When it comes to moving your UK business plan from paper to practice, choosing the right company structure and navigating through the legal and regulatory requirements can often leave many budding entrepreneurs scratching their heads.
Indeed, when it comes to forming a UK company, there are certainly a few different company structures available and understanding the benefits and disadvantages of each is key to ensuring its suitability to your future business plans.
For self-employed individuals, establishing a business as a Sole Trader can allow you to retain full control of your business whilst providing a quick and low cost option to set up.
Similarly, establishing a Partnership with another business owner can also offer a company structure that is easy to manage, operate as well as provide further opportunities to raise finance.
However, both structures do not protect against business failure, meaning business owners, both individual and partners, have full liability and responsibility for any financial losses or debt the business may owe.
In the case of Partnerships, disagreements between partners can also lead to problems with regards to how ownership and profits may be shared.
A third type of company structure, Limited Liability Partnerships (LLP), offers a degree of protection to partners wishing to set up a business together by limiting their liability to the amount they have invested already into the businesses or personally guaranteed through loan agreements.
While this certainly provides an extra level of security to business owners, the partners of LLPs are required to disclose their income and the business may be struck off if they do not start trading within one year from registration.
One of the most popular and practical ways of forming a UK company is to set up a Limited Liability Company. As with LLPs, limited companies offer business owners the security that their personal finances are separated from and protected in the event that the company should fail or owe debt.
Furthermore, as it can be set up by just one shareholder or director with no minimum capital requirements, it offers a relatively quick and simplistic means to get your business off the ground.
It is also worth noting that setting up a UK limited company is not only restricted to local UK residents and could also bring significant benefits for overseas residents and business entities alike.
For example, having a local presence not only presents easier access to UK and European markets, consumer confidence surveys have also shown that people have increased confidence in brands and companies which have a local presence and so is a key factor in improving local marketing and sales.
What’s more, the process for setting up a UK limited company for non-UK residents is highly accessible and can be done remotely without the need to visit the UK or sign any documents and there are no overly challenging requirements.
However, that’s not to say that setting up a UK limited company comes complete without complications. Non-UK residents should be aware of their own local country tax laws as well as any relevant double taxation agreements currently valid between the UK and their home country.
Dividend payments and capital gains, for example, may be deemed taxable in both the UK as well as the country of residence and so calculating the correct legal tax liabilities in both countries will most likely require the support of both UK and local accountants.
For Chinese, Pakistani and Indian nationals, for example, whose home country tax regimes differ significantly from the UK’s, circumnavigating international tax treaty rules and regulations can be particularly complicated and professional support may amount to a considerable cost.
There are also several logistical challenges which new businesses will need to consider. For instance, UK companies with an overseas director may struggle to open a local UK business bank account, which often requires UK residency as a prerequisite.
In addition, new businesses start ups and entrepreneurs will require a local UK address to which they can receive any official company mail. Fortunately, however, many virtual office service providers are now able to support in these areas.
For example, Icon Offices provide virtual office addresses for company registration purposes, mail scan and forwarding services as well as support in opening local bank accounts.
What’s more, with packages starting from just £0.99 per week, Icon Offices can provide a significantly cheaper option than hiring local administrative staff or renting a physical office space.
With this in mind, it may also be beneficial and cost effective to engage in a virtual office provider for many other aspects of your UK company formation.
For example, an application to form a UK limited company first requires registration with Companies house, paying a registration fee as well as number of forms and documents to be filed and submitted.
Companies should then receive a Certificate of Incorporation, Share Certificate, Memorandum & Articles of Association as well a Company Register with first entries usually within 24 to 48 hours of their application being approved.
Indeed, many virtual office service providers now offer full UK company formation packages and provide advice throughout the process.
For instance, for a flat fee of just £5.99 inc VAT (which includes the £13 registration fee), Icon Offices is able to ensure that your application is submitted accurately so that it increases its chances of being approved.
In addition, Icon Offices Limited also offer free support and assistance in opening a local UK bank account, including a cash back offer if your application is granted.
Forming a UK limited company also requires registering a UK company address as well as a correspondence address for directors and people within the company who hold significant control.
For those who do not yet have a company trading address, registering your company at a UK virtual office address can also act as a means of protecting your privacy, meaning your home address and personal details will not be visible to the public.
Icon Offices Ltd has a number of cost effective solutions for this.
For those unfamiliar with the UK business landscape, it is also important to understand and ensure all UK company regulatory requirements are met in full and on time.
Key regulatory requirements include filing an annual confirmation statement (annual return) with Companies House, submitting your company’s annual accounts to Companies House as well as paying the necessary due income and corporation taxes to HMRC.
To ensure legal compliance and prevent unnecessary fines for late or incorrect submissions, business owners are advised to employ a UK Chartered Accountant with knowledge and experience in this area.
If the costs of hiring an accountant, however, are too high for your new business start-ups, some agents or virtual office providers can offer flexible and cost-effective alternatives.
For example, from only £4.99 per week, Icon Offices provides a full A-Z accountancy service for businesses including annual tax filing as well as support and guidance in general business tax planning, VAT and company payroll services.
Whichever company structure you end up choosing for your business idea, it is worth bearing in mind the benefits and pitfalls of each. To keep costs low and get your business off the ground quickly, engaging with a virtual office provider can ensure your UK company formation is completed legally and correctly. Furthermore, with local expertise, guidance and a number of additional services available under one roof, it may just well be the perfect business partner you need to help you grow.