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Member Article
Setting up a company in the UK has been a continual trend over the past two decades. With the world opening up again after the height of the Covid-19 pandemic, many business owners have abandoned self-employment due to the economic effects. In 2022, however, we are now beginning to see a rise in the number of startups across the nation. Initially, things to do when starting a company in the UK appear daunting. This article will comprehensively take you through the crucial steps to starting your own business and how to own a company. So, why start a company in the UK? The most common reasons for starting a business in the UK are that individuals would rather work for themselves and maintain control over their working life. Starting a company also allows people to reap the rewards of spending time on their passions. Reports also state that the self-employed generally demonstrate greater well-being and sense of purpose coinciding with non-monetary benefits than their employed counterparts. This alone is a very tempting reason to ask, ‘why start up a private company in the UK?’ Whilst these benefits should not be overlooked, the challenges and practicalities of maintaining a liveable income should be addressed, as well.
What Type of Business Do You Want to Open?
One of the initial steps in learning how to start a company is finding out what kind of business model your idea falls under. This is crucial in order to structure your business legally and diligently, yet this is only the first of many first steps towards starting up a company in the UK. There are three main company types; sole traders, partnerships, and limited businesses. Each demands different criteria and responsibilities. In this section, we’ll explore these business models in more detail.
Sole Traders
Sole traders – or freelancers – are people who work for themselves and deliver goods or services at a pre-determined fee that generates profit. Such individuals take ownership of their business’s successes and downfalls and complete work-related tasks in their own time – sometimes hiring others to share the workload. Starting a company as a sole trader also allows you to determine where and when you work, meaning you can devise your own personal schedule. Sole traders are also responsible for providing the equipment and resources required for performing their job. Furthermore, the responsibility of paying taxes, obtaining the right insurance, and paying any debts lies solely with them.
Partnerships
Partnership businesses are similar in many respects to those of sole traders; however, partners work together, splitting earnings and paying taxes individually. Unlike freelancers, partnerships are legal connections formed over a contract between two or more individuals or companies. Each party invests both money and time and enjoys the satisfaction of profits made but endures the hardship of any losses. There are different kinds of partnerships, and similarly to the business model you opt for, you will have to research and select the appropriate kind.
Limited Companies
Like partnerships, there are different kinds of limited companies. They are legally separate from their owners, and their finances are separate from their owners’ personal funds. This means that if the business fails or suffers any liability, the shareholders are not personally responsible or financially implicated. Another benefit to this model is that the owners are entitled to keep any profits made after tax. Ultimately, there are many aspects to consider when planning your business and choosing the model it falls under. In the following section, there are questions one should ask themselves to explore the advantages and disadvantages and if registering a UK business is the route for them.
Things to Do When Starting a Company
United Kingdom companies, like others worldwide, take a lot of hard work to get off the ground. You must make sure you’ve fully considered the legal implications of opening a business and have planned thoroughly. You should also ask yourself if this choice agrees with your lifestyle. Before continuing, aspiring business owners must ask themselves these questions:
Brainstorming
Brainstorming is the very first checkpoint in how to set up a company in the UK. Like any other project, solid ideas grow and expand from tiny embers of inspiration. It is good practice in this early stage to decipher what sets your ideas apart from other similar products or services within your desired market. Whilst it is an exciting prospect to let the imagination roam at first, it is wise to be realistic and consider the potential risk factors involved that may affect you later on. You should decide at this stage whether your business offers a product, a service, or both. Knowing this, in addition to knowing your business model, will assist in helping you pinpoint possible demand for your business in the market. This will spark other possible concerns, such as the longevity and potential need for your business idea. A great way to test market demand for your business cost-effectively is to create online surveys or make a landing page to attract customers, taking note of the traffic generated. This will clarify which ideas need to be re-examined and what may need adapting.
Naming
The next step in your quest to set up a company in the UK is to select a name. This name is the first thing a potential customer will see and associate with you. It must pack a punch and grab attention whilst being memorable and telling people exactly what product and/or service you offer. An aspect of naming a company that may be overlooked by competitors is its scalability and its potential to adapt to the potential expansion of your business’s future. This means choosing a name that will not confine your business to one avenue in your selected field. For instance, ‘John Smith Guitar’ is broad enough that the owner can branch into guitar teaching, manufacturing, and repair. The name chosen must be available. It is extremely probable that your eventual website will share the same name as your company. As such, you should ensure no other businesses have claimed this name, so you have free rein over its use. There are many online tools that will help eliminate any duplication risks and, in turn, legal issues. Domain name generators also get the ball rolling until you can filter it down to options you really like and that will benefit your business. Naming will take considerable time, reflection, and more brainstorming – but it is an element that will pay off in the long run.
Websites
These days, the Internet is an indispensable research tool, whether on-the-go or at home. Thus, your website will be one of the first places a customer will visit to check out your business. You should do all you can, then, to ensure that your website will stand out to the correct audience, look professional and be easy to navigate. There are many online tools that provide different layout options. Wix, for example, is a very popular web hosting tool that allows the creator to customise their site and host it for free. Tools like these also allow you to connect your chosen domain name to the site. Search Engine Optimisation (SEO) is an essential aspect of making sure your website is seen and garners the right traffic. For the unfamiliar, SEO is the process by which website owners ensure their site will be one of the first to appear when people search for certain terms in their web browser. SEO is a wide umbrella term that covers many practices and is something you should research thoroughly when building your website.
Market Research
Reports have shown that just under half of new businesses fail because the owners have not conducted thorough research into their target audience and market demand. As mentioned earlier, there are things you can do to help in this area, such as the surveys that you may have performed in the earlier stages of your research. From this gathered data, you will be able to determine the average age, location, and language of your audience. It may appear obvious, but looking at other existing companies similar to your own will help enthuse your own ideas and also help you determine the most suitable pricing brackets for your product or service. With all this in mind, you are well on the way to being a viable contender.
Business Plan
To start a company, the next useful stage is to compile a business plan that solidifies what you aim to achieve and assists possible investors and partners in understanding what your company is about. This document should have:
Making It Official
Registering
Regardless of the business type, you will have to register your company with Her Majesty’s Revenue and Customs (HMRC) to ensure all tax is paid fully and on time. Registering also means you are operating legally like other United Kingdom businesses. Individuals who register as a sole trader must gain skills in bookkeeping to maintain control of incoming and outgoing transactions. This will alleviate the stresses of paying income tax and business rates charged to you. Freelancers that earn more than £85,000 per year must register for Value-Added Tax (VAT) but can then reclaim the VAT they have paid on purchases for their business. Similarly to freelancers, partnerships are responsible for the above, but the delegation is shared among all parties involved. Lastly, limited companies have stricter rules to adhere to. They must be registered with Companies House to operate within the UK legally. There is a checklist that must be completed with further requirements and submissions. Research must be undertaken with care if this is the model you wish to operate under.
Possible Hurdles
In this section, we cover a list of additional issues that can occur when you open a company in the UK:
Conclusion
In this article, we’ve covered how to start up a company in the UK. Getting a company off the ground can be difficult, but if you follow the advice set out here in this article, you’re sure to find it a breeze.
This was posted in Bdaily’s Members’ News section by Vlada Tselomudrova .
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