Starting a business in the UK requires following specific legal steps to operate legally and protect yourself. Here’s what you need to know.
In This Article
Choose Your Business Structure
Your first legal decision is picking a business structure. This affects your tax, liability, and reporting obligations.
Main options:
- Sole trader – Simplest structure. You run and own the business yourself. You’re personally liable for debts.
- Partnership – Two or more people share ownership and responsibility.
- Limited company – A separate legal entity. Your personal assets are protected from business debts.
- Limited liability partnership (LLP) – Combines partnership flexibility with limited liability protection.
Most new businesses choose between sole trader and limited company structures. Sole trader suits low-risk ventures. Limited companies offer protection if things go wrong.
Register Your Business
For sole traders:
Register with HMRC for Self Assessment if you earn over £1,000 per year. (You can do this online.) You’ll get a Unique Taxpayer Reference (UTR) number for filing tax returns.
For limited companies:
Register with Companies House. This can be done online. You’ll need:
- A company name (must be unique and follow naming rules)
- A registered office address in the UK
- At least one director
- At least one shareholder
- Details of people with significant control (PSC)
- Memorandum and articles of association
Registration costs £12 online or £40 by post. You’ll receive a Certificate of Incorporation when approved.
Register for Taxes
After registering your business, you must register for relevant taxes:
- Corporation Tax – Limited companies must register within 3 months of starting to trade.
- VAT – Register if your turnover exceeds £90,000 (2024/25). You can register voluntarily below this threshold.
- PAYE – Required if you employ staff or pay yourself a salary from a limited company.
Get Necessary Licences and Permits
Some businesses need specific licences to operate legally. (Check what you need on GOV.UK.) Common examples include:
- Food businesses – food hygiene registration
- Alcohol sales – premises licence
- Taxis – taxi licence from local council
- Financial services – FCA authorisation
Operating without required licences can result in fines or prosecution.
Protect Your Business Name and Brand
For sole traders:
You can trade under your own name or choose a business name. If using a business name, check it’s not already trademarked.
For limited companies:
Your company name is protected once registered at Companies House. Consider registering a trademark for additional protection. (You can apply through the Intellectual Property Office.)
Set Up Business Insurance
Some insurance is legally required:
- Employers’ liability insurance – Mandatory if you employ staff (minimum £5 million coverage)
- Motor insurance – Required if you use vehicles for business
Other insurance to consider:
- Public liability insurance
- Professional indemnity insurance
- Contents and buildings insurance
Open a Business Bank Account
While sole traders can use personal accounts, a separate business account makes bookkeeping easier. Limited companies should have a dedicated business account.
You’ll typically need:
- Proof of identity (passport or driving licence)
- Proof of address
- Business registration documents
- Certificate of Incorporation (limited companies)
Keep Proper Records
You must keep accurate business records for tax purposes:
- Sole traders – Keep records for at least 5 years
- Limited companies – Keep records for at least 6 years
Records should include:
- All sales and income
- Business expenses
- VAT records (if registered)
- PAYE records (if applicable)
File Annual Returns and Accounts
Limited companies must:
- File annual accounts with Companies House
- Submit a confirmation statement (annual return) each year
- File a Corporation Tax return with HMRC
Missing deadlines results in fines and can lead to your company being struck off.
Comply with Employment Law
If you hire staff, you must:
- Provide written terms of employment
- Pay at least National Minimum Wage
- Enrol eligible staff in a workplace pension
- Follow health and safety regulations
- Provide statutory sick pay and holiday pay
Key Takeaways
Starting a business in the UK involves several legal steps, but the process is straightforward:
- Choose your business structure
- Register with Companies House (limited company) or HMRC (sole trader)
- Register for relevant taxes
- Get necessary licences
- Protect your brand
- Arrange insurance
- Open a business bank account
- Keep proper records
- Meet ongoing filing requirements
- Follow employment law if hiring staff
Following these legal steps protects you, your business, and your customers. Take time to get the basics right before you start trading.
Your Next Step
Contact us today at 0121 268 3208 or via email at info@onyxsolicitors.com for a FREE consultation. Let us help you achieve the peace of mind that comes with having expert legal support on your side.
