When registering a new start-up, there are two main options that people normally take. This is either becoming a sole trader or registering as a limited company. According to your needs, you should’ve established by now which type of company you want to form.
75% of UK companies have no employees apart from themselves and are classed as sole traders*; therefore you could say that they’re the backbone that drives the UK economy. This reflects how easy and straight forward it is to register as a sole trader, record keeping can be simple and you get to keep all the profits after tax.
Sole trading is when the owner is the only decision maker of the company and has complete control over how it’s run. The biggest downside to this is that the law sees the company and sole trader as one entity. This means that any debts the company incurs, the owner will have unlimited liability of this and if necessary, the debts must be met at the expense of the owners’ wealth.
There are three things you should register for as a sole trader.
Firstly, register your new company through HMRC either online or through the telephone.
Secondly, register for self-assessment.
Thirdly, if your company’s turnover is more than £82,000 then you will need to register for VAT with the HMRC.
Bear in mind, you must register as self-employed with the HMRC within 3 months of starting up or face a £100 fine.
Forming a Company
There are two main types of companies, private limited companies and limited partnerships.
The main advantage of these types of company is that the law sees you and your company as two separate entities therefore any debts that it incurs will only be limited to the company and you’ll not have to fulfill these debts with your personal assets. You’re only liable for the amount of money you invested initially and cannot be pursued for any amount after this.
For a private limited company, you’ll need the following to register and incorporate with the Companies House:
- Company name and address
- Officer details (Director and Secretary)
- Share capital and Shareholder details
- Payment of £15.00
To set up a limited partnership, you must have at least one ‘general’ partner and one ‘limited’ partner; they both have different responsibilities and will need to pay tax on their share of the profit.
You’ll need the following to set up and have your partnership up and running:
- Company name
- Registered address
- Appoint general and limited partners
- Register with Companies House
- Fee of £20.00
More information can be found on the Gov.uk website.
*Stats from Startups