Everyone knows that the British government encourages and helps people who own businesses. A study by US News & World Report says that the UK is the fourth best place in the world for entrepreneurs.
If you are not from the European Union, it can be hard to start a business in the United Kingdom. Whether you live in the UK or are just visiting, this article will tell you everything you need to know about starting a business there, from the different types of company structures to the tax and paperwork rules.
Different kinds of Businesses in Britain
There are different kinds of businesses you can start in the UK. Choose the one that fits your needs best.
- Sole Proprietorship
- Partnership
- Limited Company
- LLPs
The legal business structure you choose will affect how your company is taxed, who is responsible for its debts, and how hard it is to run. Given that businesses can have a wide range of goals and sizes, there is no one framework that can be used for all of them.
1. Sole Proprietorship
You have decided to start your own business as a “sole trader.”
After taxes are taken out, you get to keep everything you make from your business. If your business has a setback, it is your responsibility to pay for it. Like the rest of the business, the name of a business has to follow rules.
When you are your own boss, you are in charge of the following:
- Watch how your money comes in and out.
- You must file an annual tax return based on how you think you should be taxed.
- People have to pay taxes.
- Pay Class 2 and Class 4’s VAT and National Insurance.
- If your annual income is more than £85k, you have to register for VAT. You can also register voluntarily if you deal with VAT-registered businesses and want a refund.
- Choosing a name for a business
- You can do business under your own name or under another name. You must register your business name as a trademark if you don’t want other people to use it for business.
2. Partnership
A partnership is the most basic way for two or more persons together to operate a business.
A business with one or more partners has the same duties as a business run by one person. When forming a partnership, you need a legally binding contract that says how profits, losses, responsibilities, and ownership will be split.
When starting a business with a partner, the following must be true:
- Just decide on a name.
- Choose a partner from the ones suggested.
- You have to sign up with the UK’s tax office (HMRC)
- The “nominated partner” is in charge of the tax and financial matters of the partnership.
3. Limited Companies
If you want to start a private company, you’ll need to choose a director to run the business along with any shareholders. When you set up a limited liability company, you separate the business’s finances from your own.
You can start a limited liability company even if you are the only worker (LLC). Just put your name down as the director of the company.
Among the many things the director has to do are:
- Follow the rules that are written in the company’s bylaws.
- You should tell someone about any changes you see in the company.
- The government needs to know about financial transactions and tax payments.
- Paying taxes is like putting money into your business.
- A company hiring people doesn’t change a director’s responsibility for the books, finances, and operations of the company.
- Since the company is a separate entity, it has its own bank account and pays its own share of business taxes. Your company can sign up for corporation tax at the same time it registers with Companies House. However, unlike with personal income tax, all of a corporation’s taxable profits are taxed. On the other hand, the government lets companies make deductions and spend money that may lower their tax bill.
4. Partnership with Limited Liability (LLP)
A limited liability partnership is an option for people who want to start a business with one or more partners (LLP). People or businesses can be members (the latter of which are referred to as “corporate members”).
Just like in a “regular” business partnership, each partner is responsible for their respective taxes on their share of the profits, but they are not personally responsible for the company’s liabilities if it turns insolvent.
Here are the first steps that must be taken to make an LLP:
- How to Choose a Name for Your Business
- Keeping a permanent address
- at least two people are involved
- It is very important to have a written agreement that explains how LLP works.
- Roles and responsibilities of the LLP representatives in submitting the company registration statement
- At all times, there must be at least two “designated members” who have more duties.
4.1 Responsibilities of Appointed Representatives
- Creating a company profile on HMRC’s website for the VAT registration of the partnership if the expected annual sales are more than £85,000.
- Setting up a system for auditing (if necessary)
- Books of account must be kept.
- Companies House asks for annual reports.
- Providing a confirmation statement from the company’s house
- Members who don’t do what the law says they have to do could be charged with a crime. You can also end the Limited Liability Partnership.
- Everyone has a role to play.
- According to what the LLP agreement says,
- Getting on the IRS’s books
- It’s possible that your company is set up in one of the ways listed above, but it really belongs in a different group, such as:
- To buy a franchise is to join an already-established business that has been successful in the past. When you buy a franchise, you have the legal right to use the trademark and business model of a successful company.
- A “freelancer” is a person in the business world who provides a service on their own using their own knowledge and skills (such as writing or photography). In this line of work, the key to success is building a client base from which to offer services.
- A business whose main goal is to help people or the environment is called a “social enterprise.” To keep working towards their social or environmental goals, these companies must be open about how they spend their profits.
- The goal of both a charity and a social enterprise is to make the world a better place as a whole. One thing that makes it stand out is that all of its money comes from charitable donations.
How to Get Started in the U.K.
Here are the steps that a person who doesn’t live in the UK must take to start a business there:
First, make sure you are not in trouble with the law.
Before opening a business in the UK, most non-UK citizens will need to apply for a work visa. However, EU citizens who have lived in the country continuously since before January 1, 2021 may be eligible for the EU Settlement Scheme.
You must first get a visa to enter a country.
Those who need a visa should apply for one well before they leave. Entrepreneurs can get into a country by applying for either a start-up visa or an innovator visa.
Last, make a plan for your business.
In the UK, people who want to start their own business must have a business plan. It will help you determine if your business ideas are good and can last.
Figure out what the best legal framework is for your business.
Before you start your business in the UK, you should figure out the best way for it to be set up.
Choose an official name and place for your business.
If your business is just you, you can call it anything you want. You need a physical location in the UK to get into the company register and start collecting taxes from customers.
Only a small number of businesses have to register their names, but others may do so as a trademark to stop others from using the same name.
To make a limited liability company, you need to form a board of directors, choose a secretary, figure out how many shares and owners you will have, write a memorandum and articles of incorporation, open a bank account, and sign up for corporation tax.
Sign up with the UK’s tax office.
You must register your UK company with HMRC so that you can pay taxes on it. For a limited liability company to be made, it must be registered with Companies House.
Seventh, find out if your industry has any special rules that you need to follow.
Depending on the type of business you run in the UK, you may need permits and licences, among other things. Check if there are any other rules you need to follow to stay out of trouble.
If you want to do business in the UK, you need a visa.
THE DETAILS ARE JUST FOR INFORMATIONAL PURPOSES BECAUSE THESE RULES ARE SUBJECT TO CONTINUOUS CHANGE AND WE ARE NOT LEGAL ADVISORS FOR VISA PURPOSES. IF YOU REQUIRE ADVICE ON ANY VISA PLEASE CONSULT AN IMMIGRATION CONSULTANT.
Forms for getting into the UK
People who have the legal right to do so can freelance, work for themselves, or start their own business in the United Kingdom. If you want to start a business in the United Kingdom, the following types of UK visas may help.
Visa for Entrepreneurs
People who want to start a business in the United Kingdom need this visa. For this type of visa, the business you want to start must be unique and backed by an approved body.
To be considered, you must show proof that you have at least £50,000 that you can invest.
Your own savings should be enough to cover all of your costs. To apply for, renew, or change the type of visa you have, you must first show that you have had at least £1,270 in your bank account for at least 28 days.
The Common European Framework of Reference for Languages says that you must also be able to speak English well at the B2 level (CEFR).
The visa is valid for three years and costs £1,021. If you meet the requirements, you can get another three years added to your visa.
Start-up Visas can be gotten with the help of a UK university or another group that has helped UK entrepreneurs in the past.
You have to show that your business idea is unique, different, and can be scaled up. The very least an application can be is worth £363.
With a start-up visa, you can start and grow your business in the UK for up to two years. You can’t get an extension on a start-up visa, but you can apply for a different type of visa in the UK.
A Global Talent Visa is the Name for it.
The Global Talent Visa program in the UK is open to experts in academia, research, the arts, and digital technology who are known all over the world. You will have to pay £608 to apply.
If you are in this group, you can stay and work in the UK for up to five years.
To Set Up an International Business in the UK
If a foreign company wants to do business in the UK or open a branch office, it must sign up with Companies House as an overseas company.
Companies House needs form OS IN01 from foreign business owners who want to open a branch in the UK. The cost to sign up is £20.
How to Start and Run a Business in the UK
The law in the UK says that all businesses must keep financial records for tax and audit purposes. Even though freelancers don’t have to keep official books, they do have to keep track of how much money they make and how much money they spend.
Merchant Bank Account
Except for sole proprietorships and partnerships, most businesses in the UK have to have a separate business bank account. On the other hand, if you want to make bookkeeping easier, you should open a new bank account.
Taxes: All businesses and people who work for themselves in the UK are required by law to register with HMRC and file tax returns.
Taxes are taken out of the profits of sole proprietorships and partnerships. Companies that must pay Corporation Tax and have limited liability or a presence in the UK must register with the tax authority. After Corporation Tax deductions and credits are taken into account, profits are taxed at a rate of 20%.
If any of the following are true, you need to get a VAT number as well:
In the next 30 days, you should make more than £85,000 from sales that are subject to VAT.
In the last year, your company made more than £85,000 in sales that were subject to VAT.
You may also need to register, depending on what you sell and where you sell it.
Insurance for Businesses
A legal and wise business owner will know how important it is to get enough insurance coverage. Most businesses in the UK will need at least one of these types of insurance.
Employers can get insurance against legal claims
If an employee gets sick or hurt while working for your company, this insurance will pay for their medical bills and lost wages.
How important it is to have a lawyer?
Public liability insurance will pay for any settlements or lawsuits that happen because you or your employees hurt or damage someone else’s body or property, or even kill them. You should buy public liability insurance to make sure you are safe both on and off the property. It can cover the cost of a lawyer and any damages given to the person who was hurt if your company is found to be at fault.
Insurance for Legal Problems
Professional indemnity insurance also called “PI insurance” protects your business if you make a mistake on a client’s job and cause financial or reputational damage.
Putting British Workers to Work
In the UK, if you want to start a business that will hire people, you have to register with HMRC as an employer and buy employers liability insurance.
If a foreign worker has the right paperwork, you can hire them to work for your company in the UK. If you have workers, you have to pay them at least the minimum wage and put money into their social security or pension plans as required by law.
Taxsteins Ltd to the rescue
If you require assistance in any of the above matters (other than Visa) please contact us at info@taxsteins.co.uk or 02071559545.
