So, you’ve had a lightbulb moment and you strongly believe it’s got legs as a service or product that customers will pay for. Great! Before you can start testing that theory and selling to customers though, you first need to get the business officially set up and legally running.
Unfortunately, having a great brainwave for a new entrepreneurial idea doesn’t automatically endow you with access to a secret manual on how to set a business up. Sourcing the right information and reliable guidance can be a bit of a minefield.
With that in mind, we wanted to make things as easy as possible for you by compiling some simple advice on how to set a business up in its earliest stages, including:
- Naming the business
- Registering the business
- Deciding where you’ll work
- Putting the right people in place
- Putting a business plan together
- Establishing your bookkeeping and accounting
What are the rules around naming a new business?
One of the first (and most fun) things you’ll need to embark on when bringing a brand-new business into the world is to give it a name. Now, with so many businesses operating around the world, it can be pretty tricky to find a business name that isn’t already taken.
In London alone, there are 1 million private sector businesses, so finding a name that’s truly unique is no mean feat.
‘Same as’ names
You will likely find yourself in some legal hot water if you brand your business with what Companies House dubs a ‘same as’ name. ‘Same as’ names are those where the only difference from another name that already exists are:
- Particular punctuation
- Specific special characters (e.g., a semi-colon symbol)
- Words or characters that are similar in appearance or meaning
- Words or characters regularly found in other UK business names
For example: ‘Shields UK Ltd’ is considered the same, by law, as ‘Shield’s Ltd’ and ‘Shields Ltd’.
To secure a ‘same as’ name, you will need to get written confirmation from the existing business that they don’t mind you calling your business something similar. This kind of permission is often hard to obtain.
‘Too like’ names
There are also ‘too like’ names to consider, which are names that are notably similar to other existing business names. ‘Shields For You Ltd’ and ‘Shields 4U Ltd’, for example.
Plus, if you want to trademark your name and it is too similar to another business’s trademark, this can also be legally problematic and best avoided at all costs.
It’s important to note that your trading name and your registered name can be different. Trading names can’t include ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’ or ‘plc’.
Make sure to do some thorough research before landing on a business name so that you don’t end up in trouble. There are different guidelines for sole traders, limited companies and business partnerships, so make sure you’re clear on which regulations you should be adhering to.
How do I register my new business?
After selecting a name for your business, one of the next things you need to think about is how you want it to be legally structured. The answer to this question will dictate what your business is registered as, and for most UK businesses, this is a choice between sole trader, limited company or partnership.
Sole trader and limited company are the most common legal structures, each with their own benefits. Which you choose is a personal decision, but it’s also important to remember that how you structure your business will affect how you pay tax and potentially, access to funding as well.
The main benefits of setting up as a sole trader:
- Due to not having to register with Companies House, setting up as a sole trader is much quicker, easier and comes with a lot less paperwork.
- Sole traders are not legally separate to their business, so you can simply keep any profits after paying tax.
The main benefits of registering as a limited company:
- The business is legally separate to the people in it, so any liabilities are separate from your own. It means that if the business ever finds itself in financial trouble, your personal assets are protected.
- It can be more tax efficient, because limited companies pay corporation tax, which is a lower rate of tax than the income tax which sole traders pay. Just remember though, that you might still need to pay tax on any income you pay to yourself from the business!
Do I need an accountant to register my business?
No, you don’t necessarily need an accountant to set your business up for you. It is possible to save a small amount of cash by doing it yourself. However, there are a whole host of reasons why we’d recommend seeking the expertise of a qualified accountant, including:
- Giving you peace of mind that the process has been done correctly and that you’re using the best structure for your business
- Access to ongoing guidance and advice, such as claiming allowable expenses and making any changes to your business
Some other important things to consider
Apart from the registration aspect, there are some other important decisions to make when starting a new business.
Putting the right people in place
When setting your business up, you’ll need to think about if you need or want to recruit any employees and what you can realistically afford as a startup.
If you’re setting up as a limited company, you’ll also need to think about any other directors, shareholders, or other people of significant control (PSC) that you want to assign during the registration process.
Deciding whether or not you need (or want) business premises
Part of the business setup process will be deciding where your business will be based. For instance, you might need a workshop, or you’ll set up in the spare room and run things online, or operate as a mobile business to meet your customers.
If your business doesn’t need to be in a specific location, then finding an alternative to renting or buying space means you can avoid hugely expensive business rates, insurance, and utilities in highly populated but expensive areas like London.
If you do decide to have any permanent or pop-up premises, don’t forget you’ll also need to consider things like licenses, permits and additional insurance.
Establishing your accounting
Good bookkeeping and accounting practices are pivotal to the success of any business. Without them, you can’t possibly sustain a robust financial reporting system, which is vital for things like budgeting, cash flow management and business development.
As a new business owner, you’re going to have a whole lot on your plate, so consider bookkeeping software or an accountant to help you out!
Visit our resource centre for more tips and guides about starting a new business in the London area.