After all the excitement of deciding to start up a business, and deciding on your business structure, you’ll now need to do some paperwork.
This is definitely not the fun part of the adventure, but it’s worth spending the time to get these done properly, so you don’t end up with a massive tax bill or get in trouble with the law!!
Within this guide, we’ll take you through the steps of setting up as a Sole Trader, Partnership, and a Company.
Sole Trader
If you’re a sole trader, you run your own business as an individual and are self-employed.
This means you get to keep all business profits after you’ve paid tax on them. You’re also personally responsible for any losses and you must also follow certain rules on running and naming your business.
To set up as a sole trader, you need to tell HMRC that you pay tax through Self-Assessment. You’ll need to file a tax return every year. We can help you register for Self-Assessment.
You need to set up as a sole trader if any of the following apply:
- you earned more than £1,000 from self-employment between 6 April 2020 and 5 April 2021
- you need to prove you’re self-employed, for example, to claim Tax-Free Childcare
- you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits
Responsibilities as a Sole Trader
You’ll need to:
- keep records of your business’s sales and expenses
- send a Self Assessment tax return every year
- pay Income Tax on your profits and Class 2 and Class 4 National Insurance – use HMRC’s calculator to help you budget for this
You’ll need to apply for a National Insurance number if you’re moving to the UK to set up a business.
Partnership
To start, you’ll need a name and a ‘nominated partner’ who is responsible for keeping the business records and reporting taxes.
In a partnership, you and your partner (or partners) personally share responsibility for your business. This includes:
- any losses your business makes
- bills for things you buy for your business, like stock or equipment
Partners share the business’s profits, and each partner pays tax on their share.
Naming your partnership
You can trade under your own names, or you can choose another name for your business. You do not need to register your name.
You must include all the partners’ names and the business name (if you have one) on official paperwork, for example, invoices and letters.
As with Sole Traders, a Business Partnership name must not:
- include ‘limited, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company or ‘plc’
- be offensive
- be the same as an existing trademark
Your name cannot contain a ‘sensitive’ word or expression or suggest a connection with government or local authorities unless you get permission.
Register
You must register your partnership for Self-Assessment with HM Revenue and Customs (HMRC) if you’re the ‘nominated partner’. This means you’re responsible for sending the partnership tax return.
All partners will need to register for self-employment
This is part we love doing so let us handle it
VAT
You must also register for VAT if your VAT taxable turnover is more than £85,000. You can choose to register if it’s below this, for example, to reclaim VAT on business supplies.
Limited Company
When it comes to registering as a company, you really need to consider several things, which can feel overwhelming.
We’ve created this handy checklist to help guide you, but we strongly advise you to speak to our team here, who can help with all the possible variants you may come across.
- Check if setting up a limited company is right for your – our guide to business structure can help
- Choose a name
- Choose directors and a company secretary
- Decide on who the shareholders or guarantors are
- Identify people with significant control (PSC) over your company
- Prepare documents agreeing how to run your company
- Check what records you need to keep
- Register
- Open a bank account in the company’s name
If you’re unsure of your obligations to the government, we have a dedicated team who can help you through the whole process. Send us a note