The United Kingdom is one of the world’s most lucrative economies, ranking at #6 in terms of spending power ($2.8 trillion) and a high per-capita income ($43,620). This makes it the perfect place to do business as a foreign entrepreneur. In this article, we’ll take a look at how to start a business in the United Kingdom and an alternative method that could make the process of starting a business even easier.
Steps to Starting a Business in the United Kingdom
There are a number of steps that you need to begin with before determining whether the business you’re setting up is viable:
#1 – Sorting out the legalities
The first step is that to check if your immigration status allows you to work as a freelancer in the UK. This includes whether you have the necessary visa and residence permits. For non-EU/ EFTA nationals, there are a number of Tier 1 work visas you can apply for:
- Entrepreneur visa UK: you must have £50,000 of investment funds with the intent to start a business in the United Kingdom
- Graduate entrepreneur visa UK: if you have graduated with an MBA and have a business idea to start in the UK, you can apply for an endorsement from the UK Department for International Trade (or a higher education institution).
- Investor visa: you must have £2 million to invest in the UK economy to be granted this type of visa.
Step #2 – Write a business plan
As a foreign entrepreneur, you are required to have a business plan, which includes market research and budget forecasts. The UK government provides entrepreneurs with helpful information and templates.
Step #3 – Determine your business’ legal structure
The following are the types of businesses you can start in the UK:
If you want to work as a self-employed freelancer in the UK or run a business on your own, a sole trader allows you to set up a business that you will be ‘trading as.’ Sole traders keep all of their business profits but are responsible to pay tax and National Insurance. Additionally, as sole traders, you are personally liable for all business debts.
General partnerships involve two or more individuals/ companies, with the business responsibilities and profits equally shared between partners. However, each partner is responsible for paying tax on their share and all parties are jointly liable for debts and losses.
Similar to general partnerships, limited partnerships have at least one ‘general’ partner who runs the business and is personally liable for any business debts. The other(s) are ‘limited’ partner(s) who are only allowed to make financial contributions and are only liable up to the amount contributed to the partnership.
Limited liability partnership (LLP):
This is a form of partnership agreement where each partner is not personally liable for debts that the UK-based business cannot pay. This partnership needs to be registered at Companies House and requires a written LLP agreement.
Private Limited Company (Ltd):
Private limited companies are a separate legal entity from the people that run it, requiring at least one director and one shareholder. Ltds are incorporated through registration at Companies House. Shares in the company cannot be traded publicly.
Public Limited Company (PLC):
Public limited companies differ from Ltd’s in that their shares may be traded publicly. However, there needs to be a minimum share capital of £50,000 with at least 25% paid prior to starting up the business.
Additionally, there are unlimited companies, social enterprises, and unincorporated associations to choose from, but these are not common business types for small-business entrepreneurs to pursue in the UK.
(Note: Foreign companies registered in the UK that want to operate as a business in the United Kingdom (or open up a branch or subsidiary) need to register as an overseas company with Companies House. This requires filling out form OS IN01, Registration of an overseas company opening a UK establishment, and paying a £20 registration fee within one month of opening your business. More information can be found here.)
Step #4 – Choose a business name and address
Depending on the business type you’ve chosen, you’ll have to choose your name and address. For sole traders, you can just use your own name, though you will need a valid UK address when registering your UK business for tax purposes and joining the company register. Technically, only limited companies need to register their business name. Additionally, businesses can register as a trademark to prevent anyone else from trading under the chosen business name.
Step #5 – For Limited Companies
If you are setting up a limited company in the UK, there are a number of things you need to do, including:
- appoint directors
- appoint a company secretary
- work out your shares and shareholders
- write articles of association and your memorandum
- open a separate bank account
- register for corporation tax
Step #6 – Register your business with HM Revenue and Customs
You will need to register your UK business with HM Revenue and Customs for tax purposes. For limited companies, you will need to register with Companies House at the cost of £12 (online) or £40 (by post).
Step #7 – Verify any additional rules for your type of UK business
The industry of what your business offers may have additional rules and requirements to do business in the UK. This includes licenses and permits, insurance for you and your employees, guidelines to follow when import/ exporting goods or handling customer data.
An Alternative Method: Virtual Phone Numbers
One overlooked method that can help jump start your startup in the United Kingdom is by using UK Virtual Phone Numbers. Virtual phone numbers allow you to gain a business presence by subscribing to a telephone number (toll free or otherwise) that is indistinguishable from a “normal” UK-based phone number. However, calls made to virtual numbers are forwarded to a destination number of your choice, including to phone numbers outside of the United Kingdom. For instance, if you have a call center based in the United States, UK callers that call your UK virtual phone number have their call routed instantaneously and directly to your call center.
Virtual phone numbers help overcome the costs, legal hurdles, and red tape that setting up a business in the UK can present to entrepreneurs. Consider contacting Global Call Forwarding today to begin your subscription for UK virtual phone numbers and start your business in the UK!
Tom Senkus has been a freelance writer for over 15 years. As a former ex-pat in the UK, he misses Cornish pasties, drinking Old Speckled Hen, and aimlessly wandering around the Curry Mile in Manchester.