A step-by-step guide to starting your own business in the UK

Step 1: Refine your business idea and write a business plan

Every successful business starts with a solid idea. Take time to research and refine your concept - this could include undertaking market research to understand your target market, identify competitors and gauge demand for your product or service. When starting a UK business you should also refine your business model to decide how you will generate revenue, whether through direct sales, subscriptions, or another model.

A well-crafted business plan can be crucial for securing funding and guiding your business strategy. A typical business plan includes the following information:

• Market analysis: detailed research on your industry, target market and competitive landscape.

• Marketing and sales strategy: how you plan to attract and retain customers.

• Operational plan: day-to-day operations, supply chain management and logistics.

• Financial projections: income statements, cash flow forecasts and projected balance sheets.

Step 2: Choose your business structure

Select the appropriate legal structure for your business. Common structures in the UK include:

1. Sole trader: the simplest form, where you are personally responsible for all aspects of the business.

2. Partnership: similar to a sole trader but involves two or more people sharing responsibility.

3. Limited company: a separate legal entity that offers limited liability protection to its owners.

4. Limited liability partnership (LLP): combines elements of partnerships and limited companies, providing limited liability while allowing flexible management structures.

You can find out more about different business structures when starting a UK business here.

Step 3: Register your business

Depending on your chosen structure for starting a UK business, you'll need to register your business with the appropriate authorities:

• Sole Trader: register with HM Revenue and Customs (HMRC) for self-assessment.

• Partnership: register the partnership with HMRC.

• Limited Company/LLP: register with Companies House and HMRC.

Step 4: Get your legal documents right

The specific legal documents needed when starting a UK business will depend on the business structure, business model and industry. Common legal documents include:

1. Articles of association

Every limited company registered in the UK is required to have a set of articles of association (often referred to simply as Articles of “AoA” for short). You can think of these as the constitution of the company, forming a contract between the business and its shareholders. Find out more about articles by reading this guide.

2. Shareholders agreement

Unlike articles of association, shareholders agreements are private legal documents between a company and some (or all) of its shareholders. These types of agreements are used to manage the relationship between a company and its shareholders. Generally speaking, a shareholders agreement deals with the governance, management and decision-making of a company and the rights of shareholders. While there is no strict legal obligation to put a shareholders agreement in place, it's strongly recommended for most companies with more than one shareholder. Find out more about shareholders agreements here.

3. Employment contract

Growing a team is one of the more exciting aspects of running a business, but it’s not without legal obligations. When hiring into your team, you’ll need an employment contract that clearly sets out the terms under which your new employee has been employed. Find out more about employment contracts here.

4. Client agreement

It is crucial that you have a contact in place with clients and customers, to protect your revenue stream and guard against legal risks. The type of client agreement needed will depend on your business's product offering, but could include:

1. Services agreement - a services agreement defines the terms under which specified services are to be provided to a customer, in return for the payment of a fee by that customer to the service provider / supplier.

2. Sales agreement - in simple terms, a supply of goods agreement (or sales agreement) is a contract that outlines the terms under which goods / products are provided by a supplier to its customers.

3. Supply of goods and services agreement - a supply of goods and services agreement is a contract that outlines the terms under which goods / products and services are provided by a supplier to its customers.

4. SaaS agreement - a software as a service agreement (or SaaS agreement) outlines the terms under which a particular SaaS software application can be used. This agreement identifies the specific software the end-client would be able to access, alongside the terms under which they’re able to use it.

5. MSA - this is a framework agreement that sets out the legal terms the parties agree to in relation to the provision of services. The parties then enter into separate statements of work (which are governed by the MSA) for each type of service being provided/project.

5. Website documents

All website owners should consider the following documents for their website:

1. Online sales terms - if the website has an online shop, you will need to include terms that deal with the products being sold on the website (e.g. payment terms, delivery, responsibilities in relation to the products). Docue has a number of different terms of sale templates depending on what product is being sold:

   • Online terms for the sale of goods;

   • Online terms for the supply or services;

   • Online terms for the supply of software; or

   • Online terms for the sale of digital content.

2. Website Terms of Use - these are legal terms and conditions that govern how a website visitor uses a website, and any restrictions on their use of the website.

3. Website Privacy Notice - it is a strict requirement of UK data protection laws to provide a privacy notice to individuals when their personal data is collected. Website owners will collect personal data about website visitors - whether that’s through an online shop, via a contact form on the website or through tracking technologies such as cookies. It’s therefore crucial that a privacy notice is provided to website visitors, so they know how their personal data is being used. Find out more here.

4. Cookies Notice - almost every website will use cookies in order to function and perform to their full potential. Data protection laws require website owners to tell individuals about the cookies on the website and how they affect website visitors. Find out more here.

5. Acceptable Use Policy - this is a policy that specifically governs a website visitor’s use of the function or features of, or information presented on, the website. It may be particularly relevant where the website visitor can upload content e.g. via a message board.

6. Freelance contract

Is your company in need of specialised expertise or short-term support? Hiring a freelancer can be a great solution to secure certain skills or knowledge when a business needs it most, but it's important to ensure that your working relationship is well-defined and legally binding. That’s where a freelance contract comes in - find out more here.

7. Non-disclosure agreement

NDAs are a particularly important component of running a business and allow companies to protect their intellectual assets. An NDA or “non-disclosure agreement” is a legal document that allows businesses to protect company information in a legally enforceable manner and might be used for things such as trade secrets, employment matters, or future business plans. Find out more about NDAs here.

Depending on your industry, you may also need specific licenses or permits to operate legally. Check with local authorities and industry bodies to ensure you have all necessary approvals.

Use this checklist for more information about legal documents to consider when starting a limited company in the UK.

Step 5: Think about finances

When starting a UK business, there are many financial aspects to consider. This could include:

• Securing funding: determine how much capital you need to start and grow your business. Explore various funding options, such as: personal savings, bank loans, investors and/or grants and subsidies.

• Set up business banking: open a dedicated business bank account to separate your personal and business finances. This helps in managing your finances more effectively and maintains clear records for tax purposes.

• Understand your tax obligations: ensure you are aware of and comply with all tax obligations.

• Set up accounting and record-keeping systems: efficient accounting and record-keeping are vital for financial management and compliance. Consider using accounting software or appointing an external accountant.

Step 6: Launch and promote your business

Once everything is in place, it's time to launch your business. Develop a marketing strategy to build brand awareness and attract customers.

Conclusion

Starting a UK business involves careful planning and adherence to legal requirements. By following this step-by-step guide, you can navigate the process with confidence and set the foundation for a successful enterprise.

Docue’s range of legal templates have been drafted and are maintained by lawyers. So if you’re starting a business in the UK, make sure you get on the front foot by creating high-quality legal documents that protect your business and comply with legal requirements.

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