You need a company
The first thing you’ll need to do is physically set up your company. The cheapest way to do so is to use the Companies House webfiling approach. It costs £12 and the Companies House website walks you through each step of the process.
To set up your company, you need to:
- Have a suitable company name
- Provide a registered office address. Keep in mind this is public record, so you should carefully consider if want to use a home address
- Nominate a director of your business
- Work out what the share capital will be and who will be the shareholders. It is usually a good idea to allot a small number of shares on incorporation as the share capital needs to be paid by the shareholder. Any additional shares can be allotted at a future date.
- Assign who are the PSC (Persons of Significant Control) of the company. These are usually people with 25% shareholdings, but it’s not always the case.
- Decide whether you are going to use standard memorandum and articles of association
Once a company is incorporated, you will need to submit annual accounts and compliance statements on an annual basis.
In addition to this, it’s worth bearing in mind that there are also other filings that need to be supplied to Companies House for every change made to the company ( for exemple shares, articles of associations, directors), but most can be done online. However, some forms still have to be submitted on paper and by post to Companies House. When in doubt, the Companies House helpdesk is usually very helpful.
You need to register for taxes
You have to create an HMRC Gateway, which will enable you to add the taxes to view, as and when they are created. When it comes to taxes, you need to look at:
- Corporation Tax
This will automatically be done once you create a company at Companies House. Your Unique Tax number is a 10 digit number that will be contained in any correspondence received from HMRC with respect to Corporation.
The first Corporation tax return will be due 12 months from the date of incorporation and you will need to attach a full set of statutory accounts.
If you are planning on employing people in the business, you will need to register a PAYE scheme with HMRC. To do so, you need to supply HMRC with the following details:
- The Directors’ personal details (Address, UTR Number, National Insurance Number)
- Your Company’s information, including registered office and registration number
- Expected number of employees in the next year
- Date you will be paying your first employee
- Bank accounts details
Once registered with HMRC, you will need to run a payroll and submit an RTI file on a monthly basis informing HMRC of the PAYE, NIC, and Student Loan deducted from employees. It's also worth noting that PAYE/NIC and Student Loan deductions are payable by the company on 19th of the following month.
At this point, it might be a good idea to get your payroll software in place or to outsource the accounting function. If payroll software is the best option for you, you should look into Xero Payroll, Quickbooks Payroll, Sage One payroll and Clearbooks Payroll. All of these are extremely efficient, and used by hundreds of companies.
VAT is not a compulsory registration for UK businesses until your turnover exceeds £85K. Before you decide to register for VAT, keep in mind that once registered, you can reclaim VAT paid on goods and services purchased for use in your business. However, you will need to charge VAT on all UK sales from the date of registration. Here are a few more things to consider:
- Service Purchased VAT can be claimed 6 months prior to VAT registration. This can be a consideration with respect to the timing of your VAT registration.
- Consider your pricing with and without VAT before registering for VAT. Who are your customers? Are they VAT registered businesses or are they individuals who cannot claim VAT?
- You will need to prepare a periodic VAT return (usually quarterly), so make sure you keep good VAT records.
When you are ready to register for VAT, the below list comprises key information that you will be required to provide:
- The VAT number of any business which the director(s) of the new company have had involvement in the last 2 years
- Each director’s personal details (address, UTR number, National Insurance number)
- Company information (registered office, registration number)
- Predicted turnover in next 12 months
- Predicted EEC sales and purchases
- Date of VAT registration
- Your company bank account details
Keep good accounting records
From the beginning, you should keep good accounting records for the company. There are a few ways this can be done:
- Outsource the accounting function
- Use a suitable accounting system, such as:
- Sage Online
All accounting systems cater for different types of business. You should review the functionality before deciding which one to pick. There are also usually discounts available, so it’s always worth shopping around for the best price once you have chosen the software package you want.
Once you pick the right one for your business, don’t rush the setup process. Once your accounting software is properly set up (i.e direct bank feeds, creating bank rules, chart of account and report formatting) it will save you time going forward. A little bit of pain now will reap rewards in the future!
Other things that are often forgotten
- HR Management
Keeping track of employee data (e.g. salary, time off, sick days, next of kin) can be a task, but there are some useful software tools that make this much simpler. We suggest looking at Charlie HR or Clearbooks.
Make sure that you have adequate insurance in place. Depending on the type of company, you will need different types of insurance. For example, if you are selling a service - you should have Professional Indemnity Insurance. If you are selling goods - you should have Product insurance.
When you start employing staff, then you should have Employment Liability Insurance. Don’t forget to secure adequate insurance to avoid any disappointment later!
- Data Protection
If you hold sensitive personal data (names, email addresses), you have a duty to protect this data. At a basic level, you should do at least these 3 things:
2. Register with ICO
3. Protect Personal data
Following the above simple steps in the earliest days of your business will ensure you’ve met your obligations both legally and to your own employees and directors. Whilst financial planning and infrastructure may not be the most exciting part of the startup journey, it’s absolutely vital to ensure you are not vulnerable or in breach of regulations later down the line.