So you’ve come up with an idea that’s going to make you your millions, with a marketing plan that can’t fail – you just need a structure in which to do it! Most people starting up a business on their own, will do it through a sole tradership or limited company, and these are the two structures that we will look at here.
Once you have decided whether you are going to trade as a sole trader, or a limited company, you will need to register the business with the appropriate authorities.
UK limited companies need to be registered at Companies House www.companieshouse.gov.uk.
This can be done on the Companies house website via their web incorporation service (£15), through any number of formation agents whose costs vary, or by submitting paper forms to Companies House (£40 or £100 for same day service if submitted by 15.00hrs).
Information required is:
- Company name and address
- Officers details (Directors and Secretary)
- Share capital and shareholder details
Once a company has been incorporated at Companies House, they will automatically inform HM Revenue & Customs who set up a computer record for your company and allocate it a Unique Taxpayer Reference (UTR).
HMRC will then send form CT41G (Corporation Tax – Information for New Companies) to your company’s registered office which gives you the UTR, along with information on what to do if your company has become ‘active’ with any business activity. If your company is active at the time of incorporation, it is possible to notify HMRC on the set up forms. If your company is dormant for a period, and then becomes active for Corporation Tax purposes, you have 3 months from the start of the activity to inform HMRC that the company is now active. The CT41G form also includes other tax implications that your company may need to consider.
For Sole traders, you will need to register with HMRC – this can be done online www.hmrc.gov.uk or by filling in a paper form CWF1 http://bit.ly/GECtic (which can also be accessed on the HMRC website). There is no cost to do this, though there may be penalties if you delay in registering once you have started trading. You cannot register more than 28 days earlier than the day you intend to start trading.
For both sole traders, and Limited Companies, you may also need to register for Value Added Tax (VAT) if your turnover is over a certain limit (currently £79,000) or you choose to do so voluntarily, and /or Pay As You Earn (PAYE) if you have/intend to employ someone else. You may also want to file a form 64-8 which allows you to appoint an agent to act on your behalf with HMRC.
So, in summary, register a Limited company at Companies House, and register a Sole trader with HMRC. And that’s it! Whichever type of business vehicle you choose, we wish you Good Luck with your new venture!