How to set up and run a small business

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Limited company or sole trader?

Key Guides

Becoming a sole trader is the simplest way to get your new business off the ground.

Once you have told HMRC of your intention to become self employed, you can start trading immediately, subject to any industry-specific licences you might need.

As a sole trader, you will have complete control over your business and finances. You can adapt quickly to any changes in your business, without having to concern yourself with a great deal of bureaucracy.
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Although the sole trader route, which is commonly referred to as being self employed, is the most popular way of running a business in the UK, there are significant advantages of operating as a limited company.
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A dormant company is one that doesn’t trade and has no accounting transactions.

There are two main situations where owning a dormant limited company can be useful for start-ups and small business owners;
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One of the main benefits of becoming self employed is the ease with which you can start up and run your new business.

You can even become a sole trader (another term for self-employed) whilst working as an employee for someone else, so you can test the water and see if you’re suited to working for yourself.

Here are 5 things you need to do when you decide to go self employed:
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If you form a new limited company, you should be aware of the legal requirements you have to meet as a limited company director, on behalf of the company.
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If you want to set up a company, you can form it yourself via Companies House, use a formations agent, or an accountant will typically be more than happy to take care of the incorporation process on your behalf.
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If two or more people wish to go into business together, and don’t wish to set up a limited company, a partnership offers a simple way to get started; it is similar in many ways to going the sole trader route for an individual.
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What is a sole trader?

January 29, 2013

There are around 2.8 million sole traders in the UK. It is the most popular, and simplest, way of starting up in business.

In this guide, we take a look at the key things you need to know about becoming a sole trader, and whether it is the right business structure for you.
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Each year, all UK registered companies are required by law to complete and submit an Annual Return to Companies House. This form provides a snapshot of relevant company information at the time of submission.
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As long as you comply with the relevant rules you can call your company whatever you like, provided that no one else is using the name already. However there are some restrictions that you need to comply with.
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Over 1.3 million businesses currently operate as private limited companies in the UK, compared to nearly 3 million sole traders, and around 450,000 partnerships.
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Incorporation is the process of creating a company structure – a new legal entity which is distinct from the individuals or shareholders who formed it.
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Board minutes are a vital part of a successful business. They ensure directors are upholding their duties and act as a reminder for decisions made during board meetings.

As well as this, they can be important to provide information to directors who were unable to attend the meeting, new directors and, if need be, aid in cases of litigation.
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A limited company can have many classes of shares. These can be ordinary shares, preference shares and redeemable shares. The articles of association usually set out the rights of these shares while allowing the directors to issue shares with such rights and restrictions as determined by ordinary resolution.
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To form a limited company in the UK, you must complete Form IN01. In this article, we look at the information Form IN01 captures, and how this information is used by Companies House.
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When you set up a limited company, you need to provide Companies House with a registered office address. This must be a real physical address, where paperwork can be delivered, and not a PO box.
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One of the first, and most important decisions you make when you set up a new business is to decide what type of legal structure you should work under.
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An LLP shares many of the features of a partnership, but also offers its members limited liability from any financial problems the business may face in the future.
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Many businesses start out as owner managed operations with one person owning all of the shares as well as being the managing director. However, as businesses grow, they often want to bring in other people as shareholders; maybe in return for an investment or possibly to a manager that they want to incentivise.
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The Memorandum of Association is one of three documents needed to incorporate a new limited company, along with Form IN01 and the Articles of Association.
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