Registering a small business – who needs to do it, and if so what do they need to do?

Every day people think they have come up with the million-dollar idea; a small business idea that will change the world and make them a fortune. However, there are quite a few steps between the birth of an idea and actually establishing a small business. There are many official and administrative obstacles before you can call yourself a business owner. A vital step is registering the small business. Doing this requires several steps, documents, agencies, etc. Some of these processes are there to help you, others will inform the government of your existence so that they can do anything they can to help you. Here, we have outlined the steps that you need to take to successfully register a small business.

There are many things that need to be considered before you begin the small business registration process. Here are some of the questions that you should ask yourself:

It may be the case that you are not required to register your business. If you are self-employed and simply using your legal name, it won’t be necessary for you to register. However, it is worth bearing in mind that failing to register a small business could mean not being able to access personal liability protection, legal advantages, as well as benefits when it comes to taxation.

The small business registration process can indeed be very straightforward; for many it’s just a case of registering the name of the business with Companies House and Her Majesty’s Revenue & Customs (HMRC). If you are running an incorporated small business, you will receive a company registration number (CRN) after you register with Companies House. You will later receive a unique taxpayer reference (UTR), which is a 10 digit code issued to all new businesses registered with Companies House.  You will need to register with HMRC regardless of your small business structure, as you will need to file for self-assessment taxation. Additionally, it may also be necessary to register with the government in order to attain trademark protection. Trademarking a business, brand, or product name can be done by filing the appropriate paperwork with the Intellectual Property Office.

Of course not every organisation is actually required to pay taxes, e.g. NGOs, non-profits and charities. If your small business is one of these then you need to register with the Charity Commission and apply for tax recognition from HMRC.

Small businesses must register with HMRC for taxation purposes before they begin trading. If you are a sole trader, you must simply register for self-assessment tax returns, and you must also pay income tax on profits earned and pay Class 2 and 4 National Insurance contributions.

If you are running an incorporated small business, you will need to register for Corporation tax. This can usually be done online when you register initially with Companies House. You will need to register for corporation tax up to three months after you begin trading, and penalties will be incurred if you register late. Your UTR is necessary to complete the process.

If your small business’s VAT taxable turnover exceeds the threshold (£85,000) within 12 months, you will need to register for VAT. You may also register voluntarily if your turnover is within the threshold but you believe it will exceed it in the future. VAT applications can be made online or in writing to HMRC. Once you have registered for VAT, you will receive a VAT certificate by post.

If your small business employs people, you will also need to apply for an employer PAYE reference number. This must be done before the first payday for your employees. Limited companies with less than nine directors may apply online here. Other small business entities may apply online here. Once you have completed the application process, you will receive an employer reference number from HMRC. The first three numbers of the code refer to the tax office that is responsible for your PAYE. The rest of the number is the tax office’s employer reference.

Registering your small business with Companies House costs £12 to register online, £40 to register by post and £100 for same-day registration. There is no cost for VAT registration, corporation tax registration or PAYE registration with HMRC.

When it comes to the information required for filing your small business, there are no real surprises. Here is a list of the details you’ll need when registering your small business:

• Name of the business
• Location of the business
• Names of the directors
• Ownership/management structure
• Information on any registered agents
• For corporations: the quantity and value of shares

Just like with the fees and required information, the documents needed to register a small business depend on what sort of business you are running. Below is a table detailing some of the documents needed for registering a small business.

Please note the legal disclaimer relating to this article.