Professional accountants specialized in business start-ups are the ones best able to support you in starting a business in the UK and give you industry experts' secrets to starting a successful business. Find tips for selecting the most suitable business structure, the different types of business models you can use and the strategy on how to start a business in the UK with the least risk.
How to choose the best business structure for your project?
One of the most important factors before starting a business is to decide on the legal structure of the business. Choosing the right structure from the start of the business will determine how you pay your taxes and their digital reporting.
During this step, it is recommended to take professional advice, accountants who offer support for business creation because of these factors. Legal form does indeed play an important role in how you make profits and how your business grows. It can also help you decide what kind of relief you can offer your investors to save them money and convince them to invest in your business.
There are four main types of business structures in the UK.
One of the easiest ways to get started in entrepreneurship in the UK is to establish yourself as a sole trader. You will need advice on how to register for self-assessment with HM Revenue & Customs. With this status, you have to file a tax return every year after an initial grace period of one year. It would be best to seek professional tax help if you want to file your tax returns smoothly and avoid the risk of mistakes.
As an individual entrepreneur, you will take responsibility for any debt your business may accumulate. Thus, exclusive trading may not be the best option for riskier or larger scale businesses, as it may not be the most tax efficient structure and may not limit not your responsibility.
As a sole trader, you will need to keep detailed records of your sales and expenses to save time when filing your tax return. In addition, you should know the basics of how income tax works on your profits and how national insurance contributions are paid.
If your business has turnover of £ 85,000 or more, you need to register for and pay VAT. It is then recommended to hire a competitive tax accountant.
Setting up as a "general partnership" is like being an individual entrepreneur. However, in this type of companies, one or more people share the responsibility for the business debts. Likewise, the profits are also shared and the individual members of the partnership pay taxes on their share of the profits.
In these companies, a partner does not have to be an individual person. A partner can also be a public limited company that owns a stake in the partnership. In the case of a shared partnership, shareholders choose a "designated partner" who is responsible for registering the partnership with HMRC and delivering the tax returns on time.
In some cases, it is also possible to opt for a “limited partnership”.
In the limited partnership, there are two roles: the “general partner” and the “limited partner”. The general partner is liable if the partnership runs into any debt. The contribution of a limited partner is financial. Therefore, they will not have the obligation to pay the debts incurred by the other partner.
The third type of partnership is the limited liability company or LLP. To create an LLP, you need an address, an LLP agreement, and of course, register the partnership with Companies House.
If you decide to proceed with setting up a company in the UK, setting up a limited liability company is often the best option. The limited company offers you the greatest legal protection. This is because your finances are treated separately from the company's finances. The taxes and savings of a limited company are also different from those of a sole trader.
When you set up a public limited company you will need to register as an incorporated company with Companies House and you will need to file your annual accounts and returns in the UK.
There are a few constraints to be observed for limited companies:
- A public limited company must have a unique name which may end in Ltd, "Limited" or the Welsh equivalents;
- It must be domiciled at a physical address in the United Kingdom;
- At least one share must be issued to a shareholder;
- Setup a ‘memorandum and articles of association’ listing the written rules of the company and; details of anyone with voting rights in your company or who owns more than 25% of shares;
The different types of businesses in the UK
There are three main types of business: service businesses, merchandising businesses, and manufacturing businesses.
These service companies provide services to their clients. We can also speak of intangible products or products that do not have physical form.
Merchandising companies buy products from wholesalers and then resell them at retail price.
Manufacturing companies buy products that they use as materials and transform to make a new product. Raw materials, labor, and plant overhead are combined by a manufacturing company to produce a new product which will then be sold to customers.
The fourth type of business exists, known as a hybrid business. Hybrid companies refer to companies that mix several types of business.
Start-up in the UK
When you start a business in the UK, you can therefore register as a sole proprietor, a limited liability company or a partnership. Whichever option you choose, it's worth seeking business start-up advice from an accountant. This will help you cover all the basics of target market, venture capital, and financial conduct authority relationships.