The United Kingdom is a parliamentary monarchal country in Europe that is constituted of four states, England, Scotland, Northern Ireland, and Wales. The UK shares land borders exclusively with Ireland and maritime borders with Germany, Denmark, France Belgium, and the Netherlands.
The UK has the 5th largest economy, is a member of all the powerful world alliances and groups, and has major influence over almost every global issue; conflicts, trade, politics, etc. The country has a rich and strong cultural background and history; the impact of which may be felt over a large part of the world. Many things that the world takes for granted today, are actually invented or come from British traditions.
Kinds of business structures in the United Kingdom
United Kingdom has a thriving economy and a stable political system, two factors that play a primary role in the growth of the nation. Business policies and systems are such that they encourage local and foreign investors to establish their presence in the UK; especially entrepreneurs, freelancers, innovators, etc. prefer the UK to start their careers.
The system allows investors to choose from a number of options to initiate and operate a business, the most popular ones are tabulated below:
S# | Type of business structures | Local name | Min.paid-up capital required |
1. | Sole Proprietorship | Sole Trader | no requirement for paid-up capital |
2. | Partnerships | General Partnership | Limited Liability Partnership | no requirement for paid-up capital |
3. | Limited Liability Company | Limited Company | Pvt. Ltd. | no requirement for paid-up capital |
4. | Cooperation | Community Interest Company (CIC) | no requirement for paid-up capital |
5. | Public Limited Company (PLC) | – | £50,000 |
Sole trader
A sole trader in the UK is a business that is owned and operated by a single person. It is the simplest format of business that does not require any paid-up capital or large investment to initiate. The drawback of such a business structure is that the owner assumes the complete liability for debt and loss in a personal capacity. While the upside is that the owner gets to keep the entire profit for him/herself.
Partnership
A partnership is a business structure where two or more people (up to 20 in the UK) form a company to perform a certain task or achieve an economic interest. It is a simple business structure that requires very little investment and is subject to very few regulations. A Partnership can further be divided into general and limited partnerships.
General and limited liability partnerships
In a limited liability partnership, the liability of each partner is limited to the amount of their investment in the business, however, there is at least one partner who assumes liabilities in a personal capacity. On the other hand, in a general partnership, all partners are equally responsible for the liabilities to the extent of their contribution.
Limited company (Ltd)
A limited company is recognized as a separate legal entity from its owners, and its liability is limited to the assets of the company. Thus freeing the owners from any personal responsibility for the debts and liabilities of the business.
Community interest company (CIC)
A CIC is a type of limited company that is set up to benefit the community rather than the owners. It has a special legal status that allows it to operate for the benefit of the community, and its assets are locked for community use.
Public limited company (PLC)
A PLC is a type of limited company that is listed on the stock exchange, and its shares can be bought and sold by the public.
It’s important to note that each business structure has its own merits and demerits, it is important to consider the specific needs of a business before choosing the appropriate structure.
Cost of registering a company in the UK
The cost of registering and incorporating a company in the UK can vary depending on the type of company and the method of registration.
Here are a few costs that are most likely to be incurred.
Registering a company online
The cost to register a company online with the Companies House, the UK government agency responsible for company registration, is currently £12. This is the cheapest and quickest method of registration.
Registering a company by post
The cost to register a company by post is currently £40. This method takes longer than online registration, and the application must be sent by mail to the Companies House.
Using a company formation agent
Many companies choose to use a company formation agent to help with the registration process. The cost for this service can range from around £20 to over £100, depending on the level of service required.
In addition to the registration fee, there may be other costs associated with incorporating a company in the UK, such as legal and accounting fees. It is important to budget for these additional costs when planning to incorporate a company.
The operational costs of a business in the UK
The operational expenditure of a business is influenced by a number of factors such as the nature of the business, industry, size of the business, location, access to markets, etc. All these costs are variable and can even change due to changes in weather conditions.
However, some of the most recurring expenses a company should budget beforehand are discussed here:
Corporate tax
The current rate of corporation tax in the UK is 19%, which is relatively low compared to many other countries.
Payroll taxes
Employers in the UK are required to pay National Insurance contributions, which are a form of payroll tax. The rate of National Insurance contributions varies depending on the employee’s salary.
Value Added Tax (VAT)
VAT is a tax on goods and services, and the standard rate in the UK is 20%. Some goods and services are exempt or subject to a reduced rate of VAT.
Rent and property costs
Rent and property costs can be significant expenses for businesses in the UK, especially in cities like London. The cost of commercial property varies depending on the location and size of the premises.
Labor costs
Labor costs can vary depending on the industry and location of the business. The UK has a national minimum wage, which is currently £9.50 per hour for workers aged 23 and over.
Regulatory compliance
Businesses in the UK must comply with various regulations and laws, which can result in additional costs, such as legal fees and compliance costs.
It’s important to note that while the cost of doing business in the UK can be relatively high compared to some other countries, the UK has a highly skilled workforce, a stable political environment, and a well-developed infrastructure, which can make it an attractive location for businesses.