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According to the latest statistics, there were 5.6 million private sector businesses in the UK at the start of 2021, and 5.5 million of them were small – that is, between zero to 49 employees. That’s a slight drop from 2020, but now that the economy is beginning to stabilise after the impact of Brexit and the pandemic, numbers are expected to go back up next year.

The idea of starting a business is definitely tempting. If you have a lucrative idea and you look forward to being your boss, becoming an entrepreneur is definitely worth it. And yet, before you can reap the benefits of entrepreneurship, you have to go through a series of mandatory administrative and legal processes, starting with business registration. It’s a process that every business has to go through, but there are variations depending on your business type.

This stage is crucial because choosing the right business structure can greatly influence your taxes and responsibilities later on.

Here’s how to register a company in the UK, how much it costs, and other essential details that every beginner entrepreneur should know:

Types of businesses you can register in the UK

When registering your business, you’ll have to choose one of the four main types of business structures. This decision is very important, as it will influence the amount of administrative work you need to do, taxes, and degree of personal liability.

Sole trader

This is the simplest business structure to set up, and you can choose it if you run your own business as an individual and are self-employed. If you’re wondering how to register a company name, you should know that you can work under your own name, or you can create a business name. As a sole trader, you can keep all the profit that your business makes, but you will have to pay a tax on them (which is why this business structure is no longer profitable once you become extremely profitable). You will also be liable for the company’s debt which means that personal assets such as your car or your house can be used to pay off debt.

Business partnership

A Partnership is a business structure where profits and losses are shared by two or more members, which can be both individuals or companies. Of course, each partner will also have to pay tax for their share of the profits. To set up a Partnership, you’ll need to choose a name, a nominated partner (who will manage the tax returns and keep business records), and register with HM Revenue and Customs. The process isn’t too complicated, but we cannot overstate the importance of choosing the right business partner. It’s a decision that will affect you for years to come, so make sure it’s someone you trust and who shares the same professional ideals.

Limited company

Unlike sole traders and Partnerships, where the individuals involved are personally liable for the company’s finance, a limited company is a separate legal entity. How to register an Ltd company? First, you’ll need to pick a unique name that must end with “Limited” or “Ltd”. When applying to register your limited company at Companies House, you’ll also need to mention a business address in the UK, the shareholders (there needs to be at least one) and their responsibilities, and articles of association (which include details about how the company will be run). Three months after starting your limited company, you’ll also need to register for corporation tax. After you do all these things, you will receive a “Certificate of Incorporation”, which means that your business is now legally recognised.

Limited Liability Partnership

A Limited Liability Partnership is similar to a Partnership, with one major difference: the partner’s liability is limited to the amount they invest in the business. To set up an LLP, you’ll need to register both at Companies House and HMRC. Similarly to a regular Partnership, an LLP can consist of two or more members, and members can be both individuals or companies. The members will have to sign an LLP agreement mentioning their responsibilities and share of the profits. Every year, the members will have to submit a tax return, based on which they will pay their taxes, and also pay National Insurance to HMRC.

How much does it cost to register a company?

Regardless of the niche, starting a business requires an initial investment. But is business setup also expensive? How much to register a company? Fortunately, it doesn’t normally cost a lot of money to register a company: depending on how you choose to do it, business registration in the UK can cost anywhere from £12 to £100.

The good news is that setting up a business doesn’t involve as much bureaucracy as it once did, and you can register your company online. Both Companies House and HMRC now have online services, which not only reduces setup costs (you’ll only need to pay a flat £12), but also registration time. If registration by post can take more than a week, most online applications are processed within 24 hours.

If you don’t want to register your business online, you can still do it the traditional way – by post. However, keep in mind that this involves extra work, such as filling in an IN01 form and cheque to the Companies House. Registering a company by post is also more expensive. You’ll have to pay a flat £40, and your request can take up to 10 days to be processed (keep in mind that this can be longer if it’s a particularly busy time). You can speed up the process and incorporate your business the same day as the application, but you will need to pay a £100 fee.

Keep in mind that these fees only apply if you want to register the business yourself. To save yourself the hassle and make sure the application is done correctly, you can hire a third party that can register you with Companies House, but their services come at a higher cost.

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