Do I Need to Register My Business Yet?

Whether you’re running an independent craft business from your spare room, or you’re managing a small business and looking to grow, sooner or later you’ll probably have to register your business.

The question is, when?

It all depends on what you do, where you work, and whether you employ others.

This essential guide will help you to decide whether or not the time is right to register your business.

If you work for yourself you’ll probably need to register your business sooner or later

When Do You Need to Register Your Business?

When it comes to registering your business, you can either register as a sole trader, a limited company, or a partnership.

When do you need to register your business? From the moment you meet the criteria for any of the following:

When to Register as a Sole Trader

There’s a difference between being self-employed, and working as a sole trader. You need to register as a sole trader if you earned more than £1,000 from your self-employed work in the space of a tax year. You’ll be personally responsible for all your business’s debts, and you’ll also take on certain accounting responsibilities. Head here to read our detailed guide to registering as self-employed, and as a sole trader.

When to Register a Limited Company

Registered as a limited company essentially means that your business finances are separate from your personal finances. Businesses can either be limited by shares, or limited by guarantee. The difference is that businesses that are limited by shares are working to make a profit, whereas businesses that are limited by guarantee are usually “not for profit”. Head here for a full guide to registering as a limited company.

When to Register a Partnership

If you register for a partnership, it essentially means that two or more people are running your business together. You all share your company’s profits, debts and accounting responsibilities. You also all pay tax on your share. Head here for a full guide to registering as a partnership.

Beyond this, there are certain rules for setting up your business depending on what you do, where you work, and whether you employ others. For example, the rules are slightly different depending on whether you work from home, or you rent business space. You’ll find a detailed guide to all of these issues here.

How Long Do I Have to Register My Business?

There aren’t really any clear laws concerning the time limit for registering your business. But the sooner you do it, the easier you’ll find the process to complete. And don’t leave things too late, or you might be subject to fines or costly HMRC investigations.

Ask yourself this: At what point did your company become “active”?

Your business is active from the moment you carry out any professional business activity. The moment you buy or sell any goods or services, receive any income or earn any interest, you can consider yourself to be in business.

How long do you have to register your business? Aim to do things as soon as possible from the moment you become active – ideally within the next month. And as a good rule of thumb, you should be registered within six months before the beginning of the next tax year. That starts in April. So if your business becomes active in September, make sure you’re registered no later than October.

Benefits of Registering Your Business

Registering your business will give you credibility. If you’re just starting out, or if you’re attempting to make your mark in a competitive industry, your status as a registered business could work in your favour. It suggests that you’re here to stay, and that you know what you’re doing. In short, registering as a business suggests that you mean business. This could be exactly the thing to encourage clients, customers and investors to start working with you.

But there are other benefits to registering your business. Register as a limited company, for example, and your own personal assets will always be protected, even if your business faces significant losses. If you don’t register, you’ll be personally responsible for all of this debt.

There are also certain tax benefits to registering your business, including:

  • Insurance Premium Deductions: In some circumstances you can claim a tax deducation for your insurance premiums. Find out more about Insurance premium deductions
  • Income Splitting: If you’re married or have a civil partnership, in some circumstances you can split your income between the two off you to make use of your partner’s tax free allowance. Find out more about Income splitting
  • Deferred Payments: If you overpay tax over a certain period, in some instances this can be kept and used for upcoming ta bills. Find out more about Deferred payments
  • Other Tax Credit Schemes: There are a number of other tax credit schemes which businesses from all different industries can take advantage of. Find out more about some of the Tax Credit Schemes available to businesses in the UK.

The main benefit of registering your business is that it will help you avoid fines, investigations and other legal trouble. You’re legally required to inform HMRC of any business operations, no matter how small. Registering your business helps you stay compliant.

What Else Do You Need to Consider?

Whether you register as a sole-trader, a limited company or a partnership, there’s one major thing that all businesses should consider from the moment they start trading.

It’s insurance. Business insurance will give you essential cover against all eventualities, from dissatisfied clients to onsite accidents; from cyber-attacks to HMRC investigations. Insurance guarantees that, no matter what happens, you’ll be able to continue trading and recover from any business setback.

At Tapoly, we offer comprehensive insurance packages that will give you the tailored cover you need at a price you can afford. Head here to get a quote in minutes.

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