The notion that every business begins with a great idea can inspire the entrepreneurial spirit in just about anyone, but it doesn’t quite capture the full story. To transform your idea into an actual company, you’ll need to register your business. Registering your business determines who owns the business, how you’ll be taxed, and other critical details about how your business will operate.
In this article, you’ll learn how to register a business in the United Kingdom and discover where to go for more help and insight.
If you’re thinking about how to start a business or are actively getting one off the ground, go ahead and bookmark this article so you can refer back during each step of the registration process.
Want to jump ahead? Use the below links to find resources for each action:
- Choosing a business structure
- Setting up as a Sole Trader
- Setting up as a Limited Company
- Setting up as a Partnership
- Considerations for all business types
Disclaimer: This content should not be construed as legal or tax advice. Always consult a lawyer, accountant or tax professional regarding your specific legal or tax situation.
Choosing a business structure
There are three main types of business you can choose in the UK. These are:
- Sole trader
- Limited Company
- Partnership
The type of structure you choose will determine business ownership, your personal liability and taxation.
Let’s look into each of these in more detail now.
Editor’s note: Every business needs a custom domain name to use for their business email and website. Find out if your business name is available as a .uk or co.uk here.
Sole trader
If you run your own business as an individual and work for yourself, you can set up as a sole trader.
This is the simplest and most common way to register a business in the UK.
With this business structure, you get to keep all your business’s profits after you’ve paid tax on them.
The main thing to note about setting up as a sole trader is that you are personally responsible for any losses your business makes. If you declare bankruptcy, your personal assets could be at risk.
Ownership: One person
Owner liability: Full personal liability
Taxes: You must fill in a Self Assessment tax return at the end of every tax year (5th April). It’s possible to do this online, but it can be a little tricky to get your head around. You’ll need details of your business accounts, expenses and any student loans you are still paying back to hand when filling out the forms.
Pros:
- The setup process is simpler than other business structures. To register, you just need to let HMRC know that you’ll be filing a tax return. If your turnover is above £85,000 you must also register for VAT.
- You don’t need to register an official company name and can trade under your own name.
- It’s easier to access your profits — you can keep what you’ve made after you’ve paid tax and there are no additional routes to getting paid.
- There are no upfront fees involved in setting up as a sole trader.
Cons:
- You are liable for all company debts, so if you get into hot water, your personal finances can be affected.
- It can be difficult to raise startup funds when you are a sole trader.
Limited company
When you set up a limited company, you have to:
- Name at least one director and one shareholder
- Register an official company name with Companies House
- Register for corporation tax
- Fill in some essential documentation
- Register for PAYE f you intend to pay yourself or any staff a monthly wage
The main difference between setting up as a limited company and a sole trader is that when you run your business as a limited company, your business is seen as a separate entity to yourself and/or the people who run it. So, your personal finances are not affected should anything unexpected happen to your business affairs.
Ownership: Shareholder/s
Owner liability: Limited
Taxes: You must register to pay corporation tax within the first three months of setting up your limited company. You’ll need a Government Gateway account before you can register for corporation tax.
Pros:
- Your personal liability is limited
- You’ll usually have better access to funding
- A few more tax perks are available to limited company owners
Cons:
- It’s more complicated to set up as a limited company than a sole trader. There are more forms to fill in and boxes to tick. But it’s not too difficult if you go through the process step by step.
- There’s a cost to setting up a limited company. For example, registering with Companies House is £13 if done online.* Remember, if you enlist the help of an accountant, there will be a cost to that, too. Obviously, there’s a cost for any business, if you’d like to learn more on this topic check out our guide on the cost of starting a business in the UK.
Editor’s note: Having trouble coming up with a good name for your business? Try this free business name generator.
Partnership
Forming a partnership is the easiest way to establish a business when there is to be more than one owner.
As with a sole trader, the owners of a partnership are responsible for all company debts.
However, with more than one person at the helm, the risk is shared.
Note a partnership is different to a limited partnership or limited liability partnership, which you can read more about here.
Pros:
Less expensive to set up than a limited company.
Cons:
- Personal liability for losses
- With two or more people equal at the helm, any disagreements can be tricky to resolve.
Related: How to write a business plan (with links to templates)
How to set up as a sole trader
You can become a sole trader in two simple steps:
Step 1: Register for a Government Gateway account
A Government Gateway account gives you access to everything you need to manage, monitor, file and pay your business taxes.
Step 2: Register for Self Assessment
This can be done through your Government Gateway account. Once you’ve registered, you’ll be sent a Unique Taxpayer Reference. This may take a few days to come through — keep it in a safe place, as you’ll need it in the future.
How to set up as a limited company
As mentioned above, it takes a little bit more time and effort to establish yourself as a limited company than as a sole trader. But if you’ve decided this business structure is best for you, it’s worth it.
Once you’re sure a limited company is the right set up for you, there are eight steps to complete:
Step 1: Pick a name
Step 2: Name your directors
Step 3: Name your shareholders
Step 4: Prepare a memorandum of association and articles of association
Don’t worry, this sounds complicated but there are templates available for writing these on the government website. Memorandum of association template Model articles of association
Step 5: Record keeping
You need to keep quite detailed minutes and accounts when you run a limited company. Everything from the results of shareholder votes to details of share purchases need to be recorded. Make sure you’re recording everything.
Step 6: Register with Companies House
You’ll need to provide an official address and choose a SIC code, which is basically a five-digit code that sums up what your business does (e.g. plastering).
Step 7: Register for Corporation Tax
Step 8: Register for PAYE if you need to
To dive into these steps in detail, read our blog on How to set up a limited company in 8 steps.
How to set up as a partnership
Step 1: Choose a name
You don’t actually have to officially register your business name in a partnership, but you’ll want to agree on what to call yourselves for your own branding purposes.
Be sure to check you’re not infringing on any trademarks when you pick your name by searching here.
Note that when you are a business partnership, you’re not allowed to use the word Limited, LTD or PLC in your name.
Step 2: Choose a nominated partner
This individual will be officially responsible for managing the partnership’s tax returns and keeping business records.
Step 3: Register with HM Revenue and Customs
The nominated partner must register for Self Assessment. You’ll need a Government Gateway account before you can do this.
Considerations for all business types
Once you’ve registered your business, you’ll want to double check you have all your other paperwork in order.
Ask yourself:
- Do I need any licenses or permits – for example to play music, prepare food, sell alcohol or trade in a public place? You can find a full list of business licences here.
- Does my business require insurance – such as public liability insurance, employer’s liability insurance or commercial motor insurance? Read more about business insurance on the Association of British Insurers website.
- Will I benefit from joining local business groups? Starting a business can feel solitary, but you don’t have to go it alone. Using local resources, such as classes or webinars, can give your business an advantage in the form of financial resources or valuable knowledge.
Remember, you’re not alone — there are many resources nearby to support you. Consider connecting with other small business owners in your area — you can share insights about the customers in your community, run cross-business promotions and strengthen your business’ ties to your area.
* Pricing current as of December 2023. Check here for current fees. *
