Forming a business in the UK
We’ve discussed how to setup a new company in the United States in several of our previous posts but felt compelled to touch on procedures for setting up a new company in the UK as well. It’s important for any entrepreneur considering setting up in the UK to appreciate the differences from the US. While business people in the US are accustomed to dealing with the laws and regulations in 50 different states, the UK businesses are subject to a single set of rules under the Companies Act 2006. You must also take care to adhere to the directives of the European Union too.
All new UK businesses need to register with Companies House, a register of companies that operates under the remit of the Department for Business, Innovation and Skills . While US companies are incorporated at the state level, in the UK they are incorporated at national level. Businesses based in England and Wales must register to the office in Cardiff, while those in Northern Ireland use the Belfast address and those in Scotland register with the Edinburgh office.
When registering, you will need to choose a structure for your business. The four most common are public limited companies (PLCs), sole proprietorship, partnerships and limited liability companies. There are also other structures available such as co-operatives and franchises. Most of these operate in the UK in the same way as they do in the USA. However, it’s important to note that PLCs are subject to a higher degree of scrutiny and are more complex to set up and administrate than other types of company. Just like in the USA, where there are services such as BizFilings and LegalZoom to guide entrepreneurs through the formation process, the UK has services like The Formations Company that do the same thing – these may be particularly useful if you are not familiar with UK company law.
You will need to complete an annual return every year and submit it to Companies House – these can be filed online for a charge of £15, or in paper form for £30. Your accountant will also need to send your annual accounts, also known as a financial statement, to HM Revenue & Customs (HMRC). Again, just like in the USA, tax authorities in the UK are very stringent – it’s vital to ensure everything’s in order or you may receive unwelcome attention from HMRC.
There are other regulatory considerations to make – for instance, if your company’s product is taxable by Value Added Tax (VAT), you may also need to register additional forms with HMRC, and you will need to apply Pay As You Earn tax and national insurance to your employees’ salaries. Once you have taken care of these, you’ll find running a business in the UK very similar to your experiences in the USA . As always consulting a native experienced attorney is recommended, we wish you the best of luck in you UK ventures!