Starting a new business venture is a daunting task, no matter if it is just a one-person operation or a bigger organisation. To get things off the ground, entrepreneurs must draw up a solid business plan, make a realistic yet compelling financial prognosis, acquire and invest adequate amounts of funds as well as time, and all that, even before any actual work operations have begun.
One aspect that is not often mentioned but is absolutely critical is making sure that the planned business is compliant with the law and that all applicable legal obligations have been met.
Even though the process goes through several universal steps, each country has its own legal system and distinct requirements that must be followed. That means that establishing a business in the UK must strictly adhere to the country’s legal process.
To avoid running into compliance issues in the future that could result in hefty fines or even court proceedings, it could be prudent to consult with specialised experts in the field, such as Howlader & co. Thanks to their extensive experience in supporting businesses, the experts will guarantee that the new small business is fully compliant.
Choosing A Name
Every business structure must have a unique name under which it is going to operate. When picking one for your small business, you must be extremely careful. The desired name must not already be taken, and it shouldn’t sound too similar to that of another, already-established business.
Having a name resembling that of a different organisation may create the false impression that the two are connected. If it becomes aware of it, the other company may initiate a lawsuit or file for a trademark infringement, alleging that your company is trying to take business away from them or to pass its own products as theirs.
The consequences could range from being legally required to change your business name, paying possible damages, and incurring additional costs associated with the forced rebranding. In short, it is paramount to do your research and pick a fairly unique and catchy name.
Chose A Proper Legal Status
Every business must also be incorporated under a specific legal status. The importance of this choice cannot be understated as it will also determine whether the company will have to be registered with Companies House, the registrar of companies in the UK. It will also determine the records and accounts that will need to be kept, the tax and National Insurance (NI) amounts that will have to be paid, and the financial liability of the owners if the business operation fails and goes down in debt.
For very small companies, in most cases, the owner is the only employee, the preferred legal status is Sole trader. This is the easiest option in terms of setting up and getting the company started. It doesn’t require registration with Companies House, and the record-keeping process is simplified compared to the other two options – partnership and limited company.
Many businesses have started their life as sole traders and then changed to a different legal status after becoming successful. Keep in mind that it may still be necessary to trademark the name of your business, as there is no other formal registration. Another essential aspect of being a Sole trader is that the owner has unlimited liability. In practice, this means that their personal assets (house, vehicles, savings) may be used to cover for the business’s debts.
Tax and National Insurance
Under UK law, all businesses must register with the HMRC (HM Revenue and Customs) as soon as they begin operations. It is necessary to do so to begin paying income tax based on the generated profits as well as Class 2 and Class 4 National Insurance. Sole traders can complete an online self-assessment.
If the turnover of the business that is VAT taxable passes a certain threshold, currently set at £85,000, the company will need to register for VAT as well. However, there are many sales that are VAT exempt, such as those involving most food or children’s toys. At the same time, other categories of goods and services may be taxed with a lower VAT rate than the standard 20%.
Additional Legal Considerations
Numerous different circumstances of the small business must also be taken into account when ensuring legal compliance. Depending on the specific industry sector, having certain insurance policies may be legally required. Other types of insurance may be optional but still recommended to have as a way to protect the business against various risks.
Specific businesses, including hotels, food outlets, hairdressers, etc., will also need to acquire a licence from their local authority in order to operate legally. Although for small businesses this may not be that important in the beginning, if at any point they decide to hire employees, they will have to ensure compliance with numerous different articles of employment legislation.
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