So you want to start a UK company

The UK is one of the best places in the world to register your company and do business. The UK is highly digitised, the process of doing business is straightforward and, most importantly, it's an English-speaking country!

This article is aimed at solopreneurs who want to focus on building their products, not having to deal with bureaucratic bullshit. I'll try to cover how to start a business and how to run it to some extent.

BUT, I'm NOT a lawyer, nor an accountant, just a person who builds his own products and happens to do business here in the UK. So take it with a pinch of salt and make sure you check the GOV.UK guides yourself.

Step 1: Registering a company

The UK is probably one of the easiest places IN THE WORLD to start a company.

Take Germany as an example - to start a company there you have to fill in a paper form, go to your local Inland Revenue office, stamp their form, sign it with a notary, take it back to the Inland Revenue office and then, hopefully, you will be registered. The whole process takes about 2 months if everything goes according to plan.

In the UK, you can now register your company on the same day (https://www.gov.uk/limited-company-formation/register-your-company). Online. And you don't even have to live here.

Choosing the right company type

If you are a person (or team of people) who just want to start doing some SaaS or similar, in 99% of cases you will want to register a limited company.

With this type of company you will be able to open a Stripe account, a bank account. You'll be able to divide shares between your co-founders (or allocate 100% to yourself if you're the only founder).

And this type of company is legally separate from you and your co-founders. It has separate finances and therefore you as a director will have limited liability for its actions (unless you don't pay tax, commit fraud or break the law - then you'll be personally liable too).

Then there are

• Public Limited Companies (PLC) - these companies can sell shares to the public on a stock exchange. A PLC must have a minimum capital of £50,000 to operate.
• Private company limited by guarantee - limits it's directors' liability to a certain amount that they will pay out if things go wrong. These companies have no share capital (and no shareholders) and are usually used by non-profit organisations.
• Private unlimited company - similar in structure to a limited company, but the difference is that you don't have to file accounts with Companies House. However, if the company goes into liquidation, as a director you'll be personally liable for an unlimited amount of money.

You can read more about the types of companies here.

Registering a company

Now that you've decided to use a limited company as your legal entity, you need to register it.

To register a company you need an address in the UK. You can either use your home address (but remember that this will be public), your accountant's address (they usually charge around £100 a year) or use the services of companies like Registered Address who provide virtual office space. I used the latter option.

If you're using your own (or your accountant's) address, you can register your company directly on the GOV.UK website for £50. If you use a service like Registered Address, they'll usually act as your agent and you'll register your company through them. Either way, your company should be live in about 24 hours.

At this point you can also add more directors to your company and issue shares. For my company I chose 100 shares at £1 each. You can issue as many shares at any price as you like, but do not issue too many shares at a high price as you will have to pay your company for them later.

Step 2: Opening a bank account

Now that you have set up your company, you can open a bank account for it.

In my opinion, the best and easiest business accounts in the UK are Monzo and Starling (but you have to be based in the UK to open them).

Wise is also good. It's easy to use, quite modern and can be set up without any headaches.

In any case, you can open as many bank accounts for your company as you like and change them later.

Step 3: Key company managing steps

To run your business, you will need to file returns with the government from time to time, pay taxes, etc. An accountant can usually do this for you, but it's not too difficult to do it yourself if you know what you're doing.

To access filing services, you will need to register with HMRC for Government Gateway. You will be able to use this credential to log in later.

When you set up Government Gateway you will need to:

1. Register with HMRC for corporation tax
2. Set up a filing account at Companies House
3. Set up PAYE - this is how you'll pay yourself. Your company becomes an employer with one employee (you) OR
4. Register for Self Assessment - you may not need this, but if you're paying yourself through dividends, you probably do.
5. Register for VAT - you will need this if your company will make over £90,000 in the next 12 months.
6. Activate all of the above. Activation is separate from registration. Activation codes will be sent by post to your company's registered address. Better to do it early to avoid headaches later.

Information Commissioner's Office

Some time after you register your company, you will get a message telling you that you have to pay a fee to the UK's data protection watchdog.

They'll ask you to pay £40 a year if you store customer data (if you're a SaaS, 99% of you do). It's a sort of government racket as you get no real benefit from it, but you have to swallow the pill and pay up or you'll be fined.

Pensions

When you register for PAYE, you will also receive a letter from the Pensions Regulator telling you that you must enrol your employees into a pension scheme.

They'll give you a deadline to either set up a pension scheme or let them know that you're not legally an employer.

You're not an employer if you don't employ people (well, apart from yourself - a director), so just let them know that. If you do employ people, this is something you should discuss with your accountant.

Other important things

Paying yourself a salary

If you want to pay yourself a salary from your company, you have to do it properly. You cannot just transfer the money from the company bank account to yourself.

I personally use FreeAgent software to manage my payroll. As well as payroll, it will help you work out how much tax you need to pay, or do the filing and so on.

Make sure you prepare a payslip and report it to HMRC before you pay yourself, so you don't have any problems later.

On the HMRC website (where you log in with your Government Gateway), make sure you pay your PAYE tax or set up a direct debit so that HMRC can take the money themselves. Failure to do so will result in interest and possible fines.

Company filings

Once a year you must file a confirmation statement with Companies House. You can do this online using the account you set up (and hopefully already activated!). It takes a few minutes to fill in a simple form to confirm that you're not doing anything illegal, that you're still a director, that the company has issued X number of shares, etc. Nothing major.

As well as the affidavit, you also have to file the company's accounts with CH and HMRC. You have to file them at the end of your financial year and this report includes things like a balance sheet of everything your company owns and a profit and loss account showing your company's turnover. FreeAgent can help you with this.

You will also need to file and pay corporation tax at the end of your accounting year. Again, FreeAgent can help.

That's it 🙂. Now your mission is to start bringing that sweet MRR to your company!