Table of Contents
As an aspiring entrepreneur, it is essential you understand the steps in creating a business entity. This article will explore the main steps and legal requirements of starting a business in the UK.
1. Choose Your Business Type
There are various types of business structures in the UK. The most common include:
- limited companies;
- limited liability partnerships; and
- sole trader arrangements.
The most common type of entity is a limited company. Individuals can identify a limited company by noting that their business name ends with ‘Limited’ and ‘Ltd’. You can also see if a business is a limited company by searching on the Companies House website.
A partnership is where two or more people come together to operate a business with a view to generate profit. You can record the details of your partnership in a partnership agreement. In contrast, a sole trader is a small business with only one owner and employee.
2. Choose a Business Name
It is vital to ensure that your business name is not the same as another business, as UK law does not permit two different companies to share the same name. Thankfully, the Companies House website has a ‘company name availability checker’ for prospective business owners to check.
It is also important to avoid choosing names that are overly similar to potential competitors. For example, if you want to compete against ‘456 solutions limited’, you should avoid naming your company ‘654 solutions limited’. Doing so nearly guarantees consumer confusion between your businesses, contrary to your interests.
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3. Declare Directors and Registered Office Location
All UK limited companies should be registered with Companies House after completing the relevant Companies House paperwork. Whilst you do not need a lawyer to do so, many prospective business owners ask a lawyer to assist for speed and accuracy.
Importantly, you need to include a declaration of your company directors and your registered office location. Ensure you determine the business directors before creating your business. Even if your business begins with a sole director, you can add, reduce and amend directors during the company’s life. These changes will be recorded (for public viewing) on the Companies House website.
The registered office location is also essential because this is where you will receive all legal paperwork concerning your business. Due to this information being publicly viewable on the Companies House website, most business owners set this as a commercial address rather than their personal address.
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4. Register for Tax
UK companies must register for the corporation and value-added tax (VAT). Most companies do so by providing their Companies House reference number or company number to HMRC. Naturally, business owners want to avoid getting on the wrong side of HMRC, so this is an essential task you must prioritise.
5. Trademark Registration and Necessary Patents
Some businesses wish to trade mark their brand or the name of one of their products. Doing so aims to prevent other companies and individuals from using them. The easiest way to do this is to use the ‘search for a trade mark’ section of the UK Government website.
Some limited companies will seek to use or sell an invention. A patent seeks to restrict others from using the same unique design in the future (so only your business can use it). The UK Intellectual Property Office oversees patent applications, and the UK Government website provides further information on this process.
Key Takeaways
As with all things, the devil is in the detail. Therefore, you must thoroughly consider and understand the appropriate business creation steps. The consequences of making incorrect assumptions can be time-consuming and expensive. For this reason, many prospective business owners obtain legal advice and assistance from expert lawyers.
If you need help creating a UK business, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
No, Companies House only desires administrative information about your limited company rather than needing evidence of sound financial planning.
Most companies also obtain assistance with the drafting of employment contracts and non-disclosure agreements concerning the hiring of staff. Whilst much of the business creation process involves meeting Companies House and HMRC requirements, you should always remember the need for employment law compliance.
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