A new business must register with HM Revenue & Customs (HMRC) and, depending on the circumstances and the type of business being set up, it may be necessary to register the business with the relevant local authority. If the new business is going to employ staff, the owners of the business need to be aware of, and comply with, a range of employment legislation.
Forming a business
The legal structure of a business will determine which regulations apply and which organisations must be contacted when starting up the business. The business advantages and disadvantages of each legal structure should be carefully considered before making a final decision about which legal structure to choose.
Sole traders and partnerships
Sole traders and partnerships must inform HMRC that they have started to trade and should register for tax self-assessment as soon as possible after starting a new business. At the latest, they should register by 5 October in their second tax year after starting up. For example, anyone starting to trade between 6 April 2017 and 5 April 2018 must register before 5 October 2018. Sole traders or partners are classed as self-employed and therefore need to make arrangements for self-assessment of income tax and for paying their own National Insurance (NI) contributions.
Private limited companies (including Community Interest Companies)
For private limited companies (and Community Interest Companies, or CICs), there is a tightly regulated process for setting up a company, which is a separate legal entity from its owners (the shareholders). The Companies Act 2006 requires the directors of a new company to submit a number of documents to Companies House, including the memorandum and articles of association of the company, details of its name, its registered office, a statement of initial significant control, including details of the 'People with Significant Control' (PSC) over the company, the names of the directors and the name of the company secretary (if the company's directors choose to appoint one).
In addition, companies are required to keep a PSC Register, which is a new register that has been introduced in order to identify and record the people who run companies and limited liability partnerships (LLPs) in the UK and to increase transparency about who owns and controls these firms.
Company directors are required to prepare, maintain and submit accounting records annually, and file a confirmation statement (which replaces the former annual return) with Companies House every year, which must include the company's PSC information.
Trading name of a business
Different regulations apply regarding the trading name of a business, depending on whether the business owner plans to trade as a sole trader, partnership or limited company. There are also certain restrictions on the business or company names that can be used.
Companies House incorporates and dissolves limited companies, they register company information and make it available to the public.