Business Hub – Starting a business

A solid idea, backed up by a detailed business plan, is the best foundation. Once you have funding in place, you can start trading after registering your business as a sole trader or limited company.

Keeping your finances organised with a business bank account may be a key part of running a business efficiently. You’ll need a business bank account if you’re a UK limited company registered with Companies House, because a limited company is a separate legal entity and there must be a clear division between the company’s finances and those of the owners and directors.

A sole trader is the simplest business structure. You are self-employed and make all the business decisions. You keep all the profits after tax and have liability for any debts. A limited company is a separate legal entity, owned by its shareholders which can reduce some of the risk. Tax is another key difference: sole traders pay income tax, while limited companies pay corporation tax. It’s important to assess all the differences and choose the right structure for your business.

Start-up costs vary. For example, a sole trader working from home as a graphic designer might set up for as little as £500; a small retailer, who needs premises and stock, might need to budget for £10,000 or more. Factor in marketing and admin costs such as registration required for limited companies, insurance and essential subscriptions, as well as physical assets like rent and equipment.

Yes. As a sole trader, you need to register with HMRC, which is free. Setting up a limited company requires you to appoint at least one director and register with Companies House.