How to register a business in the UK: a guide for entrepreneurs

by Maxine Bremner

Published • 14/12/2023 | Updated • 14/12/2023

Starting a business

How to register a business in the UK: a guide for entrepreneurs

by Maxine Bremner

Published • 15/12/2023 | Updated • 15/12/2023

Starting a business

When you’re starting a business, there are a number of different forms it can take. However, being registered is one of the most crucial legal obligations of a business operating in the UK.

Registering a business is an essential part of any business readiness checklist, but it can be a challenging process depending on the scope of your business and the legal structure it requires. However, with a methodical approach, you’ll be able to tackle each stage with a little more confidence and efficiency.

Remember: This information is for educational purposes only, and every unique business will have different requirements to address. Be sure to consult with a legal expert to make sure you register your business in a way that’s appropriate for your needs.

Here you’ll find out why it’s important to register your business, when you should register your business, the nuances between registering as different business types, and how you can register your business legally.

Do you need to register your business?

As a first-time entrepreneur, your business likely isn’t your main source of income from day one.

If you’re earning from a side hustle in your spare time, figuring out how to start a business from home, or beginning to branch out into face-to-face selling, you may not be sure whether this counts as a business that needs to be registered.

The simple answer is that you’ll need to register when your business activities earn £1,000 or more per tax year. This threshold applies to any income drawn from your business, and not profit. This means that if your business activities earn £1,000, whether you make a profit, break even or even make a loss, you’ll still be legally obligated to register your business with HMRC.

In the eyes of the government, business activities qualify as any of the following:

  • Selling goods or services

  • Taking part in any other business activity

  • Taking income

  • Earning interest from assets

To summarise, if you engage in any of these activities, and they generate an income of at least £1,000 within the tax year, you’ll be legally obligated to register your business. This is true even if your head office is just your laptop and your sofa.

Why register a business

The most important reason to register your business is simple: it’s illegal not to do so. Businesses that fail to register when required to can be handed penalties of up to £100,000 plus 10% of their gross annual profit.

The legal implications of not registering your business can become even more serious if you’re planning to sell products with tighter age restrictions or health and safety regulations. For example, if you want to operate as a street vendor, or start selling alcohol, your business will need to be registered to apply for the proper licensing.

On the plus side, there are a range of benefits that can come with registering your business with HMRC, varying from one business type to another. 

For example, with any form of registered business, you’ll be permitted to claim business expenses and subtract them from your taxable income. Setting up a limited company will also remove some financial liability from you and the other people running the company, meaning there’s less risk involved when taking out large loans for business purposes.

Which business should I register as?

The first step in how to register a business is finding the business structure that’s right for you. There are several different business types to choose when registering your business. This will depend on the structure and main features of your business. 

In order to proceed with the business registration, it’s important to understand the different business types, and decide which one is the best match for your plans as an entrepreneur.

The 4 main business structures in the UK include:

  1. Sole trader

  2. Partnership

  3. Limited company

  4. Limited liability partnership (LLP)

Here’s a brief overview of the main business structures in the UK, with the pros and cons associated with each one.

Sole trader

Sole traders are businesses owned by a single person who works on a self-employed basis. 

More often than not they’re freelance contractors who run their business from home - think copywriters or graphic designers. However, they can also manage more traditional brick and mortar businesses, such as small cafes and food vendors.

When you register as a sole trader, you’ll need to inform HMRC of your status as a self-employed person, and file self assessment tax returns

Once registered, it’s your responsibility to make sure you’re paying the right level of sole trader tax and making the National Insurance contributions required of you.

If you’re looking to start a business with no money or limited capital but are thinking of trying to develop it, you may not have to register your business just yet. 

Sole traders are entitled to a tax-free allowance of £1,000 per year. Any profit above this threshold is taxable, assuming that you’ve already used your personal tax-free allowance.

Registering as a sole trader is often the best way to register a business when you’re just starting out as an entrepreneur. It’s a very simple structure to manage, and it allows you to keep all profits after tax. 

There’s no limit on the amount of profit you can make as a sole trader. However, if the profits from your sole trader business push you into a higher tax bracket, you may find yourself in a situation where a sole tradership isn’t the most efficient way to run your business.

Here’s a quick breakdown of the tax band thresholds for the 2023 and 2024 financial year, and the possible tax rates you might be subject to as a sole trader:

  • Personal allowance (the income you can earn without being taxed): £0 – £12,570

  • Basic rate income tax (20% tax on the portion of business profits within this bracket): £12,571 – £50,270

  • Higher rate income tax (40% tax on the portion of business profits within this bracket): £50,271 – £125,140

  • Additional rate income tax (45% tax on the portion of business profits above this threshold): £125,140 and upwards.

One of the biggest drawbacks of registering as a sole trader is that it makes you inseparable from your business in the eyes of the law. 

As a sole trader, you can be held personally liable for business losses, debts, or damage caused by negligence. This means that if you run into financial trouble, you’ll have to use your own personal funds to rectify the situation and keep the business afloat.

Sole trader pros and cons

Pros

Cons

Registering as a sole trader means managing a simple business structure that’s easy to administer for you as a single person.

It can become an inefficient way to operate if your business grows enough to place you in a higher tax band.

Low admin requirements compared to other business structures. Your only legal obligation will be to submit a self assessment tax return every year.

Increased personal risk. As you and the business are 1 entity, you’ll be personally liable for any debts and losses incurred by the business.

Being a sole trader means you’ll have full control over the running of the business. With no obligation to consult other founders or stakeholders, there’s no risk of internal conflicts causing delays and inefficiencies.

You’ll keep all the business’ profits after tax.

There are no registration fees payable to the government.

Partnership

When you register your business as a partnership, the administrative requirements will be pretty similar to those of a sole trader. 

The key difference between the 2 structures is that with a partnership, you’ll need to designate at least 1 partner.

This is a common business formation for businesses where 2 or more experienced professionals pool their resources and knowledge to form a business, such as legal practices and construction contractors.

Though it’s not a legal requirement, you should have a partnership agreement in place when registering a partnership. This is a document that formalises details like the agreed share in profits, liabilities, losses, and the degree of ownership you and your partners will have at the point of incorporation. 

Your partnership agreement should also cover exit directions to explain how a partner can leave the business should they wish to. 

There’s no upper limit on the number of partners who can be a part of this business structure. However, if you bring too many partners on board, you could find yourself in a situation that’s better suited to another company structure, such as a limited company.

As with setting up as a sole trader, the listed partners in your partnership will have personal liability for any business debts and losses, and are viewed as being part of the same entity as the business itself.

Aside from completing a partnership agreement, each partner in the business must register for self assessment and submit their own tax returns at the end of the year.

Registering your business as a partnership requires the people forming the partnership to agree on a name and designate a ‘nominated partner’. 

The nominated partner is the person who will be responsible for completing all mandatory admin tasks. This means record keeping and submitting partnership tax returns.

Partnership pros and cons

Pros

Cons

Easy to register and administrate. The application process is similar to that of a sole trader and each partner files their taxes through self assessment.

Increased personal liability for all partners. Any designated partner in the business can be held responsible for debts and losses.

Shared power and responsibilities mean no one person is solely responsible for the day to day running of the business.

Potential for conflict in decision making. Because the partners have certain guaranteed powers in top-level decision making, it can lead to situations where it’s hard to reach an agreement between all parties.

A collaborative business formation that allows you to draw on the skills and experience from several leaders.

Limited access to capital. Though having several partners onboard will mean they can contribute more of their personal capital to your startup business costs, it can be difficult to secure financing as a partnership compared to other business structures like a limited company. 

Limited company

If your profits have grown beyond the administrative confines of a sole trader or a partnership, the limited company structure is one of the most popular for you to consider. 

There’s no particular industry characterised by a high volume of limited companies, though all limited companies tend to be large enough to have secured funding from an outside investor. 

Think of a handful of brands that you regularly buy from, and odds are most of them will be limited companies.

In a limited company structure, one or more directors manages the day-to-day running of the company. They’re supported by shareholders, who hold equity (investments) in the business.

Though it’s not as common among small start-ups, you can still register your business as a limited company even if you’re the only person working for it. This would simply mean appointing yourself as the director of the company on any official paperwork.

Many small business owners are attracted to the idea of registering as a limited company as it keeps the business as a separate legal entity from you as an individual, reducing your liability for any debts and losses. 

Registering as a limited company also lends your business a higher degree of prestige than other business formations, which can be particularly important for winning large contracts as a B2B business such as in the construction niche.

Because a limited company is a separate legal entity from its owner, your business must have its own bank account used to receive payments and make business purchases. This is true even if you’re still in the early phases and your business only exists as a simple online store or other site. Your business will also be subject to corporation tax, which ranges from 19-25% depending on how much profit the business reports.

As a limited company’s director, you’ll be responsible for various mandatory administrative tasks, such as submitting the company’s annual return and maintaining and filing the company’s accounts for tax purposes.

Limited company pros and cons

Pros

Cons

Minimised personal liability. As a limited company is a separate legal entity from yourself as the owner, if your business runs into financial trouble, your personal assets won’t be in danger. This is a key separation from sole traders and partnerships, where the listed owners are treated as the same legal entity as the business itself.

A more complex registration process.

Trading as a limited company creates a more professional image for your business. This can make a big difference to your prospects of accessing finance options, and opening new premises.

A lack of privacy, with some personal and corporate information being made publicly available on Companies House.

Limited companies are more tax efficient than alternative models. Your business will pay 19-25% in corporation tax on their profits compared to the 20-45% income tax that sole traders pay. This allows greater flexibility for you to reinvest in your business and plan ahead for tax deadlines.

Time-consuming administrative requirements. Limited companies are legally required to maintain highly detailed financial records for inspection by HMRC, take the minutes of meetings, and keep records of decisions made by the directors and shareholders.

Registering as a limited company has the potential for higher personal compensation because you have the option to take remuneration as a combination of a salary and dividends.

Limited liability partnership (LLP)

Limited liability partnerships (LLPs) have a similar structure to regular partnerships. The key difference here is a separation between the business and its workers, which provides you with liability protection.

LLPs tend to be heavily represented in professional service sectors like corporate law firms and high-level financial consultancies.

Similar to a limited company, the partners’ liability in an LLP is limited according to what you’ve invested in the business. That means if you’re looking to expand as a merchant, you won’t be held accountable for the negligence of other partners.

An LLP requires at least 2 partners at its incorporation. Note that only 1 of these partners needs to be an actual person, and some LLPs are formed between a person and a limited company.

Limited liability partnerships are required to be registered on Companies House, and must be registered for corporation tax. You’ll also have to update HMRC in the event of major structural changes such as a partner leaving your company.

Similar to a normal partnership, it’s important for an LLP to formally state the responsibilities of collaborators in a partnership agreement, while also outlining each partner’s share of profits. Each partner must also register for self assessment and submit their own tax returns at the end of a financial year.

Limited liability partnership pros and cons

Pros

Cons

LLPs offer liability protection, as your company and the people running it are treated as separate legal entities. As a member, you’re only liable for your investment and your personal assets will not be at risk.

An LLP can be tenuous if it’s made up of only yourself and another partner. If your partner decides to withdraw from the partnership, your business will automatically be dissolved and removed from the Companies House register.

LLPs offer greater flexibility for yourself and other members to decide how the business will be managed and how profits will be divided. This ensures the business can cater to the needs of everyone involved, compared to the more rigid structure of a limited company.

Being a member of an LLP means that you will sacrifice some degree of privacy. As an incorporated business, you’ll have to submit accounts to Companies House, meaning that details such as the earnings of individual members will be accessible to the public.

Opening an LLP can make the business more attractive to potential clients. For example if you’re running a construction firm and competing for large-scale house renovation contracts, LLPs carry a level of prestige in the eyes of potential clients that you won’t have as a sole trader or normal partnership.

As a Limited liability partnership, you won’t enjoy the same tax breaks as other business formations like limited companies. Furthermore, you won’t be able to hold over profits from 1 financial year to another.

How to register a business

Registering each type of legal business structure will have different requirements. 

Here are our guides on how you can register the 4 main legal business entities in the UK.

How to register as a sole trader

If you’re considering registering as a sole trader, it’s a quick and easy process when compared to registering under other business types. 

You don’t need to gather or confirm reams of complex information, and for most people the whole process can be done online. However, it’s still important to approach the task with diligence and ensure that nothing gets left until the last minute.

When to register as a sole trader

Sole trader tends to be the first business structure used by fledgling entrepreneurs who are starting  a side hustle. Because of this, many don’t know when their business qualifies as needing registration.

If you earned £1,000 or more through your business activities in the previous financial year (6th April last year to - 5th of April this year), you’ll need to register as a sole trader by the deadline of the 5th of October. Failing to do so could result in a fine.

Step 1: Submitting a Trading Name (Optional)

It’s not necessary to have a trading name when you’re registering as a sole trader. Because a sole trader business is owned and operated by a single person, many sole traders simply register their business using their own name. 

However, if you do decide to trade under a name other than your own, there are going to be certain rules you’ll need to be aware of.

A trading name for your sole tradership must not:

  • Include any terms suggesting that it’s a different form of business, such as ‘ltd’, ‘limited’, ‘public limited company’, etc.

  • Contain any offensive language.

  • Be the same as a trademark currently on the government’s trademark database

  • Contain sensitive words or expressions. These are a list of prohibited terms that suggest association with government bodies, local councils, and other regulated organisations.

Step 2: Create a Government Gateway Account

The government maintains its Government Gateway online portal used for a number of different functions, including registering businesses and processing tax returns. 

You’ll need to register for an account using: 

  • A full name.

  • mailing address.

  • Password.

From there, a unique code will be sent to your email address to act as your Government Gateway ID.

Step 3: Register via Government Gateway

Now that you have your Government Gateway account, you’ll be ready to register as a sole trader. 

Log in using your government gateway information, then navigate to the page for self assessment registration and follow the prompts.

Here, the portal will ask you for several pieces of information:

  • The date your business started trading.

  • The kind of business you engage in.

  • Your home address, or business address if this is different.

  • Your National Insurance number.

Once you’ve submitted this information, HMRC will send you a letter containing your Unique Taxpayer Reference (UTR). This is an additional identifying code unique to you, which will be used to validate all future tax payments.

A note on sole trader and self employed

Although they’re often used interchangeably, the terms sole trader and self employed don’t mean the same thing. 

Self employed is a tax status, and is therefore separate to how you have structured your business. 

You can register your business under various other business structures other than a sole tradership, such as a partnership or limited company, and still be ‘self employed’ when it comes to managing your taxes.

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How to register a partnership

Registering a partnership can be fairly similar to the process of registering as a sole trader. However, there are several nuances in the way that you as a partner are viewed for tax purposes which are important to be aware of.

Step 1: Designate your partner(s)

You need at least 1 partner to successfully register a partnership. 

The key piece of legislation around partnerships (The Partnership Act of 1890) specifies that a partnership can be made up of up to 20 partners, with exceptions for certain types of businesses.

Though most partnerships are made between 2 or more people, it’s important to note that a partner doesn’t necessarily have to be a person. It’s possible for entities, for example a limited company, to be classed as a ‘legal person’ for the purpose of forming a partnership.

If you choose to form a partnership between you and another person, it’s important not to rush this decision and discuss your plans thoroughly with any potential partners. 

Ideally, your partner(s) should be trustworthy and experienced in the industry you’re going to enter. They should have a demonstrable value they can bring to the business’ leadership, and be able to contribute a similar amount of time as you to the running of the business. 

Aside from this, it’s also a good idea to look for professionals who have skill sets that complement yours, rather than ones that are too similar. This will allow each partner to bring their own unique value to the business and help it stand up to a diverse set of challenges.

Step 2: Draw up a partnership agreement

Before you tackle the registration process, you need to draw up an agreement between you and your partner or partners that reflects the needs of your business.

With this agreement in place, you’ll be able to circumvent the risk of disagreements and conflict after your partnership becomes a legally-recognised entity.

The terms of a partnership can be amended to adapt to needs as they arise. Having said that, there are a few core elements that all partnerships should cover:

Percentage of ownership

The percentage of ownership should reflect the commitment that each partner has made to the business, and what they’re entitled to in the way of profits. 

Division of profit and loss

Each partner’s entitlement to the profits of the business and obligations to its losses. This is often determined by the percentage of ownership.

Length of partnership

A section that specifies how long the partnership will last, or if it’s going to be formed for an unspecified amount of time.

Decision making and conflict resolution

A clearly detailed decision-making process and protocol for resolving disputes can help mitigate any disagreements before they arise in the partnership.

Withdrawal

There should also be a specified procedure regarding how the business will handle someone withdrawing from the partnership.

Step 3: Register for tax

In a partnership, there must be 1 nominated partner who is responsible for submitting the partnership’s tax returns. 

The nominated partner and all other partners will have to submit their own self assessment tax returns, as they’re now classified as self-employed. HMRC maintains an online portal where you can register your partnership.

When using this resource, there are several pieces of information you’ll need to provide:

  • The partnership’s address and telephone number, both of which can be your residential address and private number.

  • The trading name of the partnership.

  • The trading address of the partnership, if this is different from the aforementioned address.

  • The nature of the business.

  • The date when you started trading or when you’re planning to start trading.

  • The name and address of the nominated partner.

Step 4 (optional): Register for Value Added Tax (VAT)

It’s important to note that although your partnership may already qualify for Value Added Tax (VAT), you won’t automatically be registered for it once you set-up your partnership for submitting self assessment and partnership tax returns.

If your business’ annual turnover reaches the VAT registration threshold of £85,000, or you expect it to reach this in its first year of operations, then it’s a good idea to register for VAT around the same time that you’re setting up your other tax obligations.

Changing the details of a partnership registration

Over time, the way your partnership is structured and run will inevitably need to change. When these changes take place, there are certain obligations you’ll need to fulfil when it comes to your registration with HMRC.

If a partner joins or withdraws

When you decide to bring in a new partner, they’ll need to register for self assessment like the other designated partners. If they withdraw from the partnership, they’ll need to submit a self assessment tax return for the financial year in which they left the business. 

These changes will also need to be reported in both yours and your partner’s self assessment tax returns, as well as the business’ annual tax return.

If a partner is made bankrupt

The changes to registration when your partner is made bankrupt depend on the number of partners in the business. 

If there are 2 partners, then the partnership will automatically be dissolved, and the remaining partner will have to re-register as a sole trader

If there are more than 2, then the respective members of the partnership will have to agree on whether or not to dissolve the partnership.

If you wish to change the nominated partner

The nominated partner can change who holds this title at any time by making the change in the partnership tax return or by notifying HMRC of the change in writing.

If you wish to dissolve the partnership

When you decide to dissolve the partnership, the nominated partner must report this in the partnership tax return for the final financial year of trading.

How to register a limited company

Setting up a limited company in the UK is considerably more labour-intensive than setting up other, simpler forms of business. However, for many business plans, it’s often the most logical and tax-efficient way for a business to register itself with the government.

When a business is registered as a limited company, it exists as an independent legal entity, separate from the people who own and manage it. 

This means that if and when your company incurs debt and financial issues, there’ll be legal protections which will limit the personal liability of the merchants.

Step 1: Name your company

Registering a limited company requires you to give it a name which will be recorded for all tax and registration purposes. Note that you can trade under a separate name that will appear on your advertising, product packaging, gift cards, etc. However, your official company name will still need to abide by a strict set of rules:

  • The name must end with ‘Limited’ or ‘Ltd’ (or the Welsh words ‘Cyfyngedig’ or ‘Cyf’).

  • Your business name must be unique, and not too similar to one that’s already registered on Companies House. Please note that your business name can only contain letters and numbers, and you won’t be able to use special characters and punctuation marks to distinguish it from a name that’s already taken.

  • Your name must not contain any offensive words or language.

  • Your name must not use designated ‘sensitive’ words which suggest association with a government body or certain other organisations.

Step 2: Register with Companies House

Like other business structures, HMRC provides a web portal you can use to carry out the whole registration process online.

As part of the standard costs needed to set-up a new business, registering with Companies House will cost you £12 which is payable either by debit or credit card. After completing the process, your business will usually be registered on Companies House within 24 hours.

There are several details HMRC will need about you and your business to successfully register your limited company on Companies House. 

Here are some of the key pieces of information to gather or verify when you set out to register your limited company:

Personal details about the person making the registration

When registering a limited company, you’ll need to provide certain pieces of personal information such as your full name and address, alongside details such as your place of birth and National Insurance number.

The nature of your business (as a relevant SIC code)

The UK government maintains a list of Standard Industry Classification (SIC) codes, which are unique 5-digit numbers designating the different industries and business activities that a business can engage in. 

Your business must select at least 1 SIC code as part of its registration, but can use up to 4 if necessary.

The company’s registered office address

You’ll need to provide a full UK address for your business when registering as a limited company. 

This doesn’t necessarily have to be a place where you carry out your core business operations. However, it does have to be somewhere that can be easily accessed, as this is the address where HMRC will be sending all their mail correspondence.

The details of the company director(s)

A limited company’s directors are the people at the top of the management structure, and are responsible for making the most important executive decisions for the business. 

They’ll also be held responsible for legal compliance duties, such as submitting tax returns or ensuring that relevant licensing is up-to-date. When applying to register your limited company, you’ll need to provide the names and addresses of all the appointed directors.

Please note: Like the partners legally listed under a partnership, not every director needs to be an actual person. Although at least 1 director you designate must be a ‘natural person’, rather than an organisation or business entity, additional partners can be a range of legal entities, including sole traders, partnerships, or even another limited company.

A list of shareholders

The designation of shareholder carries a slightly different implication to directors. Though your company’s directors are often shareholders themselves, not all directors are shareholders, and the 2 titles should always be thought of separately.

While a director is someone who’s responsible for the day to day running of the company, a shareholder is someone who has part ownership (a share) in the business. 

Though shareholders will have certain rights when it comes to voting on decisions made by the company’s leadership, they won’t have the same kind of hands-on, granular influence as the directors.

Company documentation

Along with designating your list of directors and shareholders, HMRC will need to see certain documents which outline how your company is going to be structured and managed.

The 2 key documents you’ll need to prepare are:

  1. A Memorandum of Association: This is a contract made between the business’ shareholders which states their agreement to form a company. This will need to specify the date when the business was incorporated, the official name of the business, and the print names and signatures of all the shareholders stating their agreement to be a part of the company formation.

  2. Articles of Association: The Articles of Association are a set of internal policies which specify the powers of a director, and what each shareholder is entitled to. It’s worth noting here that Companies House supplies its own ‘model articles’ of association, which are templates that can be used as-is or easily adapted for the needs of most limited companies.

Step 3: Finalise your registration

Once you’ve submitted this information through the right channels, your corporation will be registered. 

However, there are still a few steps you need to take in order to properly finalise your status as a limited company and ensure legal compliance as your business activity begins to ramp up.

Here are some of the additional steps in how to register a business you should consider adding to your to-do list when registering your limited company:

Add your Company Registration Number (CRN)

Once you’ve registered your business online, Companies House will send you a Certificate of Incorporation, which will officially confirm the formation of your company. 

This certificate will contain your Company Registration Number (CRN), a unique sequence of numbers and letters which Companies House will use to keep its records of your company and verify its legal existence. 

Once incorporated, you’ll need to display this CRN on your website, your invoices, your print letterheads, and anywhere else where people can expect to find basic information about your business.

Register for (Pay As You Earn) PAYE

As a merchant, for you to earn a salary from the activities of your limited company, or to pay a salary to anyone else, you must register for PAYE

Your business may still be in its very early stages, but the qualifying threshold for registering for PAYE is fairly low and the rules are stringent. Even if you’re running a food truck mostly on your own and employ a friend or family member for the odd shift on the weekends, you may be operating above the PAYE threshold and subject to the relevant rules.

If any of your employees are paid £123 or more per week, receive any kind of benefits or expenses, receive a pension, or have another job, then you’ll need to register for PAYE.

Align your bookkeeping with HMRC requirements

As a limited company, aligning your bookkeeping with HMRC regulations is one of the many legal requirements for starting a small business.

These regulations stipulate that you must keep accurate records of:

  • Any money received by the business from any source.

  • Any money spent using company accounts.

  • Details of any assets owned by the company.

  • Debts that the company owes or is owed.

  • All goods bought and sold.

  • In the case of non-retail companies, records of all the people. 

  • The total stock owned by the company at the end of the financial year.

  • Details of the stocktake you used to calculate this leftover stock figure.

As soon as your business begins trading, consult a financial expert or find a robust template to begin keeping thorough and detailed financial records. 

Doing so will not only keep you on the right side of the law, but make it much easier for you or your financial controllers to budget for and process your taxes at the end of each financial year.

Open a business bank account

The Companies Act 2006 requires limited companies to maintain a separate bank account, and regulates against directors or shareholders using their own personal bank accounts to receive business income or manage company finances.

This means that from the day that your business starts trading, it must have a separate bank account opened in the business’ name to be legally compliant.

Aside from keeping your business compliant with HMRC’s rules, opening a business bank account has a range of more practical benefits, such as:

  • Making it easy to keep accurate financial records.

  • Building a credit history for your business, which can be helpful for applying for loans or other financial support for future business development.

  • Keeping personal and business assets in separate accounts to ensure greater liability protection.

  • Improved credibility in the eyes of potential business partners, suppliers etc. who may be in a position to see whether or not you’re using a personal account.

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How to register a limited liability partnership

Registering your business as a limited liability partnership (LLP) allows for the same diversity of skills and flexibility as a normal partnership, while ensuring reduced personal responsibility for yourself and others involved in the running of the business.

Because of this distinction, registering a business as LLP has many of the same requirements as registering as a limited company. 

LLPs and limited companies

Before you get started with the registration process, it’s important to understand the distinctions between registering your business as a limited company and as an LLP.

You may already be aware that there are various similarities between a limited company and limited liability partnership. With either business structure, your business will need to be incorporated through Companies House. 

This means that both will provide some degree of liability protection for you. You’ll also have a legal obligation to report certain information and pay certain taxes every financial year

There are several differences between the 2 business types, mainly in terms of their organisational structure, the way they can share profits, and the kinds of tax regulations that apply to them.

Some of the key differences to think about when registering your business as an LLP include:

  • An LLP has to be formed by at least 2 people, whereas a limited company can be formed by just yourself.

  • A limited company’s shareholders’ liability is limited by their shares, whereas the liability of members in a limited partnership is agreed between you and the other members.

  • An LLP cannot sell shares or receive capital from its partners, whereas a limited company can.

  • An LLP’s structure can be changed more flexibly without the need for a formal vote between shareholders.

Step 1: Name your partnership

Like most business structures, the first thing you need to think about when setting up a limited liability partnership is its name.

The name must abide by the same basic rules that apply to the names of other business forms. This means that it can’t be too similar to a business name that’s already on the Companies House register, cannot contain words that might be considered offensive, and cannot contain any designated ‘sensitive’ words that suggest a connection with governments and local authorities.

Additionally, the name of your limited liability partnership must end in either ‘Limited Liability Partnership’ or ‘LLP’, or the Welsh equivalent, ‘partneriaeth atebolrwydd cyfyngedig’.

Many people who form an LLP opt to use their own names as the business name. This is a common convention in certain business niches like construction firms, plumbers, and other trades.

Regardless of whether you choose to use you and your partners’ names or come up with an original company name, remember that you and all your partners’ names must appear on official written correspondence from your company, such as letters and invoices.

Step 2: Designate your partnership’s members

A limited liability partnership must have at least 2 designated members (partners) at all times to exist. If, for example, 1 partner left a 2-person partnership, the remaining partner would be required to officially trade as a sole trader in the following financial year.

If you don’t specify at least 2 designated members of your partnership during incorporation, Companies House will automatically class all listed partners as designated members

Because designated members will have various responsibilities to fulfil in the eyes of HMRC, it’s important that you have a discussion with all relevant parties regarding who will be listed as designated members in your registration. 

Although designated members can be changed after the incorporation at anytime, beginning the process with an understanding of who carries this responsibility will help to avoid conflicts and confusion in the future.

Some of the duties that an LLP designated partner must fulfil include:

  • Registering the partnership for self assessment tax with HMRC.

  • Registering the LLP as an employer and setting it up for PAYE.

  • Maintain, prepare, and file annual accounting records.

  • Sign contracts and other official documents on behalf of the partnership.

  • Ensure that the business stays in line with data protection legislation.

  • Inform Companies House when any structural changes occur at the LLP.

Step 3: Draw up your LLP agreement

If you are considering introducing a new partnership to your business, many merchants and partners will opt to create a members’ agreement. 

This is a legal contract made between all the members of the partnership to formalise the relationship between yourselves, and specify certain rules about how your business is to be run.

Though having an LLP agreement in place isn’t a requirement, it’s strongly advised that you write one during the registration process, as it will help to minimise disputes between members of the partnership and ensure the smooth running of the company.

Some of the key areas that an LLP agreement will typically cover include:

  • The duties and rights of each member in the partnership.

  • The way in which each member’s investment in the business will be regulated.

  • Any rules about how company property is to be used.

  • How important decisions will be made.

  • How the profits will be shared and the losses managed.

An LLP agreement is a complex binding contract so we would recommend that you speak with a legal professional to help draft the agreement for you. Fortunately, many firms offer LLP agreement services handled by solicitors who are experienced in business law.

Once all members sign the LLP, and the partnership is incorporated through Companies House, the agreement becomes legally binding. 

The agreement doesn’t need to be registered with the government, and will remain confidential among the signatories.

Step 4: Register with Companies House

With completion of the previous steps, you’ll be ready to register your limited liability partnership with Companies House.

Unfortunately, Companies House doesn’t offer an online application process for registering an LLP as it does with other business structures. 

To simplify the process, many entrepreneurs outsource the registration process to company formation services.

If you want to carry out the registration yourself, you’ll need to fill in form LL IN01 and send it by post. The government charges £40 to handle this process.

Some of the key details you’ll need to fill in an LL IN01 include:

  • Basic company details, including your proposed company name, your registered office address, and the jurisdiction where your office is situated (England, Wales, Scotland, or Northern Ireland).

  • Details of at least 2 partnership members, including their full name, their country of residence, residential address, and date of birth. You’ll also need to provide a service address for designated members. 

Note that this information will be publicly available, so it’s generally a good idea to designate a commercial address rather than a private residence.

  • Details of shares and voting rights to accurately fill in the nature of control sections.

Follow-up steps after registering your LLP

After registering your LLP, there are a number of follow-up tasks you may have to address to ensure all-around compliance. 

To finalise your limited partnership’s registration you will need to:

  • Obtain UTRs for members: The members of your partnership will need to register for self-assessment and obtain UTRs for the LLP to fulfil its tax obligations.

  • Open a business bank account: Like an Ltd company, a limited liability partnership is considered a separate legal entity to the people who run it. Because of this, an LLP is required by law to have a bank account separate from the personal account of the merchant themselves.

  • Register for VAT: If your LLP's annual turnover exceeds the VAT threshold of £85,000, you must register for VAT. This will enable you to charge and reclaim VAT on eligible transactions.

  • Plan to file your confirmation statement: Every year, as an LLP you are required to file a confirmation statement with Companies House, formerly known as an annual return. This document is used to maintain records of any resolutions and meetings that have occurred, update changes in members’ details, and so on. It’s important to decide who in your business will be responsible for filing this declaration early to make sure it’s filed in a timely manner.

Getting registration right

Knowing how to register your business is an essential first step to starting your entrepreneurial journey in the best way possible.

Going in with a methodical approach to registration will help keep your business activities above board, avoid difficulties in the future and set you up to run a successful business for years to come.


Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.

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