For those who have never owned a business before there is a lot to get right from buying business insurance to registering the business. Each business is different, but how to register the business very much depends on how the business is operated. 

The main business classifications include sole traders, limited companies and partnerships. Each type has a different approach with regards to naming the business and who the business needs to be registered with, along with the types of records that need to be kept. 

Sole Traders

Sole traders are classed as anyone who runs a business as an individual and is self-employed, including those who are employed but generate additional income through a business they have set up outside of work. 

Anyone who earns at least £1,000 from self-employment will need to register as a sole trader through the GOV.UK self-assessment page. Therefore, registering a business as a sole trader usually coincides with completing a self-assessment, also known as a tax return which must be completed and paid by January 31st. 

When registering the business, sole traders will need to come up with a name for their business, which is straightforward enough with only a few regulations in place. In addition, records will need to be submitted about the business’s expenditure so that tax, national insurance and any other deductions can be calculated. 

Limited Company

Limited companies are either classed as ‘limited by shares’ or ‘limited by guarantee’, depending on whether they are a general business or a non-profit. 

The first step is to decide on a business name, with more rules surrounding the name of a limited company than with a sole trader. The term ‘limited’ or ‘Ltd’ must be stated within the official name of the business, though doesn’t have to be listed within the trading name. In addition, limited company names cannot use existing company names or trademarks. 

Registering a limited company requires a SIC code that is specific to each business type. The company will need to be registered with both Companies House and HMRC. As part of the registration process, businesses will also need to register for corporation tax. 

Before registration, the business must appoint a director with the option of also appointing a company secretary. The shareholders or guarantors must also be decided upon, along with any individuals who will have significant control over the company, known as a PSC. 

Also, documents in the form of a memorandum of association along with articles of association will need to be prepared. Limited companies are also responsible for keeping records relating to aspects such as information about directors, the results of any shareholder votes and any loans or mortgages that have been secured against the company’s assets. 

Partnerships

When at least two individuals are in business together, a partnership allows for the responsibility of the business to be shared. Though, a good point to note is that the other party can also be a limited company which in the eyes of HMRC counts as a ‘legal person’. 

The process of setting up a partnership requires much fewer steps than a limited company unless setting up a limited partnership or a limited liability partnership, which each requires a specific set of steps to be followed.

For limited partnerships, the business will need to be registered with Companies House, HMRC for self-assessment along with registering for VAT. If the general partner is a limited company, the accounts may also need to be sent to Companies House.

For limited liability partnerships, the business can be registered using approved software, through the post or by using a formation agent. With this type of partnership, there must be at least two designated members which have a responsibility for keeping the company accounts. The designated members must also register the limited liability partnership with HMRC for self-assessment and register for VAT if applicable. Also, a confirmation statement long with annual accounts will need to be sent to Companies House. 

However, for a regular partnership, after deciding on a business name, and appointing a nominated partner, the business needs to be registered with GOV.UK on its setting up a business partnership page.

The nominated partner will be responsible for overseeing the partnership’s tax records along with maintaining the business records. 

To Sum Up

While it’s always wise to consult the advice of an accountant or business mentor on all things business registration, the above gives an overview of where to head when wanting to officially document the existence of a new company.

For limited companies or non-standard partnerships, the process can be particularly complex as more steps will need to be factored in versus sole traders who can register at the time of completing their self-assessment.