Business Registration
In the UK, there are different business structures with unique tax and liability considerations for owners and shareholders. Selecting the appropriate legal and taxation structure is vital, taking into account your specific circumstances and future goals. We will assist you in choosing the right business structure and handle all the necessary registration procedures with Companies House and HMRC.
Here are the main options available.
Sole trader
The self-employed sole trader business structure is the simplest and most straightforward to establish. If you begin working for yourself, you must register this type of business with HMRC. As a sole trader, you have full control and ownership of the business.
Consequently, you have the right to retain all profits as personal income. However, you are also obligated to fulfill tax and national insurance obligations by completing a Self Assessment Tax Return. There is no specific upper limit on your earnings, but higher tax brackets may reduce tax efficiency.
As a sole trader, you assume full responsibility for all liabilities. This includes both personal assets and any jointly-owned assets with another individual.
Partnership
Partnerships differ from sole traders in that they involve two or more individuals combining their expertise to jointly own and manage a business. Similar to sole traders, partners in a partnership are subject to unlimited liability. This business structure is commonly found among professional service providers like dentists, doctors, solicitors, and accountants.
In a partnership, a deed of partnership is typically used to outline the capital contributions of each partner, the sharing of profits and losses, and designate a partner responsible for bookkeeping duties. Each partner is individually responsible for paying taxes and National Insurance based on their share of the profits.
Partnerships offer several advantages, including shared responsibility, reduced time pressures for all partners, and the ability to leverage collective financial resources and expertise. However, decision-making can become challenging, and conflicts may arise if one partner feels that another partner is not contributing enough or is receiving an unfair share of the profits.
Limited company
A limited company is a business that is privately managed and owned by its shareholders, while being overseen by its directors. It operates as a separate legal entity with its own distinct rights and responsibilities. Consequently, the company assumes full responsibility for its actions, and its financial matters are independent of the personal affairs of its owner(s).
The company retains any profits it generates after paying Corporation Tax. Once this is done, the profits can be distributed to shareholders in the form of dividends. Limited companies can have either a share-based or guarantee-based structure, and they are required to fulfill annual reporting and filing obligations with both Companies House and HMRC.
The advantages of operating as a limited company include the ability to determine remuneration packages at your discretion, especially if you are the controlling shareholder. Additionally, the business has the freedom to retain profits, safeguard its brand, and claim expenses incurred by the business.
Separate entities
Limited Liability Partnership (LLP)
An LLP shares similarities with a traditional partnership, but with the key distinction that the partners' liability is limited to the amount of their investment in the business. Registering the LLP is mandatory with Companies House and HMRC, and the LLP is required to prepare and submit annual accounts.
An LLP can be established with a minimum of two members, who can be individuals or companies. The responsibilities of members and their respective shares of profits are defined in an LLP agreement. Every member is obligated to file a personal Self Assessment Tax Return annually, pay income tax on their portion of the partnership's profits, and fulfill National Insurance payments to HMRC.
Overseas company
There are alternative methods for trading in the UK without the need to incorporate a new company. Overseas companies exploring opportunities in the UK market have several options to evaluate. One option is to engage in business activities directly from their home country, serving the UK market remotely without establishing a physical presence.
Another possibility for overseas companies is to register a "UK establishment," which refers to a branch or a place of business located within the UK. Companies choosing this route must adhere to the regulations outlined in the Overseas Companies Regulations 2009. The purpose of this fact sheet is to provide an overview of the regulatory requirements associated with such registrations.
It is important to note that determining the most suitable approach for entering the UK market depends on various factors, including marketing strategies, operational considerations, immigration regulations, and tax implications. To ensure well-informed decisions, it is recommended to seek guidance from experienced UK advisors who can offer comprehensive support tailored to the specific circumstances of the overseas company.