So, your business is up and running and things are going well. It can be tempting to focus on the everyday nuts and bolts of the business and leave some of the administrative side of things for later - when you have more time. But like the old proverb says, “tomorrow never comes”. There will never be a day when you are any less busy than you are at the moment. So it’s important to build in time daily or weekly to sort out those background administrative tasks that can make a huge difference to the health and effective running of your business.
One such areas is registering your business. What does it mean to register your business? Why should you do it? How do you do it?
What is business registration?
At its simplest, it means that your business is recognised as a legal entity. Registered businesses are entitled to rights, benefits and privileges that an unregistered business cannot enjoy. We will read more about this later.
There are different types of registration for the following different types of business.
- Sole Trader: a business that is owned and operated by one person
- Partnership: a business that is owned and managed by two or more partners. You can also set up a limited liability partnership (LLP) - see below.
- Private Limited Liability Company: this is the most common type of business. The name usually ends with ‘Ltd’, - indicating limited liability, which we shall refer to below.
- Public Limited Liability Company (PLC): similar to a Private Limited Liability Company but PLCs are publicly owned and their shares are traded on stock exchanges for anyone to buy and sell. Many companies start as private limited liability companies and when they grow they are “floated” to become public limited liability companies.
Why you should register your business
But is it really necessary to register a small business, particularly if you are a sole trader? What are the advantages?
There are indeed a number of advantages and these can broadly be broken down into the areas of identity, financial stability and legal liability:
- Having a registered business name boosts your business credibility, which can make a huge difference in your interaction with clients.
- By creating a business identity you can build a strong business brand that will endure
- Your business identity and brand is also protected once you are a registered business
- Once you have business registration you can set up a business bank account and keep you business and personal finances separate and much easier to manage.
- Having business registration and a business bank account is likely to make it easier to obtain business finance such as a small business loan.
Businesses that are registered as a Private Limited Liability Company are eligible for limited liability in cases where things go wrong. This means that if your business gets into financial difficulty, the amount for which you will be liable - and for which personal assets such as your house and car could be seized to recover money that you owe - is limited to a fixed sum, usually the original amount of money you invested in the company.
Limited liability is one of the main reason why you need to register your business. Without it, you could lose not only your business but also your personal property and other assets if something goes wrong.
Note that registered sole trader and partnership businesses do not have this same level of protection, although for partnerships it is possible to set up a limited liability partnership (LLP) to run a business with 2 or more members. This operates as a normal business partnership, but members are not personally liable for any debts the business can’t pay.
How to register your business
So in light of the above, how do you go about registering your business?
As a first step, go to the Gov UK website for help and advice. All the information you need about different types of registration are there, as follows:
It is simple to get started so don’t put off your business registration until that proverbial tomorrow, do it today!
If your business is also at the stage where you need additional business funding such as a small business loan then get in touch with us at Fair Business Loans and we will see what we can do to support your growing business.