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Start-ups - United Kingdom

Updated 02/2011

Legal requirements

No permission is required to establish a business presence in the UK, although there are regulations on the use of business names and certain business sectors which may require licences or authorisation (such as finance, defence and oil exploration).

The legal basis for setting up a business in the UK is the Companies Act 2006, which provides a comprehensive code of company law.

Legal forms for businesses

The legal structure under which a business is registered will affect the way it is taxed and the accounting records it should keep:

Sole trader

The advantages include independence, ease of set up and running, and all the profits go to you.

The disadvantages include a lack of support, unlimited liability and the fact that you are personally responsible for any debts run up by your business.

Partnership

The advantages of a partnership include its ease of set up and running, and the range of skills and experience that the partners can bring to the business.

There is unlimited liability and, as a partner, you are personally responsible for any debts that the business runs up, and problems can occur when there are disagreements between partners.

Limited liability partnership

LLPs retain the flexibility of a partnership and your personal liability is limited. There is no restriction on the number of members, but at least two must be "designated members" - the law places extra responsibilities on them.

The formation of an LLP is more complex and costly than that of a partnership. If the number of partners is reduced, and there are fewer than two designated members, then every member is deemed to be a designated member.

Limited liability company

In a limited liability company, personal financial risk is restricted to how much you invest in the business and any guarantees you have given in order to obtain financing.

However, there are extra legal duties, including the maintenance of the company's public records, e.g. for the purpose of the filing of accounts.

Franchise

The major advantage of a franchise is that it takes advantage of the success of an established business and support networks.

However, freedom to manage the business is limited by the terms of the franchise agreement. Also franchisees often pay a share of their turnover to the franchiser, which reduces overall profits.

Social enterprise

Social enterprises are businesses that trade for a social purpose.

Business plans and evaluation

When setting up a business, it is essential to have a business plan setting out the objectives of the business, its target market, financial forecasts etc.

To succeed, a new business needs a sound commercial strategy and secure financing.

Some standard requirements to be completed when setting up a business are the same as when opening a branch.

Administrative procedures

One-stop shop

The one-stop shop for new business start-ups is Business Link. It has branches throughout England and also works in partnership with Flexible Support for Business (Wales), Invest Northern Ireland, and Highlands and Islands Enterprise and Business Gateway (both in Scotland).

They provide information and guidance on the whole business lifecycle, from setting up a business to selling it.

Registering a company

There are no separate rules for foreign nationals wanting to register a company in the UK. Documentation can be prepared and the company registered in a day, provided that standard mandatory documents like Memorandum of Association and Articles of Association are adopted (it can take considerably longer if tailor-made Memorandum of Association and Articles of Association are required). “Ready-made” companies are available from company formation agents throughout the UK. Further information can be obtained from Companies House.

Business registration

Company names need to comply with certain regulations, for example, the name should not already exist on the Companies House Index and it should not contain certain words.

Next, complete the registration documents (e.g. articles of association) and send these along with the registration fee (about £20) to Companies House.

Businesses can download the necessary forms from the Companies House website.

All new businesses will have to register for business rates for any premises they occupy.

A limited company must be registered with the Registrar of Companies - Companies House. Its registration becomes official once the Registrar of Companies has issued a certificate of incorporation .

Limited liability partnerships (LLPs) must be registered with Companies House. Once the certificate of incorporation has been received you must notify HM Revenue & Customs (HMRC), who will set up a register for the annual tax return.

Social Security and Tax registration

Business Link provides information on taxes, returns and payroll as well as the obligations of employers in terms of pensions, national insurance contributions etc.

Several of the procedures involved can be completed online.

Resources

Companies House   coordinates the administration of businesses in the UK,  providing detailed guidance on the requirements for forming a company:

Business Link provides detailed information on setting up new businesses in England and Wales. For businesses in Scotland useful information is available on the Business Gateway website, and for Northern Ireland on the Invest Northern Ireland and the Enterprise Northern Ireland websites.

Check also the legislation on this topic in:

  • References

    Legal texts

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Enterprise Europe Network - Contact points

The Enterprise Europe Network provides businesses with information and advice through its local contact points. 

Choose your nearest contact point for personalized help and advice:

Further help

The British Chambers of Commerce (BCC) and the Accredited Chamber Network recently introduced a new Business Start-Up Pack. Benefits include three years' free business banking, tender alerts, half-price BCC membership, and free legal advice.

The National Federation of Enterprise Agencies (NFEA) provides a range of services to new and emerging businesses, including independent and impartial advice, training and mentoring.

SOLVIT helps businesses deal with problems that arise when national authorities wrongly apply EU market rules.

If you wish to establish a business or perform temporary cross-border services in the EU/EEA area (the 27 EU member states, plus Iceland, Liechtenstein and Norway), turn to the ‘Points of Single Contact (PSC)’ – Members of the EUGO network – that will help you to complete all necessary administrative procedures on-line! Get the information you need and submit your applications to the responsible authorities online. You no longer have to worry about contacting several different authorities one by one – the PSC will do it for you!