How to Start a Small Business in the UK

Hopefully, you’ve already got a decent business idea in mind. It needs to be a service or product that’s unique, cheaper, better, or different to what’s currently available. This should be something that provides value to your target audience that they can’t get elsewhere. Market research to determine who your intended customers are and what they need is vital.

Undertake competitor analysis as well to check your business idea doesn’t already exist in one form or another. The main things to assess in your competitor analysis are a company’s:

• Size – how many employees and customers, size of their premises
• Costs – their pricing structure for their products or services
• Location – will they be in the same area and direct competition as your business?
• Age – if they’ve been around for a few years it’s a sign of success
• Strengths and weaknesses – what they do well you can emulate, but how can you improve on any of their weaknesses?
• Sales channels – are they an online or offline business? Do they sell anywhere else?

Collecting this information about competitors and your business idea should help determine how viable it is. Seek advice about starting a small business from experts and those who have done it before and show them your idea and competitor analysis. This can provide reassurance that it could be a success or highlight issues to address before you go any further.

Deciding on the structure of your new business in the UK is important for legal and tax purposes. Speaking to an accountant or solicitor can provide you with the advice to choose which option is best for your company. There are advantages and disadvantages to each structure, so picking the one that suits your needs is vital.

The four main business structures are:

• Sole trader – as a sole trader you are the only owner of your new business, which means you get to keep all the profits made after tax. However, it also means you’re liable for any losses. This is the simplest option and common for most new small businesses.
• Limited company – this is a private company, and the structure separates your personal and professional finances. You’ll still be an owner and make profits but you’re only legally responsible for any debts to the extent of the amount you invested into the business. It’s a popular structure but more complex to set up.
• Partnership – if you’re starting a new business in the UK with someone else then a partnership is a structure where the profits and management are shared between two people.
• Limited Liability Partnership (LLP) – this is a type of structure that combines a partnership with a limited company. One or all of the partners have limited liabilities. These are the least common business structures but could be worth exploring depending on your situation.

There are various legal requirements when starting up a small business. You may have registered and sorted out your tax with HMRC but there’s plenty more you need. Ensuring all the paperwork and documents are in place before you begin can save a lot of time, effort, and money in fixing legal problems later.

Legal requirements for starting a small business include compliance with a few important areas of the law:

• Business law – to comply with various areas of business law you need Companies House and/or HMRC papers to prove you’re registered, data protection documents, tenancy agreements for any premises, contracts and details for any finance, contracts for goods and services, and documents covering intellectual property.
• Employment law – if your start-up has one or more employees (besides yourself and any partners) you must have employment contracts in place. Issues such as HR, grievances, and disciplinary also need considering and appropriate measures being brought in.
• Health and safety – any business that has five or more employees must legally have a risk assessment and health and safety policy in writing. An accident and incidents report is required to record any. Public liability cover may be necessary, as well as small business insurance to protect your start-up.
• Tax – you could be investigated by HMRC so keeping all documents relating to tax is important. This includes holding onto and keeping safe bank statements, invoices, records of expenses, and past tax returns.
• Environmental protection – your new business must comply with the Environmental Protection Act 1990. This includes ensuring that only licensed waste carriers remove any commercial waste your business produces from your site. You also have a responsibility to reduce, reuse, and recycle as much waste as possible.

Search around to find the best suppliers of any products, materials, or services your start-up needs. Shop locally to support the community and reduce any energy and emissions for transporting goods you require. Once you’ve found suppliers that suit your start-up get all the contracts in place and begin your working relationship.

If your business needs staff then you should also try to find some employees at this point. Online platforms like LinkedIn are a great place to search, you could use a recruiter if your finances allow, or place adverts online. Develop a hiring strategy so you know exactly who you’re looking for to represent your new company.