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Business foundations

For long-term success, think about how you could establish a solid business foundation for your start-up.

Business structure

First, choose your business structure.

Here are some common options:

Sole trader

It’s easy to set up as a sole trader with minimal paperwork.

Remember that as a sole trader you are personally responsible for all debts and liabilities, so your personal assets are at risk if you fall into debt.

You’ll pay Income Tax through HMRC’s Self Assessment system and might need to pay National Insurance contributions, depending on your profits.

You can start trading straight away and register with HMRC for Self Assessment if you earn more than
£1,000 in a tax year, or you can choose to register earlier.

HMRC have a useful step-by-step tool to follow when setting up as a sole trader.

Limited company

This is a separate legal entity from its owner, meaning that it offers limited liability.

It’s important to understand your responsibilities if you’re running a limited company.

You need to keep accurate records of company decisions, transactions and report changes. 

Annual accounts must be filed with Companies House, and a Company tax return should be
filed with HMRC on time, reporting profits and taxes due.

HMRC have published a helpful guide to setting up a business that compares the differences between a sole trader and a limited company and gives more information about how to set up a limited company.

Partnership

In a partnership, two or more people run a business together. 

It’s advisable to have a partnership agreement detailing roles, responsibilities, and profit-sharing.

Each partner is personally liable for business debts and pays tax on their share of the profits

Remember

Regardless of your business structure, if your turnover exceeds £90,000, you must pay Value Added Tax (VAT). Register for VAT: When to register for VAT - GOV.UK

Creating a business plan

A business plan is essential for new entrepreneurs as it outlines their vision and could help secure funding by showing a clear understanding of the market. 

You might wish to include details of your:

  • business overview and goals
  • industry insights and competitor analysis
  • business structure and team
  • products or services and their benefits
  • marketing strategy
  • financial projections and budget.

Did you know?

Start Up Loans have a free business plan template that you can use to create your own.

  1. Business name – make sure your business name is unique and not already trademarked
  2. Licences and permits – check if your industry requires specific licences or permits
  3. Tax registration – register with HMRC for tax purposes, including VAT if applicable 
  4. Insurance – obtain necessary insurance, such as public liability or employer’s liability 
  5. Data protection – comply with data protection laws if you’re handling personal data
  6. Health and safety – follow any health and safety regulations relevant to your business
  7. Employment law – if hiring staff, learn about legal obligations like contracts and payroll 
  8. Protecting your intellectual property (IP) – consider registering trademarks, securing patents, and protecting copyright for original content.

Practical business basics

Decide if you need a physical space for your business. If so, it pays to take time to understand lease agreements and the terms of your rent. Identify the equipment and tools you need and decide whether to buy, rent, or borrow them.

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Disclaimer: The Start -Up Loans Company makes reasonable efforts to keep the content of this article up to date, but we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. This article is intended for general information purposes only and does not constitute advice of any kind, including legal, financial, tax or other professional advice. You should always seek professional or specialist advice or support before doing anything on the basis of the content of this article.

The Start-Up Loans Company is not liable for any loss or damage (foreseeable or not) that may come from relying on this article, whether as a result of our negligence, breach of contract or otherwise. “Loss” includes (but is not limited to) any direct, indirect or consequential loss, loss of income, revenue, benefits, profits, opportunity, anticipated savings, or data. We do not exclude liability for any liability which cannot be excluded or limited under English law. Reference to any person, organisation, business, or event does not constitute an endorsement or recommendation from The Start-Up Loans Company, its parent company British Business Bank plc, or the UK Government. 

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