Starting a business in the UK is exciting — but without taking the proper legal steps, it can also be risky. From choosing the right structure to registering your business legally, every step matters.
This guide outlines the most important legal steps to take before starting a business in the UK, especially in 2024’s evolving economy.
Step 1: Decide on a Business Structure
Your first legal decision is choosing the right type of business:
Sole Trader
- Easiest to start
- You’re personally liable for business debts
Limited Company (Ltd)
- Legally separate from you
- Requires registration with Companies House
- Better tax efficiency
Partnership
- Two or more people share responsibility
- Simple, but each partner is liable for business debts
Limited Liability Partnership (LLP)
- Hybrid structure
- Offers liability protection like a company but flexibility of partnership
Step 2: Register the Business
Once you choose your structure, register it:
For Sole Traders
- Register with HMRC for self-assessment tax
- Choose a business name (cannot include “Ltd”)
For Limited Companies
- Register with Companies House
- Pay £12 (online) or £40 (postal)
- You’ll receive a Certificate of Incorporation
For LLPs
- Also registered via Companies House
- Need at least 2 members
- Must have a registered office address
Step 3: Set Up a Business Bank Account
For Limited Companies and LLPs, a separate bank account is mandatory.
For sole traders, it’s recommended to separate personal and business finances.
Documents you may need:
- Certificate of incorporation
- Company registration number
- Proof of ID and address
Step 4: Understand Your Tax Responsibilities
Different structures have different tax rules:
- Sole Traders: Pay Income Tax via self-assessment
- Limited Companies: Pay Corporation Tax (19% as of 2024)
- VAT: Register if your annual turnover is over £90,000
- PAYE: If hiring employees, you must register for PAYE with HMRC
Step 5: Get the Right Business Licenses and Permits
Depending on your business type, you may need special licenses:
- Food business: Hygiene certificate, premises license
- Online selling: Data protection registration
- Finance/insurance services: FCA authorization
- Construction/engineering: Local council or industry-specific permits
Check license requirements at gov.uk or with your local authority.
Step 6: Comply with Business Laws
Your business must follow UK laws:
- Data Protection (GDPR): If collecting customer data
- Health & Safety: Especially for physical premises
- Employment Law: Contracts, fair pay, workplace safety
- Marketing Regulations: Email and advertising compliance
Failing to comply can result in penalties or business closure.
Step 7: Protect Your Business Legally
To reduce legal risk:
- Create Terms & Conditions for your website or services
- Draft Contracts for employees, suppliers, clients
- Register Trademarks for your logo/brand name
- Consider Business Insurance like Public Liability, Employers’ Liability, or Professional Indemnity
Step 8: Keep Proper Business Records
The UK government requires you to keep detailed records:
- Income and expenses
- Payroll data
- Tax returns
- Invoices and receipts
You must keep records for at least 6 years — digital is accepted.
FAQs About Starting a Business in the UK
Do I need to hire a lawyer?
Not always, but it’s helpful for contracts, trademarks, or complex legal issues.
Is it better to start as a sole trader or limited company?
Sole trader is simpler, but limited company offers better liability protection and tax benefits.
How long does it take to register a business?
Online registration with Companies House usually takes 24 hours.
What’s the minimum investment required?
There’s no legal minimum, but initial costs can include registration fees, licenses, branding, and insurance.
Conclusion
Starting a business in the UK requires more than just a great idea. Legally protecting your business from day one ensures long-term growth and fewer legal headaches.
✅ Choose the right structure
✅ Register it properly
✅ Follow tax and legal rules
✅ Protect your brand and people
By following these legal steps, you’re setting your business up for success in 2024 and beyond.