made it this far, so just think of this as another step on your journey towards financial freedom. I don’t know about you, but this is one of those topics that, without even realising, I try to avoid because i never really understood the area or learnt about it at school.

While I don’t jump for joy when it comes to the legal side of business, it’s important that you start to think about this topic to avoid any nasty surprises or unexpected letters from HMRC, and we’re not talking about tax rebates…pretty much the opposite!

Please note: The information in this blog should be used as a guide. If you are unsure then you should seek professional legal advice.

What is business registration and why do I need to do it?

Business registration is essentially a mechanism to let the government know a business has been legally formed.

The process formally recognises a business and allows the owners to trade under a registered business name. Just like our caffeine distributing friends at STARBUCKS COFFEE COMPANY (UK) LIMITED

Registering your business - Starbucks example

The newly formed business can operate under the registered name and this enables access to business specific benefits, such as: business banking accounts, business loans and services, the ability to employ workers, the ability to apply for specific business permits and licenses, etc.

When it comes to taxation, HMRC views registered businesses differently to individuals and the formation of a business enables the business and HMRC to recognise different responsibilities and requirements for the people involved e.g. a company director.

It’s often wise to register a business as the registration can also offer legal protection over the name and brand of your company

What are the options when it comes to registering a business?

When registering a business, you can either register as a sole trader, a partnership or a limited company. There are a few variations in between, but we’ll come to that later.

If you’ve never heard of any of these, then it might seem like an impossible task to figure out at first, however, here at Gotiggo we’re here to help guide you through.

That said, let’s work together and explore what the three different options are. The choice you make will largely be affected by the situation that you’re in, and understanding the key features  

Let’s jump straight in.

Business registration image - Sole trader, Partnership, Limited Company

What is a sole trader?

“A person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.” – Oxford Languages  

The sole trader option is for people who are self employed and want to be the sole owner of the business. The business owner is closely connected to the businesses finances and is solely responsible for all profits and debts of the business.

What is a limited company?

“A private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested.” – Oxford Languages

Limited companies, also known as limited by shares, are structured in a different way to sole traders.

Limited companies are for people who want to legally separate themselves from the business finances, an approach that offers less personal risk but involves more admin and legal responsibilities, which may not be right for everybody. So, for example, if a limited company owned money to a lender it would be the companies assets that are at risk rather than the directors and shareholders personal assets.

Let’s consider some of the key features for both sole trader and a limited company:

Registering your business - Sole-trader vs Limited company

Limited by guarentee – Although we won’t focus on this in the blog, there is another type of limited company structure that is “not for profit” and reinvests its profits back into the company. A key difference compared to a limited by Shares structure is that limited by Guarantee companies have guarantors as opposed to shareholders

What is a business partnership?

Working on a business with somebody else or looking to bring somebody into the fold?

“A partnership is a form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates.” – Shopify Business Encyclopedia

Partnerships are for businesses that have more than one owner who share the responsibilities for profits, debts, and management. The share of the profits and responsibilities isn’t always 50/50, this can depend on the agreement that the partners have. For example, one partner may invest 60% of the startup costs, so as a result they might expect 60% of the total profits.

Just to make things “easy to understand”, there are three types of partnership. Each of which is a different way to structure the business depending on how much responsibility and liability for company debt each partner wants.

(1) ‘Traditional’ partnership

(2) Limited partnership

(3) Limited liable partnership.

Registering your business - Key features of Business Partnerships

Now we know what the three options are, let’s look at what you need to know about each of them:

Click here to jump to sole trader

Click here to jump to limited company

Click here to jump to partnership

Sole trader: What you need to know

If you’ve already been trading as a business and have earnt more than £1,000.00 within a given tax year then you’ll need to register as a sole trader. If you’ve earnt less than £1,000.00 then you’re not obligated to register just yet (this doesn’t mean that you have to wait though).

What do I need to register?

When looking to register as a sole trader you will need the following:

You need the following information: Your national insurance number, self employment number (obtained when you register as self employed) and a business name to trade under (more on registering a business name later)

Business registration

You can go to the HMRC Self Assessment page to register. It’s really easy, you just need to fill out the form as instructed and submit the form to HMRC.

Once you’ve done this, you’ll get a Unique Tax Reference Number which will be used when you complete your self assessment every year.

There is also a step by step guide on the HMRC website detailing the business registration steps as a sole trader. There are 4 steps:

  1. Check if being self employed is right for you?
  2. Choose the name you want to trade under
  3. Check what records you need to keep once registered
  4. Register for tax

Responsibilities

Once you’ve registered there are a few key responsibilities that you’ll need to keep on top off:

  • Keeping a record of your business income and expenditures.
  • To complete and return your Self Assessment tax return every year
  • To pay income tax and National Insurance on your profits
  • If you’re companies turnover is over £85K, you will need to register for VAT (Businesses that earn over £85K) then record all relevant VAT details within your accounting and records
  • If you employ people: records of PAYE and workplace pensions
  • Keep hold of any proof e.g. receipts, invoices, bank statements as HMRC have the right to request this information if needed

Pros and Cons

Registering your business - Pros and cons sole trader

Key takeaways

  • Being a sole trader is a simpler way to set up and manage your business that allows more overall control over it’s management and finances
  • Sole traders are considered more risky as the business owners are personally liable for all of the businesses debt, this means that the owners personal assets are also at risk if the business gets into trouble

If you don’t need to know about limited companies or partnerships then please jump straight to the next section: checking your business name here

Limited company registration: What you need to know

What do I need to register?

When looking to register as a limited company, you will need the following:

Business registration

To register as a limited company, you need to go to the HMRC website and follow the step by step guide to register. The application is not as simple as it is for registration as a sole trader but you’re able to save and come back to the application if you need a break or more time to get the information required.

There are 7 steps business registration steps as a limited company. These are:

  1. Check if setting up a limited company is right for you?
  2. Choose a Name
  3. Choose directors and a company secretary
  4. Decide who the shareholders or guarantors and people with significant control (PSC) of your company
  5. Prepare documents agreeing how to run your company
  6. Check what records you need to keep
  7. Register your company!

If you prefer not to register online you can fill out traditional paper forms and send them to HMRC.

Responsibilities

As a director of a limited company, there are a few key responsibilities that you’ll need to keep on top off:

  • Following the articles of associate (the agreed rules of the company)
  • Keeping on top of company records and reporting any changes, you can be assisted with this e.g. employ the services of an assistant
  • File the accounts and the company tax return, same as above but with the services of an accountant
  • Being clear about any personal benefits that transactions the company might make
  • Paying corporation Tax

Please note: while you might employ people to assist with your responsibilities, it’s you as the director who is accountable if the activities aren’t complete or done on time. You could be fined, prosecuted, or disqualified if you don’t meet the director responsibilities.

For more guidance about running a limited company please see the UK Gov guide.

Pros and cons

Registering your business - Pros and cons Limited Company

Key takeaways

  • Limited companies are an attractive option as they offer directors protection from debts from the business
  • There are lots of reporting requirements and responsibilities that you have to keep on top of in order to run a limited company
  • Other businesses and organisations see your company as safer to work with and this might enable opportunities
  • The withdrawal of profit from the company is restricted
  • The structure of the business is very different to sole traders, with Shareholders and directors

If you don’t need to know about sole traders or partnerships then please jump straight to the next section: checking your business name here

Partnerships: What you need to know

Another twist to the story… your partner isn’t a human being… it’s another business…

A partnership doesn’t have to be between two actual people, one of the partners could be another business, such as a limited company, which counts as a “legal person”. 

What do I need to register?

When looking to register as a sole trader you will need the following:

Business registration

Registering a partnership is also very simple, follow the instructions for registering a business partnership on the HMCR website.

There are three steps that you need to follow:

  1. Set up with HMRC
  2. Name the Partnership
  3. Register the Partnership

Don’t be a dodgy Dave

In a business partnership, each partner is responsible for completing all their own tax returns on time. Each individual is responsible for keeping their accounting up to date and managing all tax returns accurately and honestly.

Responsibilities

As an owner of a partnership, there are key responsibilities that you need to keep on top of. Depending on the type of partnership and the specific roles that you’ve taken you could be subject to the responsibilities found within sole trader or limited companies. If you’re still unsure, please seek professional legal advice.

Pros and cons

Registering your business -Pros and cons Business Partnerships

Key takeaways

  • There is more than one of you running and managing the business, this will make it easier compared to doing it on your own and starting up might be easier to fund.
  • Multiple people in charge increases the risk of disagreement and liability for decisions of others, especially when it comes to finances
  • The profits are split, so you will have to ensure that you are both inputting the same amount of effort or value
  • It’s advised that you have clear agreements at the beginning for roles and responsibilities and the division of any benefits

If you don’t need to know about sole traders or limited companies then please jump straight to checking your business name here

Checking your business name

Just like your daughters new pet rabbit, that first car of yours, or that spider that’s been staring you out in the bathroom, businesses need names too. (However, it’s probably best to stick to one unlike fluffy, flopsey, or whatever it is now)

The sky’s the limit when it comes to being inventive with your business name, as long as it’s not offensive or already taken.

How do you check to see if it’s already taken?

Our good friends at Companies House have set up a webpage where you can check to see if a name has already been registered, try here. The name you pick will be the legal name associated with your business, so please bear in mind that other people might see this too…

When you search for a business on the web tool, if it’s already been taken it will show the company name, it’s company number, and when it was incorporated. Have a go and be nosey, punch in some of your favorite brands and companies.

Business Incorporation and Certificate

Once you’ve completed your business registration, there are a number of exciting things that will happen, it’s essentially the birth of your company.

Happy birthday!

Registering your business - Happy birthday your business is registered

Once you’ve registered the business, it’s given a unique company number from Companies House, this number always stays the same.

Companies house will then inform HMRC when the registration is completed and then HMRC will send you an unique taxpayer reference number (UTR) and issue the company a CT41G Tax Notice to file corporation tax.

Once you have your UTR you can log into your personal tax account on the HMRC website to file your tax returns.

You get a certificate of incorporation, this is evidence from the Government that you are a UK registered Company.

Psst! – keep this information safe as it’s very important.

Other things to consider

Registration of your business is simply the beginning, you need to consider other aspects of your business too.

Here’s some helpful reminders of some of the things that you need to consider.

License and/or permits

Some industries require licenses or permits in order to trade, such as selling food, trading on the streets, selling music or providing international services. Make sure that you’re aware of all licenses and permits that you might need to trade and run your business.

You can use the HMRC license checker to see which licenses and permits you need. It’s best to be as prepared as possible as skipping this check could prove costly in the future. In most cases, licenses and permits are there to help protect you, the consumer, and the niche that you work in. It’s best to take this step seriously.

If your business deals in online selling of goods, exporting and importing international goods or storing or using personal information of customers then there are rules that you need follow.

Where you work

Thinking about where you’ll work is an important part of planning for your business as there are some requirements that you might not have considered before.

Want to work from home? If you’re renting, you’ll need permission from the landlord to formally work from that property.

If you own your home, you might need to contact your mortgage provider. If you’re planning to make some adjustments to your property you might need to contact your local planning office for planning permission.

Significant increases in deliveries or attracting customers is also something that your local council might need to be notified about.

Renting an office or property for your business? If you’re renting a property to run your business from, you’ll have tenant responsibilities that you must follow. There are some really important aspects to consider: fire safety, managing asbestos, as well as repairs and maintenance.

Health and safety is a vast area of responsibility you may not be familiar with but you’ll need to budget for in your business plans.

If you have employees, you need to consider their health and safety while they are working in that building. You can download a workplace health and safety guide from the HMRC website. Click here to view the guide

Insurance

When setting up your business there could be some compulsory insurance that’s legally required in order to begin trading, e.g. such as public liability insurance. In some cases you might want to take out insurance that can offer you some piece of mind, e.g. stock insurance.

Visit the advisory site, ABI.com for more information on the types of insurance that you might want to consider and some guides on workplace insurance.

If you’re ever in doubt, contact your local council or seek professional legal advice.

Employing people

Ready to admit that you can’t take on everything? Some help might be needed?

Employing somebody is a big responsibility but also something that’s an amazing experience if done correctly.

There’s a guide on the HMRC website on employing staff. There are 7 steps that you need to consider, such as DBS checks, legal rights to work.

Points to remember

There’s no right or wrong way to structure your business, what might work for you might not work for your neighbour. The different structures are there to help you thrive as a business and, despite popular opinion, aren’t there to give you more hoops to jump through.

You’re free to run your business how you want and you’re free to reconsider your choice further down the line. Although some options are harder to change than others e.g. limited companies.

As it stands, the vast majority of businesses in the UK are sole traders at 62.7% followed by limited companies at 28% and 9% are registered as partnerships according to the Department for Business and ONS.

We hope this guide was helpful, please subscribe to the Gotiggo mailing list to get more useful information on being a successful entrepreneur.
Useful HMRC links:

Aaron Hughes
Aaron Hughes
Hey, I'm Aaron! I'm one of the two co-founders of Gotiggo. I used to work as a professional in the public sector in the UK. I enjoyed my job role, however, I knew that I wanted more! I decided that the normal 9 to 5 grind was not going to give me the financial freedom that I desired, so I made the decision to start this website in the hopes of helping other like-minded people.

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