So, you have the next big idea, and you want to start your own company. It’s easy and almost anyone can do it, right?
Not, exactly.
You see, starting a company is pretty easy… but building a successful business requires a lot of time and effort. You’ll need to spend hours developing and testing your idea, refining your target market, and proving that you can reach them. Then you’ll need to plan how you’ll turn your idea into a business. In other words, you’ll need a business plan.
Once done, you should follow the steps to register your company, get funding, open a bank account, and ultimately, start trading. This is a challenge in itself.
Fortunately, we’re here to help. In this post, we’ll take a closer look at the 7 steps to launch a startup in the UK.
Before Getting Started
Every good business starts with an excellent idea. Sure, you’ll be able to start your company in a relatively short time, but without a good idea your chances of success are slim. So, before starting your company, you would’ve spent hours planning and conceptualising.
During this time, you’ll:
- Come up with an idea. Maybe you’ve been brewing about a problem you need to solve for a while? Or maybe you’ve just thought about an innovative product recently? No matter what the case, you’ll need a good idea to start your business.
- Consider whether you could build a business around your idea. It’s no use if you have a good idea, but there’s no interest or demand for it. This means you’ll need to do some research to find out if your idea is viable in the market. This will ensure that you don’t waste time and effort on a business that’s likely to fail.
- Refine your idea. Your market research could show you that you have a good idea, but that it needs some tweaking. If it does, it’s better to make changes early in the process because later, it could be costly.
- Create a business plan. This could be one of the most important things you need to do before starting your company. When you have a clear, documented business plan, you’ll know what your goals are and how you’ll achieve them.
Register Your Company
Your first step after you’ve done your planning, will be to register a limited company through Companies House. To do this, you’ll need to file the following documents:
- The application to register a company (form IN01). This form contains all the vital information about your company.
- Memorandum of association. The memorandum of association confirms your intention to form a company. It also confirms that you’ll become a member of that company.
- Articles of association, unless you use the model articles. The articles of association set out the rules the members of the company will abide by.
- Additional information if your application includes a sensitive word or expression.
Let’s look at the application form a bit closer. Most of the information you’ll need to provide is relatively simple. There are, however, some aspects that need a little more explanation:
- Registered address. The registered address of your company should be its official address. This is also where you’ll receive all written communication. You can use any address you want as long as it’s a physical address in the UK. Also, the address should be in the country where you register the company.
- Directors. As a private limited company, your company should have at least one director. This will usually be you. No matter who the directors are, you should make sure that they’re not disqualified from acting as one. A director can also not be bankrupt or under the age of 16.
- Statement of capital and initial shareholdings. Here, you’ll need to provide details about the shareholders and the number of shares they have. The easiest is to issue shares at a nominal amount, for example, £1. This makes it easier later if you want to raise capital.
Open a Bank Account
The next step is to decide where you’ll put all the money your company makes. Yes, you’ll need to open a bank account. Luckily, in the UK, you’re spoilt for choice when it comes to banking.
For one, you can look at one of the well-known business banks. These include names like Lloyds, Bank of Scotland, HSBC, Yorkshire Bank, and others.
The problem is that it’s often challenging to open a business account with these banks. This is even more so when you’re a new business. This is simply because they’ll want to know about your company in detail. So, you’ll have to provide information on the directors, funding, what the company does, and more.
Another option would be to consider one of the digital or challenger banks available in the UK. Some names here include Revolut, Tide, Monzo, Anna, and others. With these banks, business accounts are usually quicker and easier to set up.
Another benefit is that they provide their services completely digitally. This means no more spending endless hours in queues when you could be running your business.
The biggest benefit of digital banks is that they’re cheaper than traditional banks. And this is especially important for new companies that want to keep their expenses low.
Bank accounts for startups
Disclaimer: This list is not advising you on banking nor recommending you to use, or avoid, the services of any particular bank.
Starling
Starling offers a fully regulated UK business bank account, where your money’s covered up to £85,000 by the Financial Services Compensation Scheme. All with no monthly fees or UK payment charges.
Key features are free access for multiple directors, and integration with Xero, FreeAgent and QuickBooks.
Tide
Tide offers free e-money accounts, as well as FSCS protected bank accounts provided by ClearBank. Tide is trusted by 350,000+ UK businesses and freelancers.
Startups and entrepreneurs can save time with built in accounting integration, invoicing directly from the app and team cards for expense management.
Monzo
Famous for shaking up your personal banking experience, Monzo’s business accounts give startup founders more of the same great app experience. Multi-user access is available on the £5 p/m Pro tier.
Silicon Valley Bank
For high-growth, venture-backed startups, SVB offers financial and banking services to help capitalise on business opportunities, manage cash flows and access global markets.
Get an Accountant
You’ll also need an accountant. Now, you might want to know why you need an accountant if you’re not making a lot of money yet? The thing is, using an accountant offers several benefits for your business.
For one, when using an accountant, you’ll have assistance in completing the complex forms often necessary when starting a company. They can also be invaluable when it comes to preparing financial models for fundraising and to apply for R&D tax relief.
Another benefit of using an accountant is that they’ll get you ready for tax season. So, they’ll ensure you file your tax returns correctly and on time with the result that you’ll pay what you need to. This gives you peace of mind and one less thing to worry about.
Accountants for startups
Disclaimer: This list is not advising you on business accounting nor recommending you to use, or avoid, the services of any particular accountant.
Like banking, you’ll have many choices when it comes to accountants. Here, you should consider one of the firms that offer services for small businesses.
Ember
By automating all of your finances, accounting and tax, Ember makes life simpler for startup founders and freelancers.
Limited companies get everything they need for just £79 + VAT / mo, including a dedicated support team of accountants.
Sole traders can get started for free, or join the Pro subscription at £29+VAT for in-app support and free self-assessment returns.
Square Mile Accounting
Square Mile Accounting are a team of qualified online accountants & consultants with a passion for tech, helping founders build & scale successful businesses.
The firm is built around a three pillar structure of BUILD, SCALE and ACCELERATE, uniquely designed to tailor services and support around the evolving needs of fast growing startups.
Crunch
Crunch is billed as “the only accounting and tax software you’ll ever need”. For over a decade, they’ve been helping the self-employed community manage their accounts simply and effectively.
Other startup accounts
- ihorizon
- Accounting Wise
- RS Accountancy
Get Your Tax Affairs in Order
When your company makes a profit, you’ll need to pay tax on it. These profits include the money you make while trading, or, for instance, returns on investments.
This means you’ll need to register your new company for Corporation Tax with the HMRC. Typically, you’ll do this when registering your company. If you didn’t, you’ll need to register it separately. The important thing is that you should do this within three months after you start trading.
Once you’ve registered, you’ll need to:
- Keep proper accounting records. This requires full details of how much the company earns, its expenses, assets, liabilities, and so on.
- Prepare a Company Tax Return to work out how much corporation tax you’ll need to pay. It’s here where accountants are especially helpful.
- Pay Corporation Tax. The current Corporation Tax rate for companies is 19%. This means if your company earns £10,000, you’ll pay £1,900 in taxes for the tax year. If your company didn’t make any profits, you’ll also need to report this to HMRC.
Apart from Corporation Tax, you’ll also need to consider VAT at some stage. You only need to register to pay VAT when your taxable turnover is more than £85,000, or you know that it will be. This means you’ll likely not have to worry about VAT when starting your company, however, if you may wish to register regardless.
Protect Yourself and Your Startup
It’s also important that you take the necessary steps to protect your company. When you do, you’ll be able to mitigate the risk of loss or damage if something goes wrong.
One of the first ways to do this is to get the necessary insurance in place. For instance, you might use some vital equipment to run your company. You’ll have to insure these to protect the company against loss, theft, or damage.
Another insurance you can consider is liability insurance. This protects you against loss if someone gets hurt or ill, or their property is damaged as a result of something your company is responsible for.
Protection goes further than insurance, though. Depending on your company, you might also need a patent to protect any intellectual property. This prevents other companies from profiting from your idea.
Also, in the digital age, you’ll, more than likely, store and use customer data. You should understand the General Data Protection Regulation (GDPR) and know how to apply it.
Insurance for startups
Disclaimer: This list is not advising you on business insurance nor recommending you to use, or avoid, the services of any particular company listed.
Superscript
Launched in 2015 as Digital Risks, Superscript has done a great job of making insurance better for digital businesses. Superscript is authorised by the FCA and protected by the FSCS.
Other startup business insurance
- Hiscox
Get External Funding if Necessary
Let’s face it, not everyone has vast amounts of capital lying around. Many new business owners also don’t have the credit history to borrow large sums of money. If you don’t, your first option would be to bootstrap your business.
This means you’ll start out small and invest any profits the company makes back into the business. You’ll then repeat this cycle as your company grows.
The problem is, this isn’t always a viable option, especially if you’re doing business in a competitive industry. If this is the case, you’ll need funding. The most important step you’ll need to take in getting funding will be to make yourself attractive to potential investors.
To do this, you should get Seed Enterprise Investment Scheme (SEIS) approval. This scheme makes it easier for you to raise money when starting your company because it offers incentives to investors who invest in your company by buying shares.
Keep in mind, though, there are some criteria you should meet to take advantage of the scheme. For example, your company should:
- Be established in the UK.
- Not be listed on any recognised stock exchange.
- Not be a member of a partnership.
- Not be controlled by another company, acting with or without other people.
- Carry out a new qualifying trade.
- Not have gross assets of more than £200,000 when its shares are issued.
Keep in mind, though, these are just some of the criteria you’ll need to meet and there are others. You can find out more about the scheme, how it works, and its requirements here.
Start Trading
Congratulations, you’ve made it through. Now the final step is to start trading. To do this, you’ll need several things in place which you need to consider.
By this time, you’ll already have the products you want to sell. Likewise, if you’re selling services, you would’ve planned how you would offer these services. Now, you should ensure that customers can pay you for your products or services.
You should thus have the necessary tools in place to accept payments. This could be a card machine for a brick-and-mortar store. It could also be setting up a payment processor for an e-commerce business. The key is that you get this functionality in place.
Another thing you should consider is enabling your customers to find you. Nowadays, this will rely on a well-thought-out digital marketing strategy. This strategy allows you to raise awareness about your brand, reach your customers, and enable you to make sales and generate revenue.
Key takeaways
There’s a lot that goes into starting a new company. You’ll first have to come up with an idea, test whether it’s viable, and tweak it until you find traction. That’s only one part of the puzzle, though.
Once you have proven that you have an idea worthy of building a business, you should follow the steps to register your company, open a bank account, get trading, and maybe even get funding.
With the right tools and support, setting up and running a UK company is a relatively painless process.