Do I Need To Register My Business?

Starting a new business is an exciting time, and in that location's a lot to recollect most, from what you're going to call your business to how y'all'll promote your products or services. One question that yous might be left wondering is "do I need to register my business and how do I do it?"

In this article, we'll explain when you need to register your business organisation with HMRC and Companies House and how to go near doing and then, whether you're trading as a sole trader or a limited company.

When do you lot have to register a business?

Many people brainstorm trading as a sideline, earlier deciding to turn their hobby into a business. But when do you need to register as a business?

If you lot're making less than £1,000 per year, you are able to take advantage of the trading income allowance. This means that yous can earn up to £1,000 per year without informing HMRC. As shortly as y'all attain this £1,000 threshold, yous'll need to annals your business concern with HMRC and commencement completing an annual cocky-cess tax return.

It'due south of import to remember that this £one,000 annual earnings threshold for trading income allowance relates to income, rather than profit. This means that as soon as your business begins turning over £1,000, y'all'll need to register your business with HMRC.

Sole trader or limited company?

Before you register your business, y'all'll need to decide on a legal construction for your business. The most pop options in the UK are sole trader, partnership and limited company. Let's accept a look at these options in more particular.

Sole trader

If yous own and control a business alone, you may decide to operate your business organisation as a sole trader, on a self employed basis. This ways that you have sole responsibility for your business, although y'all may choose to employ other staff.

From a legal perspective, the business does not have its own legal standing: it is legally attached to the sole trader. If your sole trader business concern is successful, all of the profits vest to you as the business owner. Withal, information technology'due south besides important to note that if the business organisation falls into difficulty, you are responsible for the debts of the business.

Partnership

If you are planning to start a business with 1 of more other individuals, you lot may decide to run the business organisation as a partnership. This enables two or more than individuals to exist jointly responsible for the business, sharing profit, loss and decisions betwixt the partners of the business.

Liability in a partnership is similar to that of a sole trader, except the liability is split between the partners, rather than one individual. Yet, information technology is possible to create a partnership agreement to establish culling terms and contractually ascertain the business relationship.

Express visitor

If you're looking to limit your liability, you may exist considering forming a express company. Express companies have ane critical deviation when compared to partnerships and sole traderships: a limited company is its own legal entity, meaning that it exists legally in its own correct. This means that a express company holds its own liability, so the directors and shareholders are not responsible for any unpaid business debts, excluding their investment into the business.

When you form a limited visitor, y'all tin and then be a director and/or shareholder of the business. Although any profits belong to the business organisation, you lot can draw a manager's salary, along with shareholder dividends. This may work out more revenue enhancement efficient than interim as a sole trader, although it's e'er best to consult a qualified accountant to be certain.

How to register a business organisation

In one case you've decided on the right legal construction for your business, it's time to register it. The process of registering a business will depend on the legal structure that you've called. Permit'due south have a look at the steps you'll demand to follow to register your business officially, whether yous've chosen to become a sole trader, a partnership or a limited company.

Registering a business concern as a sole trader

If yous've decided to fix your business every bit a sole trader, the process of registering your business is relatively straightforward. You'll but need to register online for self-cess with HMRC earlier v^th October in your business' second tax year.

The registration process is uncomplicated, consisting of a brusk online class. After completing this, you'll then receive a letter containing your Unique Taxpayer Reference (UTR), which you'll need to file your self-assessment revenue enhancement render. Yous'll receive a 2d letter containing an activation code which you'll utilize to activate your online business relationship. After your account has been activated, you'll so be able to complete a tax return for your first year of trading.

Registering a business every bit a partnership

When you begin a partnership, you'll need to designate one partner as the 'nominated partner'. This person will be responsible for registering the new partnership with HMRC. You can do this through either an online partnership registration form or past completing form SA400.

Each of the partners will likewise need to register as self employed with HMRC, following the same process every bit a sole trader. Yous'll exist required to submit an annual self-cess course for the partnership, as well every bit for each individual partner.

Registering a business concern as a express company

If you decide that a limited company is the right legal structure for your business, you'll need to register your company with Companies House, also as registering for Corporation Tax. Registering your limited company with Companies Business firm is relatively straightforward and the majority of applications are approved in just a few hours.

Earlier you lot tin annals your limited visitor, there are a few things you lot'll need to ensure that yous have. These include:

A unique visitor proper name
A registered address for your business
Details of the company's directors
Details of the visitor'south shareholders

The cost of registering your limited company with Companies House is £12 and must be paid at the time of application.

Once your application to register your company is complete, you'll receive a letter from HMRC which explains your legal obligations as a express company. This letter volition also comprise your Unique Taxpayer Reference (UTR) which you will be able to apply to register your limited company for Corporation Revenue enhancement.

You will also need to register every bit an employer and set up PAYE (Pay As You Earn) to be able to pay any employees, equally well as paying yourself a director'southward salary.

When exercise you demand to register your business with Companies House?

Many business owners wonder whether they demand to annals their business organisation with Companies House. Companies Firm is responsible for keeping an official register of companies inside the UK.

If you are operating as a sole trader or partnership, there is no need to register with Companies House. Nonetheless, if you program to trade every bit a limited company or limited liability partnership, you will demand to be registered with Companies House before you can begin trading.

When do you need to register for VAT?

Whether you're trading as a sole trader, a partnership or a limited visitor, you'll need to register your business for VAT if your VAT taxable turnover is college than the VAT threshold, which currently sits at £85,000 in a rolling 12 month period.

To register for VAT, you'll need to use HMRC's online VAT registration service. This involves creating a VAT online business relationship which yous will then utilise to submit your VAT returns to HMRC.