Setting up a new business in the UK can be time-consuming and complicated, with a variety of different rules and regulations to consider. Dixcart Legal Limited (Dixcart Legal) can assist with understanding the legal requirements in a seamless way (as well as providing access to tax, IT, and payroll teams if required) so that founders and directors can focus their attention on the business.
Set out in this note are some key considerations when setting up a company in the UK.
ISSUES TO CONSIDER BEFORE YOU SET UP A BUSINESS
- Where do I want to sell my products/services?
- Do I want to form an establishment in the UK or do I want to appoint a third party, such as an agent, initially?
- What is the cost of establishing a company in the UK?
- If I do want to set up a business in the UK, what sort of legal structure do I require?
- What rules and regulations do I need to comply with?
- Do I need to register for VAT?
- What do I need to do before I start trading?
- What do I need to do once I start trading?
- Do I need a property?
- Do I need a registered office in the UK?
- What name do I intend to use for my business?
- Do I need personnel?
- Will staff from overseas be working in the UK?
- Do I need a website?
- What data protection rules apply?
- Do I need trading contracts (e.g. terms of business or sale, distribution agreements)?
These are only a few of the considerations to take into account. Below, we have outlined the summary information and how Dixcart can help.
- What legal structure should be used?
This should be one of the first things to consider. This decision affects the tax and national insurance contribution requirements, HMRC reporting obligations, the liability attached to the business and the documents needed.
There are four widely used business structures in the UK. These are outlined below:
|Sole Trader||The business is owned and run by one individual. There is no legal distinction between the owner and the business. The sole trader takes all of the profits but also all the liabilities of the business.|
|Partnership||Two or more persons conducting business together.Partners generally have unlimited liability and a partnership is not a separate legal entity. The Partnership Act 1890 governs how partnerships are run, but the default statutory position is usually not suitable. We therefore recommend that written partnership agreement to set out how the partnership works, how each partner deposits money into and withdraws it from the business, the decision-making processes and plans for when a partner chooses to leave the business, becomes ill or is deceased.|
|Limited Liability Partnership (LLP)||This is a hybrid structure, between a partnership and a limited company.An LLP is a separate legal entity. It is registered at Companies House and is governed by the Companies Act.Members’ personal liability is limited.An LLP does not have shareholders or directors and is taxed like a partnership, meaning that profits are divided among the partners (members) who then pay tax on their own share at a rate appropriate to their circumstances.|
|Limited Company (this note focuses on private limited companies. However, there can also be public limited companies, whose shares may be publicly traded.)||A limited company is a separate legal entity, which can be limited by shares or by guarantee. The members’ (usually called shareholders) liability is limited. In the case of shares it is limited to the amount paid (and unpaid) on the shares they hold or, in the case of guarantee, to the amount they have agreed to contribute to the company’s assets if it is wound up.A company limited by shares is most common. Shares make it easier to pass on ownership of the business, provide different ways of managing tax affairs and possibly giving incentives to employees.Companies are governed by the Companies Act 2006. There are many rules to follow (with potential criminal penalties for breaches).|
The most suitable structure will depend on the nature of the business. Dixcart Legal can assist in navigating the advantages and disadvantages of each to help businesses make the correct choice.
- Regulations when setting up a Business in the UK
The choice of the legal structure will determine which regulations apply to the business. For example, in the case of a limited company, the articles of association the company’s governing document), the name of the company and the details of the directors and shareholders must be registered at Companies House and are generally publicly visible. In addition, there are statutory filing and record-keeping requirements.
There may also be industry-specific regulations, depending on the intended activities of the business.
A business is likely to engage one or more individuals from the start, most commonly as employee or consultant. An employee is an individual who works under a contract of employment, meaning that the individual agrees to serve the employer. A consultant is a self-employed individual working under a contract, who agrees to provide certain services to the employer. The question of whether someone is an employee or a consultant is a mixed question of fact and law.
The principal costs for an employer when hiring employees (other than the usual costs of recruitment and training) are base salary, pension contributions and employer national insurance contributions. An employer may also choose to provide other benefits (such as share options) to attract appropriate talent to the business.
When recruiting, employers should consider employment law issues, as prospective employees may become entitled to claims even if they are never offered a job. For example, discrimination rules affect the whole recruitment process.
Employers must observe UK immigration and visa requirements. In every case an employer must verify an employee’s eligibility to work in the UK by inspecting originals of relevant documents (even for UK nationals). Visa applications may be necessary for certain individuals.
When engaging an employee, employers must within the first two months of employment provide a statement of the terms of employment containing specific minimum information. A full employment contract will contain more detailed terms.
The above issues are just a few key considerations for employers and are not exhaustive.
How we can help
Dixcart Legal Limited provides legal solutions and assistance to the business community globally and in the UK. We can assist with all of the matters referred to in this note.
If you have any questions regarding the above, or require any assistance, please do not hesitate to contact Dixcart Legal: firstname.lastname@example.org