Britain has topped the Forbes list of ‘Best Countries for Business’ for two years running… even as we grappled with the uncertainties surrounding Brexit. The main reason? It’s really easy to start a business here as the financial and the legal requirements for starting a business in the UK are not onerous.
Britain, the ‘Nation of Shopkeepers’
That famous phrase about Britain being “a nation of shopkeepers” (attributed to Napoleon, although there’s no evidence that he ever said it) was originally meant to be an insult.
So, you may be surprised to hear that I’ve always seen it as a compliment! I think “a nation of shopkeepers” is a wonderful way to describe our plucky, hard-working entrepreneurial spirit.
But if we wanted to update that phrase for the modern age, we could easily start referring to the UK as “a nation of start-ups”.
One Formed (Almost) Every Minute
Entrepreneurs are taking note. In the 2018/2019 tax year alone, 672,890 start-ups were founded in the UK… which translates as almost one new business formed every minute!
We’re not letting the strange events of 2020 dampen our spirits, either. Recent research shows that three out of four business owners are feeling confident about their chances of generating success in 2021.
From this, you can rest assured that if you’ve been thinking about taking the plunge with that brilliant business idea, you’ll be in good company.
All you’ve got to do now is make it official!
So, what are the legal requirements for starting a business in the UK?
Here Comes the Legal Bit
The reason why Britain keeps topping the ‘Best Countries for Business’ lists is because we tend to make it as easy as possible for talented entrepreneurs to thrive.
However, that doesn’t mean you can just set up a Facebook page and start trading!
Thankfully, the legal basics aren’t too onerous. There are some that will need immediate attention, while others can be introduced as you move forward in your business.
Ensuring you work on the legal requirements for starting a business from day one will help you set up a business that’s properly primed for success, right from the start.
What’s in a Name?
Finding a unique name for your business can be difficult. However, you will need something that is unique for a couple of reasons.
The first (highly practical) reason is that you don’t want to run into problems with duplication – or have to use the bane of my life, hyphens(!) – on your website URL.
The second (just as practical) is that the name of your business should not (must not, in the case of limited companies) be the same as that being used by any other business.
If you want to check whether the business name you want to use is already in use in the UK, you can use the Companies House Name Availability Checker.
Choose Your Legal Status
What do I mean by this?
There are three recognised legal entities for businesses in the UK. These are:
Sole Trader
Sole Trader is the simplest way of getting a business started.
You don’t have to register with Companies House; your accounting processes are much easier and less costly; and you have greater access to the money that comes into the business.
This is the main reason why many start-up businesses go for this option.
A downside of this option is that the individual is the company. That means, if anything goes wrong, the business owner is personally liable. Everything they own (house, car, possessions etc.) could be at risk.
Partnership
This is an option if there is more than one business owner. In this way, two or more people share the costs, risks, and responsibilities.
The negative is, as with the sole trader option, partners are not protected financially. If the business goes under each person becomes liable for the debt.
Limited Company
Setting up a Limited Company does require you to register at Companies House and your accounting processes will be a bit more involved – and will cost more.
However, when you set up a Limited Company you and the business are two separate entities. There are also a number of tax advantages.
This means that you have greater, personal, financial protection, as the company finances are separate from your own personal finances.
One thing to note, if there is more than one person involved in the business and you are looking at setting up a Partnership, you can become a Limited Liability Partnership (LLP). This removes the problem of personal responsibility in a general Partnership.
Register Your New Business with HMRC
The first thing you’ll have to do is tell HMRC that you’re trading, which means registering your new business for tax.
Your company status – Sole Trader, Partnership, Limited Company – will determine how you account for your business income and expenditure. It will also determine the level and complexity of your accounts.
The amount of tax you pay, and your liability for VAT, will depend on the turnover and profit in the business.
To find out more about the requirements for business types, how to register with HMRC and all the tax implications, you can visit the government’s business advice page.
Make Sure You’re Covered
If you are planning to work from home the first thing you will need to check is that the business you’re setting up can be legally operated from there – and that you have the right permissions to do so. This could involve speaking to your mortgage provider or landlord.
However, whatever your business is, you will have to have insurance. The size of the business and the products being sold will have a massive impact on the types on insurance required.
Insurances could include:
- Public Liability
- Professional Indemnity
- Motor Insurance
- Employer’s Liability
- Building and Contents
- Employment Protection
- Money in Transit
- Product Liability
- Theft
- Business Interruption
- Cyber Cover ….
The list can go on and on.
For more information, check out this blog on the Companies House website: What Insurance Does a Small Business Need?
Your Internal Legal Documents
Oh my goodness, there are so many options, depending on the type of business. Everything from a Memorandum Of Understanding, Shareholders’ Agreement, Non-Disclosure Agreement to Terms & Conditions For The Supply Of Goods Or Services.
However, the three areas that are often overlooked – and should not be – are your Website Terms and Conditions, your Cookie Policy and your Privacy Policy.
Website Terms and Conditions
Your Website Terms and Conditions formulate the online agreement between you and your clients and website visitors. They outline everybody’s rights and obligations and should provide basic guidance on how to use the website.
Without these terms and conditions, you could be at of liability for your website’s content and any fault that may arise as a results of its use.
And, above all, they also help safeguard your intellectual property and your user’s data.
Cookie Policy
You will use Cookies on your website to provide a customised and user-friendly experience for your website visitors.
A Cookie is a small amount of computer code that is stored on your website user’s computer that gathers information. This information allows you to develop marketing strategies to encourage your website visitors to become customers.
Your Cookie Policy will tell people who visit your website about your use of cookies. It will explain which types of cookies are used, the kind of information they gather, their purpose, and finally the procedure for deleting the cookies.
Privacy Policy
It is required, by law, that all businesses have a comprehensive Privacy Policy.
Your Privacy Policy should explain how your business collects, uses, discloses your customer’s personal data.
The policy should focus on personal information that directly relates to the customers (i.e. name and address) to prevent them from exposing their identity.
Avoid Overwhelm …
… but, do keep compliant with the legal requirements for starting a business in the UK.
Don’t feel you have to tackle everything at once. Make a list and work your way through it, taking things step-by-step.
In the meantime, if you’ve got a brilliant business idea, and you’d like someone to talk to about it, grab a cuppa and let’s have a chat.
All you’ve got to do is book a complimentary Breakthrough Session… simply choose your favourite date and time, and I’ll do the rest.
