Everything you need to know about registering your small business

Ready to start your own business?

Before you tell the world, there are a few administrative tasks you need to take care of. One of the most important ones is registering your business with Companies House and HMRC.

This article will help you choose the correct business structure, register your business and make sure your intellectual property is protected.

Choose your company status

The first step is to think about the company status that suits you best. The status you choose will determine how much admin you have to do and the kind of financial records you need to keep. It also affects whether you'll be liable if your company incurs any debt.

We've included some of the most common options below, but it's always good to take advice from a qualified accountant if you're unsure which status to choose.

Sole trader

This status means that you work for yourself. You'll keep records and accounts of your activities and - since you're working alone - you'll keep all the profits. However, because you and the company are one and the same in the eyes of the law, you'll also be solely liable for any debts.

Limited company

The main difference between a sole trader and limited company is that a limited company exists as a separate legal entity. That means the company's finances are kept separate from your own finances, so you can't be held personally responsible for any company debts.

Partnership

If you want to be self-employed but team up with a co-founder, think about partnership status. A partnership means that two or more people share the risks, costs and workload of starting a business.

Partnerships are a great way to combine skills and experience, plus it can be comforting to share your start-up journey with someone else. It's something that worked well for healthy snack brand Pep & Lekker.

"I co-founded the business with my sister-in-law, who's also a really good friend. We enjoy doing different things - I focus on customer relationships and business development and Juliette comes up with the recipes and product development. We make big decisions together, but get on with different tasks autonomously."
Susan Gafsen, co-founder of Pep & Lekker

Learn more about future-proofing co-founder relationships >

Setting up a social enterprise

To start a social enterprise - a business that has a social or environmental mission - there are additional legal structures to think about. These include community interest companies (CIC) and charities.

How to register with Companies House

Small business owners registering with Companies House can choose from the following options:

• Incorporate through this page on GOV.UK. It costs £12 and your company is usually registered within 24 hours

• Use a formation agent to register your company

• Register and file documents using third-party software

How to register with HMRC

Registering your new business with HMRC is a fairly clear-cut process. However, your filing requirements will differ depending on which status - sole trader, limited company or partnership - you've chosen.

Sole trader

The calculation of tax and National Insurance for sole traders is done through Self Assessment. If you haven't filed a Self Assessment before:

• Register for Self Assessment online

• You'll receive a letter with your Unique Taxpayer Reference (UTR) number within 10 days, which you'll need to file your tax return

• You'll then receive another letter with an activation code for your account

Once you've registered, you'll be classified as self-employed. You will then be able to submit tax returns that show your income and expenses from self-employment, as well as details of any employment elsewhere.

Deadlines for Self Assessment returns are as follows:

• Paper returns should be received by HMRC by 31 October

• Online tax returns should be completed by 31 January

Limited company

One of the biggest differences when registering a limited company is that you'll also need to set up and register a PAYE scheme. Since the company is a separate entity, you will be considered an employee of that company.

Limited company owners should complete a Self Assessment company tax return at the end of their accounting year. This should show the company's taxable profits and whether any corporation tax is owed. There's more information on this here.

The return should also be filed with Companies House to comply with the Companies Act 2006. You can do this free of charge through the Companies House WebFiling service.

While the filing deadlines for Self Assessment and partnership tax returns are fixed dates for everyone, this isn't the case for limited companies. Your company tax returns must be filed 12 months after the end of your company's corporation tax accounting period.

Partnership

When you set up a partnership, you need to choose a 'nominated partner'.

The nominated partner will be responsible for registering the partnership for Self Assessment with HMRC, sending the tax return and keeping business records.

The other partner/s will need to register separately and send their own individual tax return, as well as a partnership supplementary page.

The deadlines for partnership tax returns are the same as sole trader returns:

• Paper returns should be received by HMRC by 31 October

• Online tax returns should be completed by 31 January

Make claiming expenses easy

Remember that you can claim expenses in your tax return, like accountancy fees, travel expenses and costs of working from home.

It's easy to forget this in the day-to-day running of your business, but trust us - when you sit down to complete your return, you'll wish you spent more time keeping track of those little purchases.

Keep hold of receipts, bank statements, copies of customer invoices and, if you're starting your business from home, utility bills.

There's some good advice on record keeping here. Alternatively, a lot of accounting and business banking apps now allow you to scan in expense receipts on the spot.

Registering for value added tax (VAT)

If your business turns over more than £85,000 - or if you think your turnover will exceed that amount soon - you should also register for VAT.

Being VAT-registered can bring credibility to your business and make it more attractive to bigger clients. However, adding VAT to your invoices could make you more expensive than competitors and you'll need to file a VAT return every three months.

This VAT return records things like:

• Your total sales and purchases

• The amount of VAT you owe

• The amount of VAT you can reclaim

Working with an accountant

You don't need to wait until your business reaches a certain size or level of complexity to speak to an accountant.

A qualified accountant can help you decide what structure is best for your business and complete your tax returns for you. Even if your accounts are simple at the moment, rules and regulations tend to change frequently and without warning, so make sure there's an accountant you trust in your network.

Meet five accountants who'll help your business become 'fit for finance' >

Protecting intellectual property

Once you've registered your business with Companies House and HMRC, your final consideration should be to protect your intellectual property (IP).

Having the right protection will help to stop people stealing or copying things like your brand or the look of a product.

There are four kinds of IP that you can protect:

1. Patents

These protect inventions that make something work in a new or novel way. Their function might change what a product does or how it does it - for example, you could patent the chemical formula in a fizzy drink or the technology behind a new form of Bluetooth.

2. Trademarks

These are distinctive signs that distinguish goods or services in the marketplace. Any of the following could be registered as trademarks:

• Name

• Logo

• Slogan

• Colour theme

For example, Toblerone's distinctive triangle shape and Nike's 'Just do it' slogan are both trademarked.

3. Designs

A registered design protects the overall visual appearance of a logo or product. This includes the physical shape, configuration (how different parts are arranged) and decoration (like a pattern on a product).

Apple iPhones and Coca-Cola bottles are both registered designs.

4. Copyright

Copyright protects literary or artistic works, like books, films and photographs. It's an automatic right for anything that's written or recorded, so the copyright holder is usually the first creator or author.

That said, be mindful that there's a grey area if you produced something while working elsewhere - an employer could claim ownership.

You can register and protect your IP by visiting the Intellectual Property Office website.

Find out more about IP and how it can help your business grow >

Registering a home workspace

So you've registered your small business and made sure your intellectual property is protected - breathe a sigh of relief!

The next step is to take care of your workspace. Most people start their businesses from home - it's the cheapest and easiest option after all. You can meet important clients in a cafe or local co-working space, and outsource work to remote freelancers.

Jason Nichols opted to work from home when he started his innovative coffee-in-a-bag business.

"I sell products and, luckily, I have the space at home to store them, so I can fulfil orders and work from there. It's cheaper at this stage of my business, as I'm not holding enough stock yet to justify paying for more space."
Jason Nichols, founder of New Kings Coffee

However, there are a few questions that commonly get asked about starting up at home. Do you need to register your home as the official workspace for your business? Do you need to tell your landlord?

Here are the answers.

Do I need planning permission?

You'll only need planning permission if:

• Your home will no longer be primarily used as a private residence

• Your business will create a significant increase in traffic or people in the area

• Your business will involve activities that are unusual for a residential area

• Your business will disturb neighbours at unreasonable hours

In short, if you're going to be running your business quietly from a room - motivational playlist optional - and your house will pretty much remain a house, you won't need planning permission.

If you aren't sure, you can reach out to your local council to check.

Do I need to tell the local authority I'm working from home?

If you need planning permission, you will need to inform your local authority. If you don't, you won't.

As a home-based business, you'll be covered by small business rate relief too. That means there's no requirement to pay rates on the part of the house you're using as an office, unless you've converted it into a business premises. For example, if you've set up a shop in your spare room.

Does my insurance provider need to know too?

Yes, it's best to inform your insurance company. An upgrade from domestic to business policy usually isn't expensive, and it's important to ensure business-critical equipment like a laptop is protected.

Your insurance provider should also be able to recommend appropriate insurance options for your business, like public liability insurance which will protect you if a visitor injures themselves.

Should I tell my neighbours?

It's always best to keep your neighbours onside. An unusual number of deliveries or visitors will inevitably draw attention, so let them know in advance that you'll be working from home.

If you think there might be some disruption for them, perhaps send a bottle of wine or box of chocolates to compensate.