What do you need to do to set up a Business?

Sole Trader

As a sole trader you run your own business as an individual and are self-employed.

You can keep all your business’s profits after you have paid tax on them and you are personally responsible for any losses your business makes.

When starting out you must register for self assessment with HMRC and file a tax return each year. The tax year runs 6th April to 5th April and tax returns must be filed by 31st January following the end of the relevant tax year.

Once ready you can register at the following link

https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed

Naming your Business – You do not need to register your trading name, this can be your own name or a name you have chosen, however it cannot match with any existing trademarks

Sole Trader Responsibilities – In addition to filing your tax returns you must keep accurate records for your business and pay income tax and national insurance on any profits you make.

If your revenue (sales) exceed £85,000 you must also register for VAT.

You should also ensure you have the correct qualifications; and/or insurance protection/permits to operate in your industry.

Limited Company

Limited companies are legally separate from the people who run it. It will have separate finances from its owners/shareholders and any profits it makes after tax remain within the company

Naming your business – The name for a company must be unique. You cannot use names that are the same or similar to other registered companies. You can check your name at

https://beta.companieshouse.gov.uk/company-name-availability

Most often companies are set up on line and it can be a quick and easy pricess id you have the information to hand.

When ready setting up a limited company you can complete the form online at:

https://www.gov.uk/limited-company-formation/register-your-company?step-by-step-nav=37e4c035-b25c-4289-b85c-c6d36d11a763

You will need the personal details of the directors of the company along with details of the agreed shareholders.

Before you set up the company you should agree on the content of:

  1. The Memorandum of association (an agreement confirming shareholders agree to the company set up) and
  2. The Articles of association (which outlines the rules that will be used when running the company.)

There are standard versions of theses two documents available when setting up a company on line.

If you wish to alter these only the articles of association may be adjusted through amending or uploading model articles. Given these outlines how the company will be run it is worth getting them right especially if you are sharing ownership of the company with others.

If the memorandum is to be changed from the standard version, you must register the company by post. This cannot be adjusted once the company is set up.

Date of trading – even if the company will not be trading until a date in the future you must note that the responsibilities for company reporting and directors duties start immediately.

Operational considerations such as, required qualifications, and/or insurance protection/permits to operate in your industry should also be considered

If your revenue (sales) exceed £85,000 you must register for VAT.

Finally you will need to consider how you will extract funds from the company and register directors with HMRC for personal tax returns if required.

Partnership

Seek legal advice and draw up a partnership agreement. This will outline how the partnership will run and detail dispute resolution procedures along with processes for amendments.

Usually a partner is chosen to be the ‘nominated partner’ is responsible for managing the partnership’s tax returns and keeping business records act on behalf of the others of signing or representing etc.

Once agreed on the nominated partner register partners and the partnership with HMRC

https://www.gov.uk/set-up-business-partnership/register-partnership-with-hmrc

Naming your Business – Similar to sole traders a partnership does not need to register the trading name, this can be partner names or a name you have chosen, however it cannot match with any existing trademarks

Partner Responsibilities – In addition to filing your tax returns you must keep accurate records for your business and pay income tax and national insurance on any profits you make. You must register for self assessment with HMRC – see link above.

If your revenue (sales) exceed £85,000 you must register for VAT.

There are variations to the standard partnership which could be considered, including:

Limited Partnership (were there is at least 1 general partner and then additional limited partners). This operates like a standard partnership however limited partners are only liable for what they have contributed.

Limited Liability Partnership (LLPs) – where all partners pay tax on the profits however, they are not personally responsible for any of the debts.

LLP share some characteristics with companies and must be registered with Companies house. They also:

  • have a registered address that will be available on record
  • have restrictions around the name so that is must be unique and have LLP or Limited Liability partnership at the end
  • must also have at least 2 designated members.

Further information can be found at.

https://www.gov.uk/guidance/set-up-and-run-a-limited-liability-partnership-llp

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