It’s always worth having a run through to make sure there isn’t anything you’ve missed when setting up your business. We’re sure you’ll have most of these covered, but it never hurts to be doubly-sure! In this guide, we’ll run through the steps to take when setting up your own business.

Deciding upon your company structure

This is fundamental and something you’ve probably already decided, so we will just have a brief run-through of the options available.

Sole trader

Being a sole trader means you are the sole owner of a business and you and your business are considered as one combined financial and legal entity. Because this is the simplest way of working it is also the most popular for those starting out.

Limited Company

A limited company is its own legal identity, separate to you (as the owner) and any other directors and shareholders. This means that your personal finances are protected. Every limited company must be registered with Companies House. Working in this way could be more tax efficient than working as a sole trader. In our Freelancer, Sole Trader or Ltd Company guide we give the top tips when deciding whether to work as a sole trader or ltd company, outlining the advantages and disadvantages of each.

Partnership

As the name suggests, the business is shared between two or more owners. Our full guide to starting up a partnership outlines the key considerations for this type of business, and how you would go about setup, depending on the type of partnership you may choose.

Choosing a business name

This is one of the fun parts of starting your own business! How you secure your chosen name depends on your company structure.

If you are a sole trader, you’ll want to check that no-one else in your business arena is using the same name, purely so people don’t confuse you with another  – but assuming not you are free to trade under your chosen name. Here, in our answer to ‘How do I choose a company name as a Sole Trader?’ we explain the do’s and don’ts.

You must also ensure your name is not offensive in any way, is not the same as any existing trademark, does not contain any sensitive words or words that are associated with the government (unless consent is granted).

The only difference if you’re choosing a name for a limited company is that you need to check with Companies House that it’s not already taken. Assuming it’s not, you can register it with Companies House and it will be yours and yours alone and is protected by law.

For partnerships, the rules differ depending on whether you’re setting up an ordinary, limited, or limited liability partnership. Limited and limited liability partnerships will need to register the name with Companies House, similar to a Ltd company.

Understanding clients and supplier needs

This covers quite a broad ground! There are a number of things you need to think through in terms of how your status impacts how you deal with your clients and suppliers.

Let’s start with VAT. You have no choice but to register for VAT if your ‘VAT’able’ turnover exceeds the VAT registration threshold of £90,000 in any 12-month period. You may simply choose to register for VAT even if your turnover is lower than that, if you think it will benefit you in your industry. Some businesses prefer to only deal with other businesses that are VAT registered as it gives them a sense of confidence with the perception that you are established and of a certain size. Our Contractor’s Guide to VAT explains this further.

You’ll also need to think about whether you need any extra cover when it comes to insurance, which we’ll cover a little later in this article.

For those contracting through a limited company, IR35 is now an issue that you need to be on top of. IR35 is legislation designed to prevent individuals from claiming they are contractors or freelancers when, for tax purposes, they’re considered employees. This is to stop people incorrectly enjoying the tax benefits that can come with being a sole trader or limited company. Do you need an IR35 check? We have an exclusive offer with Kingsbridge Insurance for our clients to get a free IR35 status review.

Setting up payment structure and employees

Talking to your small business accountant will enable you to determine the most tax efficient way for you to pay yourself, not just the when and how much, but for limited companies that’ll be whether it should be a mix of salary and dividends.

Regardless, you’ll want to make sure you are paying yourself the minimum to meet National Insurance thresholds and gain a qualifying year towards your state pension and other benefits.

If you have employees, you’ll need to set up your payroll correctly. You’ll need to register with HMRC as an employer and enrol eligible employees in a workplace pension scheme. You can then operate the payroll yourself or through your accountant. In addition, you’ll need to take out employer’s liability insurance and adhere to certain health and safety requirements.

Will you need a separate business bank account for your small business?

Even if you’re operating as a sole trader, it’s worth setting up a separate business bank account, it is so much simpler to run that way and will enable you to manage your finances effectively. But you can just use your personal account if you choose to do so although we wouldn’t advise it – when it comes to bookkeeping and accounting, it’ll be clearer kept separate.

A limited company must legally have its own separate bank account, as the company is a distinct legal entity. Using your own bank account can lead to excessive tax bills further down the line.

Will your small business need insurance?

If you have a limited company, the company is a separate legal entity, so your personal finances are protected. However, you’ll need insurance to protect your business in the event something goes wrong.

As a sole trader, you and your business are considered one single entity so it’s really important that you protect your personal finances by having insurance.

The most common insurance policies are:

Public Liability – essential for all limited companies to protect you against claims made against your limited company. This sort of insurance isn’t usually very costly, but as with all insurances, the premium will be based on the nature of your business and its associated risks. Public Liability is also important for sole traders and partnerships in the event someone is injured, or their property is damaged, as a result of your business. It will cover the cost of compensation for the injured party as well as legal fees.

Professional Indemnity – this is probably the most important business insurance for a limited company. It will protect you should a client bring a claim against your business in relation to work that you have done for them, which may be for significantly more money that the original work. Some clients will insist that you have professional indemnity insurance in place before they will deal with you. Many sole traders will also require professional indemnity to protect them against client claims.

Employers Liability – this is a legal requirement if you employ more than one person i.e. anyone other than yourself. This will protect you should an employee claim compensation for an illness or accident they believe was caused due to their employment. This applies even if the second employee is your partner or spouse.

Other insurance products available include IR35 insurance, Cyber Liability Insurance and Legal Expenses Insurance. If you are unsure as to what levels and types of cover you need, you should contact an insurer, like our partners over at Kingsbridge.

What bookkeeping tools will I need?

Good software is the easiest way to keep your financial records in order and up to date. If you’re self-employed, a partnership or limited company, and not registered for VAT or PAYE, you can choose whether you want to use such software or not. Here at Integro, we can include FreeAgent in our bespoke accounting service packages for small businesses. It provides a seamless way to regularly update your company records with the minimum amount of time or fuss. It’s all the more important for limited companies as keeping records for 6 years is mandatory and should you be investigated by HMRC at any time, you’ll have all the information you need to hand.

It’s also worth noting here that if you are a VAT registered business, it is mandatory for you to keep digital records and files using compatible software. From April 2026 it will also apply to sole traders with a taxable income of over £50,000 and in April 2027 for those with an income of £30,000 to £50,000.

Once you’re confident that you’ve made all the decisions about how you want to structure your business and run it (and remember you can always change your mind at a later date as long as you’re fulfilling any obligations that you need to!) get in touch with us at Integro. Why not take a look at our comprehensive, bespoke accounting services for small businesses. We’d love to talk to you about how we can help you make your small business a success.