Choosing your structure and registering

Every business has a legal “shape”. It is one of the first things to decide. Do not panic about getting it perfect — you can change later, and going from sole trader to company is easy. Registering a business is the same across the whole UK, so you use the same systems as everyone else. But Scotland adds a few twists, which this chapter flags.

The three main shapes are a sole trader, a private limited company, and a partnership.

Sole trader — the simplest way

Being a sole trader means you are the business. There is no line in law between you and it.

• It is the simplest and cheapest way to start.
• You keep all the profit after tax.
• There is no Companies House paperwork, and your money stays private.
• You can still employ staff.

But there is one big catch:

You can trade under your own name, or pick a trading name. A sole trader’s name cannot include words like “Ltd” or “plc”, and it must not copy someone else’s trademark. Your own name and a business address must appear on your invoices.

Private limited company — a separate legal person

A limited company is its own “person” in law, separate from you. This brings the big benefit of limited liability.

To set a company up, you register with Companies House. You will need:

• A company name that follows the naming rules.
• At least one director (a company secretary is optional).
• At least one shareholder (this can be the same person as the director).
• To name anyone with real control — a Person with Significant Control, usually someone owning more than 25%.
• A memorandum and articles of association (the founding papers — made for you online).
• A registered office address and a SIC code that says what you do.

Running a company means more paperwork. Every year you must send Companies House your accounts and a confirmation statement (a short form confirming your details). You also file a Corporation Tax return. A company’s information is public — anyone can look it up.

Partnerships — going into business together

A partnership is two or more people running a business together, sharing the work, profit and debts.

• General partnership: the simplest kind. Each partner registers for Self Assessment, and one “nominated partner” also registers the partnership and files its return. A written partnership agreement — covering who decides what, how profit is split, and what happens if someone leaves — is strongly advised.
• Limited partnership: has some partners who run things (with unlimited liability) and some who only invest (with limited liability). Registered at Companies House.
• Limited liability partnership (LLP): all members get limited liability. Registered at Companies House. Common for professionals like solicitors and accountants.

What about a social enterprise?

A social enterprise is a business with a good cause at its heart — helping people, a community, or the planet. It is not a legal shape on its own. A social enterprise can be a company, a partnership, or a special form like a SCIO (a Scottish Charitable Incorporated Organisation, run under Scottish charity rules). If your business has a charitable or community aim, get advice on the best shape.

Which shape is right?

Here is the quick comparison. There is no single “best” — it depends on you.

Steps that everyone should take

Whichever shape you pick, do these too:

1. Check your name is free. Search the Companies House register and check for trademarks.
2. Open a business bank account. Companies need their own account. Sole traders should have a separate one too, to keep business and personal money apart.
3. Start keeping records from day one, ideally with simple software. See Money and tax.
4. Check if you need a licence for your trade. See Your legal responsibilities.
5. Sort your insurance. Employers' liability cover is a legal must from your first employee.
6. Follow data protection rules if you handle people's personal details.