How to Register a New Business

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    Contents

    Guide Author

    James Longley

    Managing Director

    min read

    Are you planning to embark on a new business venture? Are you uncertain about whether you must officially register your business before commencing operations? Alternatively, if you’ve already launched your business without proper registration, do you need to register your

    In either scenario, it’s crucial to determine the appropriate registration authority and understand the relevant regulations and guidelines.

    Our comprehensive guide will provide you with answers to these questions and walk you through the process of registering your business.

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    How to register a new business?

    Every freshly established business in the UK is required to complete registration with Her Majesty’s Revenue and Customs (HMRC). In its simplest form, this entails notifying the tax authority of your business’s existence and ensuring the appropriate payment of all applicable taxes.

    If you intend to operate as a limited company, an additional step involves registering your business with Companies House.

    This entails a more intricate administrative process, which we will delve into with greater depth in subsequent sections.

    How to register a limited company?

    Registering your business in the UK involves two main steps: registering with Her Majesty’s Revenue and Customs (HMRC) and potentially registering as a limited company with Companies House. Here’s a simplified breakdown:

    HMRC Registration

    This is a straightforward process. Create an HMRC account to inform them of your business bank account’s existence and ensure you’re paying the necessary taxes.

    Limited Company Registration

    If you plan to operate as a private limited company, there are more steps involved:

    Consider Your Business Structure

    Decide if being a limited company is suitable for your business. Alternatively, you can be a sole trader or business partner, which involves less paperwork but less personal financial protection.

    Choose a Company Name

    After deciding on the limited company structure, select a unique name for your company and check its availability using the online Company Name Availability Checker at Companies House.

    Appoint Directors

    Appoint at least one director who will be responsible for various company duties, including managing records and tax filings. You can also appoint a secretary for smoother administrative operations.

    Allocate Shares

    Understand that a limited company consists of shares, and you must have at least one shareholder (subscriber) when you set up the company. Shareholders may have certain rights and responsibilities.

    Create Company Rules

    Develop company rules, including a ‘memorandum of association’ and ‘articles of association,’ which outline the company’s purpose and rules for operation. If you register online, the ‘memorandum of association’ is automatically generated for you.

    Record-Keeping

    Maintain records of directors, shareholders, company secretaries, loans, agreements, transactions, shareholder votes, and mortgages.

    Provide Official Address

    Offer an official address for your company registration, which can be your business premises or your home address if you don’t have a separate business location.

    Select SIC Code

    Choose a Standard Industrial Classification (SIC) code that describes your company’s activities and sector. This code helps categorize your business.

    Registration with Companies House costs £12, payable by debit or credit card, and usually takes about 24 hours to process.

    Once completed, you’ll receive a certificate of incorporation, legally recognizing company formation of your business as a limited company or limited liability partnership. You’ll also be registered for Corporation Tax simultaneously.

    These steps outline the basics of registering your business in the UK. Ensure you carefully consider your business structure and follow the necessary procedures for successful registration.

    What if your hobby is your business?

    The line between a hobby and a business can be unclear. In simple terms, if you’re making money from your hobby or side gig, you must register it as a business with HMRC, even if you work from home and don’t have a physical business location.

    You should register when:

    • You engage in any buying or selling of goods or services.
    • You earn income and make a profit.
    • You purchase items with the intention of selling them for profit.
    • You earn interest.

    If you plan to hire employees or explore business insurance, you must register your business. It’s wise to do this promptly.

    Once the administrative tasks are complete, you can consider relocating your business or beginning the hiring process.

    However, you don’t need to register with HMRC if your business earns less than £1,000 per tax year.

    How do you register a new business with HMRC?

    Registering your business with HMRC is a simple online process. Just follow these steps:

    1. Visit https://www.gov.uk/set-up-business.
    2. Create an account or log in if you already have one.
    3. Explore the different business structure options (e.g., ‘sole trader,’ ‘limited company,’ ‘business partner’) and choose the one that suits your business.
    4. Select your chosen option and follow the provided instructions, filling in the necessary details.

    The online registration should typically take no more than an hour. Once you’ve completed it, you’ll receive your Unique Taxpayer Reference (UTR) number by mail. With this UTR, your registration becomes official.

    While registering with HMRC is straightforward, remember that you’ll be responsible for submitting self-assessment forms and paying taxes moving forward. To learn more about self-assessment, visit the government website.

    What business structure should you choose?

    When you register your business with HMRC, it’s crucial to determine its structure. The choice you make will impact how you pay yourself and your staff. You have three main options:

    Sole Trader

    You can operate as a sole trader if you’re an individual running your own business and are self-employed. As a sole trader, you retain all your business profits after tax but are personally responsible for any business losses. There are rules to follow regarding your company’s operation and name.

    • You should choose this option if you earned over £1,000 from self-employment between April 6, 2020, and April 5, 2021, or if you want to make voluntary Class 2 National Insurance payments for benefits.
    • Keep in mind that you must prove your self-employment for certain benefits and avoid including specific terms in your business name.
    • Registering as a sole trader means you pay tax through ‘Self-Assessment’ and file an annual tax return.
    • You’ll also need to keep records of your business sales and expenses, pay ‘Income Tax,’ ‘Class 2,’ and ‘Class 4 National Insurance,’ and register for VAT if your turnover exceeds £85,000.
    • As a sole trader, your personal assets may be at risk if your business faces financial trouble and can’t cover its debts.

    Business Partnership

    A business partnership involves shared responsibility for the business, where partners share profits and are individually liable for any business losses and debts. Partnerships can include individuals and legal entities like limited companies.

    • To establish a business partnership, you need to choose a business name, nominate a partner, and register with HMRC.
    • Each partner pays tax on their share of the profits, and they share the responsibility for any business debts.

    Limited Company

    A limited company is a distinct legal entity separate from its owners, offering personal liability protection. The company pays its debts, and business owners, shareholders, and partners in company limited, aren’t personally responsible for these debts.

    • To become a limited company, you must register it with Companies House, which provides a unique company registration number (CRN).
    • A limited company must adhere to Companies House regulations and make its details publicly available.
    • The company can engage in contracts, employ staff, and handle its finances separately.
    • Business profits are kept within the company, and owners pay themselves through salaries and dividends.

    Selecting the right structure is vital for your business’s financial and legal arrangements, so choose wisely based on your needs and goals.

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    What registration numbers will your business receive?

    When you register with different authorities, they’ll provide you with specific reference and registration numbers.

    It’s essential not to confuse these numbers, as mixing them up can lead to unnecessary administrative complications between HMRC, Companies House, or other relevant agencies. Here are the key numbers you’ll receive:

    Company Registration Number (CRN)

    This eight-digit number, typically starting with zero, is issued when you register as a limited company or limited liability partnership with Companies House. It uniquely identifies your company and confirms its registration.

    Unique Taxpayer Reference (UTR)

    HMRC issues this 10-digit number, which is used to identify your company for tax-related matters.

    VAT Number

    Usually prefixed with “GB,” this nine-digit number is issued by HMRC for businesses registered for VAT. You should only register a company for VAT if your taxable turnover exceeds £85,000. Even if you don’t reach this turnover threshold, you can still register and reclaim VAT paid on goods and services.

    Employer Reference Number (ERN)

    HMRC provides this eight-digit number, which includes a mix of numbers and letters. It is obtained when you register as an employer and is sometimes referred to as an Employer Pay As You Earn (PAYE) reference number on tax forms. You need it for end-of-year HMRC PAYE returns.

    The deadline for registering your business with HMRC is October 5 after the end of the tax year in which you became self-employed.

    For instance, if you started self-employment on June 20, 2021, the latest date to register your business would be October 5, 2022.

    It’s advisable to register with HMRC promptly to avoid delays or oversight. You’ll only begin paying taxes once your earnings reach a certain threshold, so there’s no need to delay this important step.

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    What happens once your business is registered?

    Once your business is officially registered, it will be recognized by HMRC as a legitimate entity. You can begin conducting business operations using your registered office address and business name as soon as you receive confirmation from either HMRC or Companies House, depending on your registration method.

    If you chose to register your cchooseompany as a sole trader, it’s crucial to remember that you are responsible for completing an annual tax self-assessment. Keeping accurate records of your business income and expenses will simplify the process of filing your tax returns.

    A helpful practice for sole traders is to establish a separate business or free business bank account to maintain a clear distinction between personal and business finances.

    What changes have happened in regards to registering a business post-Brexit?

    No significant changes have occurred in the process of registering your company in the uk, after Brexit. Suppliers will still need to verify their VAT registration, but the registration process remains unchanged.

    Many businesses in the UK are owned by individuals who are not UK or EU nationals, so registering your business should not pose any significant challenges.

    Let Utility Bidder help your business

    Once your business is up and running and properly registered, it’s essential to ensure you’re getting the best energy deal possible.

    Our knowledgable and dedicated team at Utility Bidder specializes in simplifying the process of comparing business gas and electricity deals. Don’t hesitate to reach out to us today, and we can help you save both time and money on your business’s energy needs.

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