25 July 2023

The Lifecycle of a Business - A Guide to Setting Up Business in England and Wales

Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina.

On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.

With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.

So, First Things First…..

A Guide to Setting Up Business in England and Wales

Setting up a business in a new jurisdiction can be both an exciting and daunting prospect. From getting to grips with the corporate requirements to considering the tax consequences to understanding the registration and filing requirements, there will be plenty to think about and many decisions to be made, but once you’ve determined on the best corporate structure and understand the tax position, what other issues need to be dealt with? Many of these will depend on the legislation and business practice in the country in question, as well as the type, sector and size of the business.

Here, we provide a guide to setting up a business in the UK. (For the purposes of this guide, we have assumed that your business will be set up as a private company limited by shares, but most of the points below will apply regardless of the type of business entity. For more information about the types of entity available, see here.

Lawyers

  • From the initial setting up of the business through to exit, you will require legal advice at all stages of the business’s lifecycle in the UK
  • Ensure that you instruct responsive, pragmatic UK lawyers with the correct expertise and experience to be able to assist you as you set up your business and going forward

Accountants / auditors

  • All UK companies must keep accounting records and, depending on the size and nature of your business, you may be required to file annual accounts with the Registrar of Companies. These accounts may also need to be audited
  • As a result, you may need to instruct accountants and auditors (although this will depend on the type of business entity and its size)

Banking and finance arrangements

  • You will require a business bank account in the UK and so will need to set this up with a bank of your choice
  • Consider too whether you will need to take on any third party financing in relation to your business and if so, whether this will be obtained from a UK bank or other finance provider. Remember also that various grants are available, such as R&D grants, which your business may be able to apply for
  • Bear in mind too that if your business borrows from UK non-residents, there may be withholding tax obligations that have to be considered and possible exemptions claimed
  • It may be possible to claim a tax deduction for interest paid but there are complex rules that will need to be considered, especially where the borrowing is from connected persons

Directors

  • Where a UK company has been incorporated to run the business, directors will need to be appointed. Under English law, a company must have at least one director although the company’s constitutional documents may specify a greater number. In addition, at least one director must be a natural person
  • While there is no requirement for directors to live in the UK, all directors must fully understand their duties under English law and there may be tax consequences if board meetings are not held in the UK. A general set of directors’ duties is set out in the Companies Act 2006, but directors’ duties can also arise under other legislation and at common law. Failure to comply with these duties can have serious consequences, including personal liability and disqualification as a director, and may also constitute a criminal offence. In addition, if the majority of directors don’t live in the UK, the company may become dual resident in another country for tax purposes

Tax

  • Without delving too much into tax legislation (our Tax team are happy to assist if further information is required), once you have decided what form your business will take you will need to ensure that the business is appropriately registered with HM Revenue & Customs, the UK’s tax authority, so that the appropriate tax returns are filed and taxes can be paid
  • You’ll also need to engage an advisor to ensure that you are compliant with all day-to-day tax requirements, such as VAT and PAYE. Your legal advisor or accountant should be able to assist here

Property

  • Do you need any office, factory or other premises? You will need to decide where you want to be located and whether you intend to purchase or lease the real estate. There are likely to be tax charges (VAT and stamp duty land tax (SDLT)) on the acquisition of any such premises

Intellectual property (IP)

  • Do you own any trade marks, design rights, domain names or other IP? Consider protecting these by registering them
  • Have you any inventions that require patent protection and which are not already so registered in the UK? Ensure that any patent application is made as soon as possible as it can be a lengthy process

Employment

  • You may need to hire staff so consider which recruitment agencies you would like to work with and the terms of employment you can offer. Once you have recruited, you will need to check an employee’s right to work and enter into appropriate employment contracts with your new employees. The terms of these may depend on factors such as their role, experience, responsibilities and so on
  • In addition, you will need to put in place various policies and possibly compile an employee handbook
  • Employment law in the UK is complex and there is a myriad of legislation surrounding the rights of workers and employees, covering matters such as health and safety, discrimination, dismissal, minimum wage and so on. You will need to take legal advice to ensure that you are in compliance
  • If you have set up a company in the UK, are any of the directors also employees? If so, the company will need to enter into service agreements with them
  • You may already have a successful business set up elsewhere in the world and wish to take advantage of the opportunity to second employees from that jurisdiction to your new business in the UK. There are various factors to consider here and you should take UK legal advice to ensure that immigration laws are complied with and that such arrangements are put in place correctly
  • Do you have any consultants or contractors working for the business? Ensure that adequate consultancy agreements have been entered into with them. In the UK, the line between a consultant/contractor role and employee can be very easily crossed and this will, among other things, result in different tax and national insurance contribution liabilities being taken on by the business. It is important that you take legal advice about this if you are intending to engage consultants or contractors
  • You will also need to choose suitable payroll software or engage a payroll services provider to deal with the payment of your workforce and ensure that the correct deductions for tax, national insurance contributions and pension payments are made. In addition, you will need to consider what, if any, insurance-backed employee benefits (such as private medical insurance and permanent health insurance) need to be introduced

Pensions

  • There is an obligation under UK employment law to automatically enrol most workers in a workplace pension scheme and so you will need to find a pension scheme provider and set this up
  • Workplace pensions also have their own set of laws and regulations, the applicability of which will depend on the size of your business, the number of employees, its structure and so on. You should obtain UK legal advice about this

Insurance

  • What insurance cover will you need? Certain insurance cover is required under English law for businesses, while other policies may be recommended or available but are not obligatory
  • You may want to speak to an insurance broker to find out more about the cover available, what the different policies offer and the premiums

Data Protection

  • Data protection is likely to affect various aspects of your business, including employment, suppliers and customers and your business will need to comply with the relevant UK laws, including the Data Protection Act 2018

Regulatory and compliance

  • Is your business regulated in any way under UK law, for example, does it fall within the financial services sector, energy or life sciences? You will need to apply for the appropriate licence or registration if this is so
  • The English legal framework also covers matters such as marketing and advertising standards, consumer protection laws and websites, some or all of which may apply to your business. You will need to ensure compliance where relevant and are likely to require legal advice to ensure that nothing slips through the net

Commercial arrangements

  • Assuming that new commercial arrangements will be entered into with, for example, suppliers, distributors and possibly, customers, you may need to establish relationships and discuss terms with various third parties
  • These commercial arrangements should be formalised in written contracts or terms and conditions. Bear in mind that even if intra-group arrangements are to be put in place, it is advisable to document these in writing

Forsters LLP is a full service law firm and has the length and breadth of experience to assist you with all of your corporate, business, employment, tax and real estate needs and queries. If you require any more information or would like to discuss your situation, please speak to your usual Forsters’ contact.

Disclaimer

This note reflects the law as at 25 July 2023. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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