If you want to run your own business in the UK you have two main methods – either be a sole trader or set up a limited company (OK there is a third method by starting a partnership LLP scheme but we’ll stick with the main two for this article).
As a sole trader you are effectively self employed and the strict rules in the UK mean you need to tell HMRC of this change to your income within three months of starting your business otherwise they will fine you (the initial fine is £100 and just keeps growing – the system of fines is a few years old now but almost everything with a deadline date has a fine and some deadlines you won’t know about unless you read up on everything).
As a sole trader this means you are personally liable for anything that goes wrong. Although insurance may cover some of the losses (for example, if you get sued for providing wrong information) courts and others can come after your personal assets. The positives are that you don’t have all the red tape that owning a company entails.
Setting up a private limited company in the UK is very easy and can be done online if you want an “off the shelf” name then company registration can be done in a matter of a few hours using online registration agents. All agents are policed by companies house and are integrated with their own system. Once you have chosen the name of the company then the agent will send all the relevant forms to your via email or for a small additional fee hard copies to your business address.
Once you have a trading company then you will probably be the director and with that comes certain responsibilities. Of course losses are limited to the company and not you personally but each year you will have to file a set of accounts at companies house, complete the annual return and other required paperwork – normally this is undertaken by an accountant each year as they know exactly what to do and file things on time and properly.
Whether you are a sole trader or limited company if your turnover is going to be over a certain threshold each year (currently £67,000) then you’ll also have to register for VAT – then of course if you take staff on there are additional regulations with regards to employing people and paying income tax and national insurance.
But setting up a private limited company in the UK is fast and cheap (about £40) but there are responsibilities that you should be aware of before you go down this route.
