How to become a limited company being a sole proprietor

January 3, 2023
How to become a limited company being a sole proprietor

The UK is the world’s leading monetary, industrial and business center and is ranked among the top 10 countries in terms of ease of doing business. Starting a business here is very prestigious, quite easy, profitable and relatively inexpensive. The English government strongly supports small businesses, creating a comfortable environment for successful entrepreneurial activities. Starting your business in the UK means guaranteeing a secure future for yourself.

Benefits of opening a business in UK

  • High level of economic development;
  • Political and social stability;
  • Progressive income tax;
  • Low interest rates on loans;
  • Inexpensive service;
  • Asset security and risk minimization;
  • Stable and thoughtful legislation;
  • No double taxation;
  • Prestigious jurisdiction;
  • Use of a developed banking system;
  • Established trade relations providing access to the financial markets of Europe and the USA;
  • The prospect of acquiring an English residence permit.

Organizational and legal forms of doing business in United Kingdom

There are 4 main types of enterprises in the United Kingdom:

  • Private business-company limited by shares or simply a private UK limited company. The owners are liable for the obligations of the business-company with monetary investments spent on the acquisition of shares.
  • Private corporation limited by guarantee. The founders are liable for the results of the corporation’s activities by guarantee obligations, concluded in the memorandum of association.
  • Public limited company UK. Similar to a limited liability corporation, but has the right to publicly sell shares.
  • corporation with unlimited liability.

Among foreign companies, sole proprietorships,UK limited companies liability and partnerships are the most popular.

  1. Sole proprietor (Sole trader)

The easiest way to start your own business in the UK is to register as a sole proprietor. The founder, solely managing the business, is liable for all the debts and obligations of the corporation. In order to be allowed to set up this type of business, a foreign person must take out an insurance policy and register for self-taxation with HM Revenue and Customs (HMRC).

  • Limited company in the UK

The main demands for the founders of an LLC:

  • acquisition of a legal address;
  • drawing up the articles of association of the company;
  • registration of the status of a corporate taxpayer.
  1. Partnership

It implies cooperation between a foreign investor and a local managing partner. For those who want to simplify and speed up the procedure for starting a business in the English territory, this is the most suitable type of community. Added to the benefits of partnership is the absence of the need for permanent residence within the state and the associated economic costs and waiting times for entry permits. The creation of this type of enterprise requires the execution of documents on cooperation and approval of the favorable impact of foreign financial investment on the economy of the state.

Business enrollment process in UK

To start a business in the UK, a foreign founder must:

  • choose a company name;
  • register the legal address of the company;
  • conclude memorandum of association;
  • declare the amount of the authorized capital;
  • draw up the articles of association of the company;
  • register with Companies House.

The approval of the legal establishment of the enterprise is the issuance of the “Certificate of Registration”.

UK Limited company Features:

  • LTD is a resident company in the UK;
  • at least 1 (one) shareholder;
  • a shareholder of LTD can be an individual or legal entity without residency restrictions;
  • at least 1 (one) director;
  • the director must be only an individual without residency restrictions;
  • Company secretary is not required;
  • there are no legal capital demands for an English LTD;
  • the minimum authorized capital is at least £2;
  • Possibility to obtain a VAT number.

Taxation of company limited in the UK:

An English Limited UK company is a UK tax resident. The company pays taxes on a progressive scale of 20%-25% (since April 1, 2012).

Principles of taxation of English LTDs:

  • if the profit is less than or equal to £300,000, a 20% income tax rate is applied;
  • if the profit is more than £1,500,000 – 25%;
  • a tax credit is provided for the difference between the amounts of profit.

To obtain a VAT number, the obligatory demands are an office in the UK and a corporate account in a local English bank.

Basis for issuing a non-resident certificate is the payment of taxes in the UK.

Advantages of using an limited companies in the UK

  1. Trading schemes;
  2. property ownership;
  3. agency company.

Blitz Information on private limited companies in the UK:

  • Founders: at least 1 (one) shareholder.
  • Authorized capital: no demands.
  • Management: at least 1 (one) individual as a director.

UK Virtual Office LTD includes:

  • phone,
  • fax and
  • mailing service.

Accounting private limited company united kingdom in the UK

English companies must submit a financial report for each financial year. The cost of accounting services depends on the number of basic operations under the agency scheme, respectively, on the number of accounting entries per month and the planned annual turnover of the corporation.

Limited company united kingdom yearly reporting:

  1. Yearly return (contains general info about the company: name, enrollment number and emplacement of the business-company, owners and director) is given in every 12 months (counted from the moment the company was founded) to the Companies House;
  2. Yearly Accounts (monetary report, which contains: Balance Sheet and Profit and Loss Statement, as well as explanations to them) is submitted within 18 months from the end of the reporting period to the Companies House;
  3. Yearly Tax Return (a tax report that includes info about the company’s profit for the reporting period and the amount of tax paid), is submitted to HM Revenue & Customs (tax in the UK) in the form of a completed form.

In the UK, for LTD corporations, the first year of operation is preferential. The company submits yearly accounts only after 18 months from the beginning of its activity.

The basis for the preparation of financial statements are primary documents: contracts, invoices, etc., as well as bank statements. Tax reporting is prepared on the basis of financial reporting. The state allocates 9 months for the filing of reports by the LTD company.

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