Re­gis­ter­ing a small business – who needs to do it, and if so what do they need to do?

Every day people think they have come up with the million-dollar idea; a small business idea that will change the world and make them a fortune. However, there are quite a few steps between the birth of an idea and actually es­tab­lish­ing a small business. There are many official and ad­min­is­trat­ive obstacles before you can call yourself a business owner. A vital step is re­gis­ter­ing the small business. Doing this requires several steps, documents, agencies, etc. Some of these processes are there to help you, others will inform the gov­ern­ment of your existence so that they can do anything they can to help you. Here, we have outlined the steps that you need to take to suc­cess­fully register a small business.

There are many things that need to be con­sidered before you begin the small business re­gis­tra­tion process. Here are some of the questions that you should ask yourself:

It may be the case that you are not required to register your business. If you are self-employed and simply using your legal name, it won’t be necessary for you to register. However, it is worth bearing in mind that failing to register a small business could mean not being able to access personal liability pro­tec­tion, legal ad­vant­ages, as well as benefits when it comes to taxation.

The small business re­gis­tra­tion process can indeed be very straight­for­ward; for many it’s just a case of re­gis­ter­ing the name of the business with Companies House and Her Majesty’s Revenue & Customs (HMRC). If you are running an in­cor­por­ated small business, you will receive a company re­gis­tra­tion number (CRN) after you register with Companies House. You will later receive a unique taxpayer reference (UTR), which is a 10 digit code issued to all new busi­nesses re­gistered with Companies House.  You will need to register with HMRC re­gard­less of your small business structure, as you will need to file for self-as­sess­ment taxation. Ad­di­tion­ally, it may also be necessary to register with the gov­ern­ment in order to attain trademark pro­tec­tion. Trade­mark­ing a business, brand, or product name can be done by filing the ap­pro­pri­ate paperwork with the In­tel­lec­tu­al Property Office.

Of course not every or­gan­isa­tion is actually required to pay taxes, e.g. NGOs, non-profits and charities. If your small business is one of these then you need to register with the Charity Com­mis­sion and apply for tax re­cog­ni­tion from HMRC.

Small busi­nesses must register with HMRC for taxation purposes before they begin trading. If you are a sole trader, you must simply register for self-as­sess­ment tax returns, and you must also pay income tax on profits earned and pay Class 2 and 4 National Insurance con­tri­bu­tions.

If you are running an in­cor­por­ated small business, you will need to register for Cor­por­a­tion tax. This can usually be done online when you register initially with Companies House. You will need to register for cor­por­a­tion tax up to three months after you begin trading, and penalties will be incurred if you register late. Your UTR is necessary to complete the process.

If your small business’s VAT taxable turnover exceeds the threshold (£85,000) within 12 months, you will need to register for VAT. You may also register vol­un­tar­ily if your turnover is within the threshold but you believe it will exceed it in the future. VAT ap­plic­a­tions can be made online or in writing to HMRC. Once you have re­gistered for VAT, you will receive a VAT cer­ti­fic­ate by post.

If your small business employs people, you will also need to apply for an employer PAYE reference number. This must be done before the first payday for your employees. Limited companies with less than nine directors may apply online here. Other small business entities may apply online here. Once you have completed the ap­plic­a­tion process, you will receive an employer reference number from HMRC. The first three numbers of the code refer to the tax office that is re­spons­ible for your PAYE. The rest of the number is the tax office’s employer reference.

Re­gis­ter­ing your small business with Companies House costs £12 to register online, £40 to register by post and £100 for same-day re­gis­tra­tion. There is no cost for VAT re­gis­tra­tion, cor­por­a­tion tax re­gis­tra­tion or PAYE re­gis­tra­tion with HMRC.

When it comes to the in­form­a­tion required for filing your small business, there are no real surprises. Here is a list of the details you’ll need when re­gis­ter­ing your small business:

• Name of the business
• Location of the business
• Names of the directors
• Ownership/man­age­ment structure
• In­form­a­tion on any re­gistered agents
• For cor­por­a­tions: the quantity and value of shares

Just like with the fees and required in­form­a­tion, the documents needed to register a small business depend on what sort of business you are running. Below is a table detailing some of the documents needed for re­gis­ter­ing a small business.

Please note the legal dis­claim­er relating to this article.