Q&A - Describe the basics of setting up a business in the UK

A checklist of things to do when starting a business can run to many pages. There are many practical issues to address in terms of setting up the administration of the business, obtaining the resources to trade and then, even harder, finding and keeping the first customers! Here is a summary of the main actions that a start-up needs to address:

Register the business:
A sole trader needs to let the Inland Revenue know that a new business has been started so that appropriate income tax and national insurance records can be maintained. A private limited company needs to be registered with Companies House, including the various incorporation documents (formal legal records) which describe how the business will operate and who the shareholders and company officers are. Depending on sales turnover, the business may also need to register to account for value added tax (VAT) on its transactions.

Choose an appropriate business name:
This might sound easy, but it is easy to get a business name wrong! Customers deduce a lot about what a business does and what it can deliver from the name. There are also strict rules about what a private limited company can call itself (e.g. the name cannot include offensive words, suggest the business is of national importance or connected with royalty!) It is also important that the business name does not breach any existing trademarks (most brands are protected by these).

Choose a business location:
Many (in fact most) start-ups begin life at home, operating from the back bedroom, loft conversion or garage. Alternatively, the business may need to rent office or warehouse space, or lease an appropriate retail outlet in order to begin trading. Choosing the right premises is a key business decision. The start-up wants premises that help it operate effectively without excessive costs. At the same time, it is important to avoid being tied to premises that might not suit the business in the future. Different options suit different businesses. Working from home is a good option if all the business needs is a small office space. You can also rent premises or buy a property outright - depending on what start-up finance is available.

Start to keep proper business records immediately:
The importance of this cannot be overstated. It is easy for the start-up entrepreneur to ignore or postpone record-keeping, but this can come back to haunt the business if the tax authorities decide to investigate the business. It is also vital that a start-up has a detailed understanding of the revenues, costs and cash flows of the business. A good solution is for the start-up to set up and use a dedicated business credit or debit card, so that all business expenses are controlled and recorded separately. A simple Excel spreadsheet can be used to maintain monthly summaries of income and expenses, comparing with the start-up