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 help you choose an appropriate business structure and handle the relevant registrations with Companies House and HMRC, depending on your circumstances.

Sole trader

Operating as a sole trader is one of the simplest ways to run a business. You own and control the business and retain its profits after paying any tax due. You generally need to register for Self Assessment if your gross trading income exceeds £1,000 in a tax year, although other circumstances may also require registration.

Income Tax and National Insurance are generally calculated on your taxable profits. You must keep appropriate business records and meet any applicable reporting requirements.

A sole trader is not legally separate from the business. You are personally responsible for its debts, which means your personal assets may be at risk.

Partnership

An ordinary partnership involves two or more partners running a business together and sharing its profits and responsibilities. Partners can be individuals or legal entities, such as companies. Partners generally have unlimited liability for the partnership's debts.

A partnership agreement can set out capital contributions, profit and loss sharing, management responsibilities and arrangements for partners joining or leaving. A nominated partner is responsible for the partnership's tax return and business records. Each partner is responsible for the tax due on their share of the profits, with the treatment depending on whether the partner is an individual or a company.

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 separate legal entity from its owners. Most commercial businesses use a company limited by shares, which is owned by shareholders and managed by directors. Companies limited by guarantee have members rather than shareholders.

The company is responsible for its own debts, and shareholders generally have limited liability. However, personal guarantees and certain actions by directors can create personal liability. Companies must maintain accounting records and meet applicable Companies House and HMRC reporting requirements.

Profits may be retained in the company or distributed to shareholders as dividends where sufficient distributable profits are available, after allowing for tax liabilities. Owner-directors may receive salary, dividends or a combination of both, subject to the relevant tax and company law requirements.

Limited Liability Partnership (LLP)

A limited liability partnership (LLP) combines a flexible partnership structure with a separate legal identity. Members generally have limited personal liability for the LLP's debts, although exceptions can apply, including where personal guarantees are given.

An LLP requires at least two members, who may be individuals or companies, and at least two designated members responsible for compliance duties. It must register with Companies House, prepare and file annual accounts, and submit confirmation statements. An LLP agreement sets out members' rights, responsibilities and profit-sharing arrangements.

An LLP carrying on a business with a view to profit is generally treated as tax-transparent, with members taxed on their allocated shares of its profits. Individual members generally report these through Self Assessment, while corporate members are normally subject to Corporation Tax. Special rules can apply.

Overseas company

An overseas company may conduct business with UK customers without incorporating a new UK company. Depending on its activities and physical presence, it may need to register a UK establishment with Companies House.

Companies House registration and UK tax obligations are separate matters. An overseas-incorporated company may become UK tax resident if its central management and control is exercised in the UK, subject to any applicable tax treaty. Even without UK tax residence, its UK activities may create tax and reporting obligations.

We help overseas companies, including Hong Kong-incorporated businesses, assess their UK tax residence, registration and reporting requirements, and consider whether a UK subsidiary or branch is appropriate.