Setting Up A Company 101
Starting a business can be a massive undertaking. But not everything has to be a headache. Giving your business the right start will give you an advantage later down the road – and it’s easier than you think.
In this article, we explain how soon-to-be founders can get their business off the ground.
Registering your company
First things first, your company needs to be recognised by another entity (and no, that doesn’t just mean your business partner).
In the UK, new businesses are “incorporated” with Companies House – the government’s official registrar. Registration is pretty simple, but there are some crucial things you will need during the process.
- Your company’s name
- The registered address for your business (where the official post can be sent).
- A list of Company Officials: You must have at least one director and you must list anyone who can or will represent the company and its business. You must also include their addresses, nationalities and date of birth.
- A breakdown of your Share Structure: Decide on your company’s share capital and how those shares will be split between relevant company officials. Also, be sure to declare whether different classes of shares will be issued and how.
- Who are your Shareholders? You will need to make clear who owns some of the shares in your company. Beyond a name and address, you will also need to provide three personal pieces of information for each shareholder e.g. National Insurance number, eye colour, birth town etc. as security information.
- PSC Registration: You must keep a record of any and all “Persons of Significant Control” in your company. These are individuals who own more than 25% of your company or have over 25% voting rights.
- Complete and submit your Articles of Association: Every company is required to have a set of documents that act as a rule book for how the company should be run. This will include details on voting rights, dividend distribution and director’s powers. In most cases, it will be sufficient to use already existing generic documents called model articles found on companies house.
- Memorandum of Association: This is a simple agreement which each shareholder must comply with to state their intention in forming a limited company. Usually, this is already inputted into the registration page of companies house and just requires a tick box to be completed.
- Standard Industry Classification (SIC) Code: Every industry has a unique five-digit code to identify their line of business to the government. Not quite sure where you fit in? You can add up to 4 SIC codes to describe your business. A full list of industry codes can be found here.
More useful templates for the submitting of these documents can be found on the “Starting A Business” page on Companies House.
Once submitted, it’ll take around 24 hours to get fully registered and cost you £12 – a small price to pay for kickstarting your exciting new venture.
Insurance Made Easy
As your business grows, so does the need for adequate protection against the setbacks you do, and don’t see coming.
From early on, founders have a number of options available when securing insurance; a useful quote comparison website can be found here but some insurances are a real must.
- Employer’s Liability Insurance (EL) – You are legally required to have it if you have any employees in your business to protect against injury or sickness costs.
It’s super important to get EL as soon as you have registered your company and hired your first employee. For every day you aren’t properly covered, the government can fine you £2,500.
There are also other insurance packages that may be beneficial to your specific business needs.
- Business Contents Insurance – Covers the physical tools and machinery used in your workspace in case of loss, theft, or damage.
- Public Liability Insurance – Protects against customer injury or damage (useful if you plan on having regular interactions with the public).
- Business Interruption Insurance – Helps to recover the cost of lost sales if unexpected events (e.g. floods or fires, a new strain of coronavirus) prevent your business from running.
- Offering advice or knowledge? Consider taking out Professional Indemnity Insurance to cover legal fees in case your work leads to a client’s loss of sales.
Adding more insurance policy protections will increase costs so consider bundling packages together, lowering your risk liability and showing your provider that the business is well run to get a better rate.
Power to the Payroll
You’ve registered your company, got the essential insurance coverage, now it’s time to hire some employees. As well as registering your company you will also need to register as an employer. Here you need to tell HMRC several important details.
- How many employees do you plan to take on (don’t forget to include yourself)
- How much each employee will be paid – be sure to keep in accordance with the national minimum wage. And remember that the thresholds change depending on age.
- You must pay Employer’s National Insurance. This is a monthly payment of 8% of how much every employee earns above £8,840 a year.
- Remember to have EL set up prior to employees starting work at your company.
Getting Online to Reach Customers
No matter what line of business you are in, it’s imperative to have a digital presence on the internet. Not only does this allow you to reach millions of potential customers, but it also demonstrates your legitimacy as a business.
Luckily, coding and designing a website from scratch are things of the past. Of course, many larger companies will have in-house web designers, but when you are starting out you can make do with user-friendly website builders like Wix or SquareSpace.
One of the most important parts of a website is to lock in your domain name.
Domain names are what your customers will type into a search engine when they are trying to reach your products – they are essential to creating a memorable, authoritative impression for your users.
The most common domain suffix is “.com” which reflects the website’s commercial intentions. But you could use “.org” “.net” or “.co.uk” which all create slightly different impressions – you need to decide what is the best look for your business.
Once you’ve chosen your web domain, it’s essential to get it registered as yours. You’ll need to find a register service and “purchase” the name you have chosen. It is possible that the name you have come up with is already registered, so be prepared to have some backup options in the case.
This guide is by no means exhaustive but covers some of the key moves to make as you are starting up your business.
Check out Floww’s other guides on business proficiency below to stay ahead of your competition.