Are you looking to incorporate your startup in the UK? Here I present 5 simple steps you need to accomplish in order to have your startup ready to operate and receive investments:
- Bank Account
- SEIS Approval
I’ve been through this process for more than once before creating Altar.io and I realised that one clean recipe over the different steps was missing, so here I try to nail the point!
1. TELL THE QUEEN YOUR COMPANY EXISTS
Register the LTD Company through Companies House:
Among some easy fields that need to be filled, there are some that worth a few words:
- Address: you can easily work from home (as I did and am doing part-time); it’s boring I know, but at least you’re not gonna waste money on not-strictly necessary points. Another solution is to find a co-working space. In London, there are some which are pretty affordable (£150 a month), but many are pretty expensive (£500 – £1000pm). Anyway, for Companies House that does not matter: you just have to register an address that is convenient for you for receiving the mail post.
Important: Companies House will deliver an Authentication Code at the registered address: be sure to store it somewhere, it’s really important to make amendments through Companies House.
- Initial Capital: your easiest solution is to issue 100 shares at £1 in value each: in this way you don’t have to make a complex assessment if you’re raising future money: the calculation for ownership will be on a 100% basis. Don’t worry: you don’t have to pay this £100 now (100 shares at £1 each); this is the legal amount, not the cash you are asked to pay. To register the Company you only need to pay a £12 application fee.
- Please make sure that the Director(s) has/have UK residency: it’s not mandatory, but you can benefit from several allowances from HMRC (UK Tax Entity): for instance, if you’re not trading yet, you can claim back the VAT paid on the invoices paid within the UK
2. GET YOUR PIGGY BANK!
Open a bank account: quite a burden at first, branch managers usually ask lots of questions regarding the business nature, the directors, where the money comes from, etc. If you mention that you will be funding the company through crowdfunding, they will turn up their nose because due to (imagine that) money laundering issues. Do stick a simple story i.e. you and your business partner(s) will fund the Company entirely.
I opened a bank account with Barclays: one of the most important advantages is that through the Barclays App you can do everything you want: Great UX – as a startupper would demand.
Beyond the App UX, you should consider also the cost related to different banks’ accounts:
Barclays, HSBC, Lloyds and NatWest offers 12/18 month of free banking: after that period it’s easy to calculate the costs associated with the bank account:
Besides the traditional high-street banks above there is a new wave of digital banks hitting our device screens. They are challenging the idea of traditional banking and are proving to be an easier option when it comes to opening a business account. Many of these new players are becoming competitive options for a number of reasons including:
- Removing fees for transferring to foreign currencies
- Removing maintenance costs for business accounts
- The ability to create an unlimited number of multi-currency physical or virtual cards for your colleagues.
- Ability to sync with your invoicing and business communication software.
- Full control through web and mobile apps.
Here is the full list of digital banks that currently offer business accounts:
Although new to the game they may be the perfect solution to your startups’ needs, and continue to grow and bring in new features making them an exciting choice for your company.
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3. BE ATTRACTIVE FOR INVESTORS!
Get your SEIS approval: The Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies raise equity finance by offering tax reliefs to individual investors who purchase new shares in those companies.The shares must be held for a period of 3 years, from date of issue, for relief to be retained. Relief is available at 50% of the cost of the shares, on a maximum annual investment of £100,000.
This is a very powerful tool when negotiating with an investor: they know immediately that their risk is cut to half! Apply to SEIS through this link.
4. YOUR ACCOUNTANT IS YOUR FRIEND
There are many great accountancy firms in London specifically dedicated to startups.
Crunch is one of the cheapest yet known for being great: their price starts at £29.50 + VAT per month. iHorizon is another great accountancy firm that also has expertise on US law and it usually makes the bridge between the two countries if scale-ups want to move overseas.
As for invoicing software, so you can bill your clients, I’d suggest you get familiar with Xero, which is one of the most popular and cheapest Saas for invoicing: starting at just £20.62 pm for the premium account.
5. TAXATION: YOU DON’T NEED TO START WORRYING JUST YET
This is not a proper step, but it’s good to have the situation clear in mind once you have set up the business – HMRC: here is the tax department of the UK Government.
You need to Register for Corporation Tax (20% in 2016) when you start trading or you restart a dormant business (that means a company that exists but does not trade). You have three months of time to register your company with HMRC here.
Another important aspect, the VAT: You must register when your turnover goes over the threshold (£83,000), or you know that it will in a 30 days period. The threshold is based on your VAT taxable turnover — the total of everything sold that isn’t VAT exempt. Plus, as already mentioned, you can claim back the VAT paid on the invoices paid within the UK until you start
Now that red tape is well under control you can concentrate on building your product.
Paolo started working in banking in Milan and London. After the financial career, he created a startup and then joined Altar where he mainly deals with business development and fintech projects.