How to start a business in the United Kingdom | US guide

There are more than 5.6 million businesses registered in the UK, of which some 76% don't employ anyone other than the owner. In fact, 99.3% of the businesses in the UK are small and medium enterprises (SME), accounting for 60% of all private sector employment.

These small businesses are really what keep the British economy moving, and the UK government looks to support new business founders whenever possible.

Thousands of new businesses open in the UK every year. If you want to join them as a US citizen and open your own new enterprise in Britain, here's a quick guide to get you on the way.

What types of corporate entities are there in the United Kingdom?

The UK has three main legal forms of corporate entities. They are:

• Sole proprietorship (also known as sole trader)
• Limited companies
• Partnerships

Sole proprietorship

The most common and flexible business structure in the UK is sole proprietorship, accounting for 60% of the total number of businesses registered in the UK.

This legal structure tends to be used by ‘one person’ or micro businesses with very few employees, which usually means you’ll have more affordable operating costs.

Since there’s no legal distinction between you and the company in this business structure, you’re taxed at the same time for both your personal tax liabilities as well as those incurred through your work.

Sole traders must make Class 2 and Class 4 National Insurance contributions in addition to income tax when they file taxes annually.

Sole traders also have ‘unlimited liability’, meaning they are solely and wholly responsible for all debts and financial obligations of the business.

To open this type of business you must register with the UK tax authorities as self-employed.

Limited company

If you want to open a limited company in the UK, similar to a US corporation, you must have a registered office in the country, although it's not necessary that all of the directors live in Britain.

Registering a limited company in the UK is more complex than setting up a sole trader arrangement, and will fall into one of two categories:

• Private limited company (ltd) - Businesses with at least one shareholder and director, which does not offer shares to the public and faces fewer regulations.
• Public limited company (plc) - A PLC is different in that it opens up shares to the public on the stock market and must adhere to strict regulations.

With a limited company, tax is managed separately to personal liabilities. ‘Limited liability’ means the business alone is liable, not the individuals involved - which removes a certain element of risk.

All limited companies must file annual accounts with Companies House, which will become publicly available.

Partnership

Partnerships are the least common structure, making up a small percentage of all corporate entities registered. There are 2.7 million companies, and only 167,465 ordinary partnerships in 2024.

A partnership is similar in nature to sole proprietorship, with ‘unlimited liability’ in common between the two business structures.

The main difference is that there are two or more people involved in a partnership, so you’ll have shared responsibility - for better or worse.

You can enter either a general partnership where every partner has the same level of responsibility or a limited partnership where some partners have ‘limited liability’.

Try our Business Name Generator tool to brainstorm ideas for your new company name.

Visa requirements for US citizens looking to open a business in the UK

As a US citizen, you need to have the right visa to legally enter and run a business within the UK.

While some European countries allow entrepreneurs the right to live and work in the country with minimal friction, the UK has more stringent requirements.

There are two types of visa you can choose from to live and work in the UK:

Start-up Visa

The Start-up Visa is ideal for budding entrepreneurs that need funding to get their business idea off the ground.

You can stay in the UK for up to 2 years on this visa to build your business.

To qualify for this visa, you’ll need to secure an endorsement from an approved UK organisation such as an incubator or university.

Upon approval, you must submit an application to the Home Office along with a business plan, proof of endorsement, and financial details.

Innovator Founder Visa

The Innovator Founder Visa is suitable for seasoned entrepreneurs that already run viable businesses.

For this visa, you’ll also need to secure sponsorship from an endorsing body, and prove that your business is viable with the potential for growth.

You can stay in the country for 3 years with this visa, but you’ll need to check in with your endorsing body after 12 months and 24 months to show that you’re making progress in your business.

Things to know before getting started

The good news is that there’s no minimum capital requirement to start your business in the UK. Bear in mind that you will need a UK-based business bank account to start your new business.

Aside from the cost of registering with Companies House, the other steps such as registering for tax are free. All processes can usually be completed online, and shouldn't take more than a few days in most cases.

What’s the company registration process in the United Kingdom for someone from the US?

The UK Government website offers a wealth of information about how to register different types of business. The process varies according to the type of business you wish to create.

The most straightforward registration process is to open for business as a sole trader. In this case you only need a National Insurance number, which is an EIN equivalent, and to register with the tax authorities as self-employed.

The process to set up a limited company in the UK requires a little more time. You need to:

• Select a name, and set up a UK address for the company
• Register your business with Companies House
• Provide proof of identity for at least one director and at least one shareholder
• Set up your company for Corporation Tax

The documents you'll be asked to provide include:

• Articles of association
• Memorandum of association
• Statement of capital
• Standard industry classification coding

Business partnerships effectively means that you’re running a business as an individual but share responsibility for the business with all the named partners.

To get started you must register with the tax authorities as self-employed. You can then run the business while being taxed as an individual, with an agreement made among the partners about profit sharing.

Registering your UK company with Companies House can be done online and usually takes just 24 hours.

If you register online, ¹the process is now £50 for limited companies but fees vary if you opt for additional services such as same-day registration.

Alternatively, there are postal registration routes (at an increased fee), and a ‘same day’ service for which you pay a premium.

Legal obligations and responsibilities

Once you’ve registered your business you must also register for corporation tax within three months of starting trading. This can be done online. Your company accounts can also be posted online once you're up and running.

You also need to register if you start employing people. This can take up to two weeks and must be done before you pay your employee for the first time.

The British government’s guide on how to register as an employer is very helpful in this process. From here, you can also register your employees easily online.

As soon as you start to employ people, you need to get employers liability insurance. In addition to this, you have a duty as an employer to pay above minimum wage, prepare a contract of employment, and check the individual's legal right to live and work in the UK.

A full list of employer responsibilities can be found on the government website.

Should you register for VAT?

In the UK, goods and services are subject to VAT (Value Added Tax) during the production or distribution process.

The responsibility of paying this tax falls with the end consumer.

If you’re looking to start a business in the UK and scale quickly, it’s important to know that you must register for VAT once your taxable turnover exceeds the threshold of ²£90,000 per year.

Once you’ve crossed that threshold, it’s a legal obligation to register for VAT with HM Revenue and Customs (HMRC).

Once a business is registered for VAT, you must charge VAT on your sales and issue VAT invoices. The business can also claim back any VAT they have paid for business purchases.

Hiring employees for your business in the UK

If you end up in the position of needing to hire employees for your new UK-based business, here’s some important information to help guide your decisions:

The UK full-time workweek is 40 hours, with most companies offering 9-5 schedules over five days. There’s a maximum 48-hour weekly working limit as stipulated by the Working Time Regulations, which can only be waived with written consent from employees.

In the UK, there’s both a National Minimum Wage and a National Living Wage.

National Minimum Wage - The minimum amount employees are entitled to earn per hour

National Living Wage - Higher than the National Minimum Wage, employees earn this once they’re over the age of 21

You can use the official National Minimum Wage and Living Wage calculator if you’re in doubt as to what you should pay your employees.

All full-time employees are entitled to a minimum of 28 days of paid holiday per year.

Where can I find help to start my business in the United Kingdom?

The UK Government website has a range of information and links to organisations offering support for your business. Business support such as grants and financing is also available. Many of these schemes are run regionally, so you should check which are available in your area.

Another useful resource is the Great.gov website. This government backed site offers information and support, such as connecting new business owners with mentors.

Once you’re in the United Kingdom and ready to get going, look for local networking events on sites such as Meetup, Eventful and Eventbrite. Here you can meet like-minded people, and build your customer and business contact book.

There’s plenty of help out there for people looking to start their new enterprise in the UK. With adequate preparation and some help from your new network and friends, your business will get off to a flying start.

Discover Wise: The affordable way to manage international payments

Expanding your business operations abroad requires an adaptable payment solution. Starting a business in the UK is a complex task, but opening a business account doesn't have to be.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. You can get GBP account details, even as a US citizen, and receive payments from your UK customers without any fuss.

With a Wise Business account, you can easily send, receive, and hold business funds in 40+ currencies at the mid-market rate without paying monthly account fees.

Use local bank account details in major currencies for a one-off fee and make sending money abroad hassle-free with access to 160+ countries.

Open a Wise Business account online

Some key features of Wise Business include:

• Major local account details to receive international payments with ease.
• No monthly account fees, just a simple one-off fee for account details.
• Receive payments from e-commerce platforms such as Amazon or via Stripe.
• Create invoices using the Wise invoice generator or invoice templates.
• Accounting integrations, including a QuickBooks Bill Pay connection.
• Batch payment options for fast payment of up to 1,000 people.

Read the guide on how to open a Wise Business account

Sources used :

¹ Companies House

² Gov.uk

Sources last checked on 15-November- 2024.