How to register a business in the UK
Samir Kamnani
·June 12, 2024
You might have a business idea for an ecommerce shop that you know will take the world by storm—but before you get to selling, there’s a bit of red tape to get through first.
In order to market and sell your ecommerce products, whether domestically or abroad, you’ll need to set up a registered business. Here’s what you’ll need to know to get started with registering your business in the United Kingdom.
Choose a structure
First, you’ll need to decide on the legal structure of your business. In the UK, there are four main options: sole trader, partnership, limited liability partnership, or limited company. This decision will affect how much tax you pay and how much control you have over your business.
- Sole trader
If the business is yours alone, and you intend to keep it that way, operating as a sole trader is a simple and streamlined way to set up your business. You’ll need to get a National Insurance number, and will be responsible for paying income tax on your profits. Once you meet the annual revenue cutoff of £90,000, you’ll also need to register for Value Added Tax (VAT) and collect the applicable sales tax on your products. - Partnership
A partnership is similar to a sole trader, but is a business agreement formed between two or more partners in which each partner has a set amount of business ownership. The partners share profits according to their agreement, and are separately responsible for paying the tax owed on their share. However, this arrangement can be risky because every partner is responsible for other partners’ negligence or misconduct, and for debts that the business incurs. - LLP (limited liability partnership)
An LLP is a business structure that operates similarly to a partnership, but limits the liability of each partner to the amount of money they’ve each invested in the business. Each year, the members must fill out a financial statement, and owners must individually pay tax on their share of profits. - Limited company
A limited company is a separate legal entity. As such, it bears its own legal responsibilities, maintains separate finances from its owners, and is subject to specific tax obligations. Profits, after taxes, are either retained or distributed as dividends. Limited companies can be structured by shares or guarantee, and must meet annual reporting and filing requirements.
When deciding on your business structure, think more about your plans for growth than where you are right now. A business attorney can help you evaluate the pros and cons of each model if you’re unsure.
Incorporate your business
Once you’ve determined how you want your business to be taxed and treated as a legal entity, it’s time to get registered.
If you’re a sole trader or a partnership, you won’t be required to form a separate entity, but will need to register your business name with HMRC.
If you’ve chosen an LLP or limited company, you’ll need to register your business at Companies House, and draft two legal documents: your Memorandum and Articles of Association. A Memorandum is a legal statement signed by all owners that shows intention to form the company, and the Articles of Association consist of a series of written rules that govern how the company is operated. Your Memorandum will be created automatically if you file online, and you can either refer to existing templates for filling out your Articles of Association, or create your own.
If you decide to draft your own Articles of Association, it will likely be helpful to consult with an attorney or accountant to ensure that you’ve covered all of the relevant terms you wish to include.
Understand the rules for operating an online business
Finally, when you’re ready to launch, keep in mind that you’ll be subject to certain regulations when it comes to operating a business that sells products online—and must follow additional guidelines if you’re exporting your products to other countries as well.
Make sure to offer straightforward terms and policies around the sale of your items, with a clear returns policy that outlines your customers’ options if they don’t want the item or if it arrives damaged. If you’re responsible for collecting VAT, make sure that your VAT number appears prominently on your website and other marketing materials.
When exporting products, check the exporting rules for each country where you plan to sell your products. You’ll likely need to go through customs in each country, and may be responsible for additional duty fees. You can navigate the process yourself using international carriers, or partner with a 3PL or exporting service that can help you through the process for an additional fee.
Set your business up for success
Once your business is officially registered, make sure that you’ve set it up for sustainable growth with a smart business strategy and the right tools and technology to support it.
Using an ecommerce platform like Shopify can help you build an ideal tech stack for your ecommerce business, as you can integrate multiple apps to support different parts of your business from Shopify’s App store. If you’re selling internationally, you can streamline the process with Shopify Plus’ cross-border commerce features, such as localisation, currency conversion, and duties and tax compliance.
Make sure that you have a solid plan for international and UK returns management, too. By using Loop’s returns management solution, you can set up customised workflows to streamline both domestic and international returns, with dynamic routing to ensure cost-effective return shipping to the most convenient return hub. Loop can also help you optimise for exchanges, helping you preserve more revenue from returns and increase your customer lifetime value.
Find out how Loop can help you boost revenue for your UK ecommerce shop.
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