How To Register A Business - X-Forces Enterprise
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How To Register A Business

How To Register A Business
How To Register A Business

Before you start selling your first products or signing clients, you’ll need to know how to register your business. There are a few different business structures to choose from so let's have a look at the options...

Whether you register as a sole trader, partnership or limited company, they all have their own obligations when it comes to when and how to register your business.

Sole Trader

If you’re running a low-risk small business from home, you’ll likely be registering as a sole trader with HMRC. Sole traders run their business as an individual and are self-employed. To register as a sole trader, you’ll need to tell HMRC that you pay tax through a Self Assessment.

You’ll need to keep records of your sales and expenses and submit a Self Assessment tax return every year. HMRC offers a calculator to help you budget for your tax payments as a sole trader. It’s also a good idea to open a business bank account to make managing your finances simpler.

You can keep all your business’ profits after you’ve paid all the relevant taxes and National Insurance, but you’ll have to manage your own taxes every year. New Making Tax Digital rules are already in force for VAT-registered businesses, and from April 2024 this will also apply to self-employed people with a turnover above £10,000.

Partnership

In a partnership, you register with HMRC, however, you are also required to choose a nominated partner for the business. This person is responsible for managing the partnership's tax returns and business records. The partners of a business split the profits between themselves and are responsible for paying their own tax on their share.

A partnership could ease some of the burden through each partner having their own skillset - creating a well-balanced team – or through providing a larger amount of financial support, which is sometimes known as a sleeping partner.

Limited Company

Registering your business as a limited company can seem complex, but it doesn’t have to be. If you register a limited company, your business is a separate legal entity, and your personal and business assets are also separate. Because of that separation, you need to be registered with Companies House in addition to HMRC.

If you are also a shareholder in your company, you can choose to pay yourself a smaller salary but pay dividends from company profit. As dividends are taxed differently to salary, you may pay less tax overall. Another major benefit can be taken from the name: limited company. Broadly speaking, if any significant debt is incurred, or large claims made against your company, your personal assets are safe.

To set up your limited company, you’ll need to consider the following:

  • Your company name
  • Registered address
  • Your Standard Industrial Classification (SIC) code
  • Appoint a named director
  • Details of shares
  • Register for Corporation Tax

VAT Considerations

Whatever your business structure, if your business’s total turnover (subject to UK VAT at zero, reduced or standard rate) exceeds £85,000 in any rolling 12-month period (or in the next 30-days alone) you will need to register for VAT and submit a VAT return. Some businesses benefit financially from being VAT registered and therefore choose to voluntarily register in advance of hitting the VAT threshold. Making Tax Digital rules apply to VAT-registered businesses and impact how records are kept, figures prepared and returns submitted for VAT.

Choosing Your Name

You must try to choose a unique name. If you are not careful and tread on a pre-existing business’ toes, you could have legal claims bought against you both for money and to force you to change your name. Whilst there are various businesses in the UK with the same name (for example The Red Lion, A Cut Above, etc.) this is generally best avoided.

You need to do as much research as you possibly can into your name before proceeding with it. This includes, but is not limited to, extensive Google searches, Companies House searches (this can be done online) and Intellectual Property Office searches (again online).

Business names are protected by the law of passing off. This allows another business with the same or a similar name to bring legal action against you if what you are doing is causing or is likely to cause confusion.

Business logos are protected by the law of copyright. If your logo is the same or similar to somebody else’s you could be sued for copyright infringement.

You could consider obtaining a Trade Mark. It’s generally rare for a new start-up to do so, as it can be time-consuming, complicated and expensive, plus it’s not really known at that point to what extent the name/logo will need protection over and above the laws of passing off and copyright.

You could consider obtaining a Trade Mark. It’s generally rare for a new start-up to do so, as it can be time-consuming, complicated and expensive, plus it’s not really known at that point to what extent the name/logo will need protection over and above the laws of passing off and copyright.

Certain names are either not allowed by law or require prior approval. These are listed at Companies House and include things for example that suggest a connection to the government, or certain professions.


The above is an extract from an excellent guide produced by our partner organisation the Federation of Small Businesses, the full version of which can be found here

Before you start selling your first products or signing clients, you’ll need to know how to register your business. There are a few different business structures to choose from so let’s have a look at the options…

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