Are you looking to incorporate your startup in 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
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 part-time doing); 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 (500–1000£ pm). 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: the easiest solution is to issue 100 shares at a 1£ value each: in this way you don’t have to make complex assessment if you’re raising future money: the calculation for the ownership will be on a 100% basis. Don’t worry: you don’t have to pay this 100£ now (100 shares 1£ each); this is the legal amount, not the cash you are asked to pay. To register the Company you need to pay a 12£ application fee only.
- Please make sure that the Director(s) has/have UK residency: that’s not mandatory though, 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 keep a simple story. (i.e) you and your business partner(s) will fund the Company entirely.
I opened the 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 of the different banks account:
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:
Nowadays, challenger digital banks are raising their tone but not yet in the business space unfortunately; Tide, Holvi, are becoming available soon for business accounts. Others, like Atom and Monzo will start trading for personal accounts, opening in the future tools for businesses. They intend to never charge costs involved in maintaining a bank account, plus their strategy is entirely online: stay tuned and let’s see, they might be perfect for our startups’ needs!
3. BE ATTRACTIVE FOR INVESTORS!
Get the 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 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 has also expertise over the 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 on the 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: 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.