The United Kingdom is a great country that welcomes immigrants from around the world and also encourages entrepreneurship. The legal scheme to open a business in the UK as a foreigner is well organized. However, you may still face some challenges if you don’t fully understand the requirements.
To open a business in the UK as a foreigner is not an easy task especially if you are not a citizen of the European Union. The United Kingdom is diverse, with a strong economy and full of various investment opportunities. Starting a fresh business in the UK is time-consuming and a bit risky when compared to buying an already established business.
Because there are no limitations on foreign ownership, international investors are at liberty to buy a business in the UK. But, you must comply with the tax laws of the United Kingdom. Are you planning to open a business in the UK and you’re not a British citizen? all you need is to apply for a visa.
In this article, we’ll discuss the steps necessary to open a business in the UK as a foreigner. Also, the various types of business, taxation, and business visas you will need. Let’s get started!
Procedures Necessary to Open a Business in the UK as a Foreigner
Are you planning to open a business in the UK as a foreigner? No biggie, we got you! Kindly follow the steps below to have an idea of the procedures.
1. Check your legal status
As a European Union citizen who has lived in the UK before January 2021, you may qualify for the EU Settlement Scheme. But before the commencement of your business in the UK, you must first apply for a work visa.
2. Apply for a visa
It’s stated that you will need to apply for a work visa, therefore you should apply ahead of time to avoid delay. The start-up and the innovator visas are the two types of visas entrepreneurs in the UK can apply for
3. Write your business plan
To successfully open a business in the UK as a foreigner, you need to prepare a business plan. The business plan is essential to enlighten you and decide if your business ideas are feasible and long-term or not.
4. Choose your business structure
Before you begin the process of opening a business in the UK, you need to pick a business structure that best suits your potential company.
5. Pick a company name and address
In case you want to start up as a sole trader, you can register your name as your company name. But, if you are registering for tax purposes, you must include an address.
6. Register with HM Revenue and Customs
Make sure you register your business with HM Revenue and Customs for taxation. Companies House requires limited companies to register.
7. Review any additional rules that apply to your line of business
Lastly, there may be additional requirements based on the type of business you open in the UK such as permits or licenses. Ask questions and research to be sure there are no other rules to observe.
Types of Business in the UK
There are various types of business in the UK and you must choose the type that best fits your company’s structure. Below are the four types of business. Read on!
1. Sole Trader
A sole trader is someone who owns and operates their own business, in other words, a self-employed individual. After paying your company taxes, the remaining profits are yours. But, when the company runs at a loss, you will bear it all by yourself. The duties of a sole trader are as follows.:
- Keep a record of your revenue and expenses.
- File a self-assessment tax return yearly.
- Pay income tax.
- Pay Class 2 and Class 4 national insurance.
A partnership is the process whereby two or more people run a company together, in the form of joint ownership. The structure of business for a partnership is almost similar to that of a sole trader. With the exception that you have other business partners, which can be one or more.
When you open a partnership business in the UK, you will need to prepare a formal agreement. The formal agreement is a written document that will describe in detail the agreed method of splitting profits, losses, and ownership between you. Furthermore, you must ensure the following is in place when setting up a business partnership. Scroll down!
- Choose a business name.
- Choose a nominated partner.
- Register with HM Revenue and Customs (HMRC)
Meanwhile, the nominated partner is the one in charge of administering the partnership’s tax returns and keeping records of its finances.
3. Limited Companies
A limited business is a private company and you’ll need to appoint a director to handle the company in addition to any shareholders. The finances of a limited company are independent of your finances as the founder. Furthermore, let’s assume you are the only staff that the company employed, you can still register as a limited company by making yourself the director.
The director’s duties and responsibilities include:
- Complying with the company’s rules and standards, as outlined in the company’s book.
- Keep track of all the activities of the company and report any changes when necessary.
- File the accounts and company tax returns.
- Pay Corporation Tax.
You can hire employees but a director is solely responsible for the company’s records, accounts, and performance, legally. The company will need to have a personal bank account and it will be subject to corporate tax because it’s a distinct legal establishment. Corporation tax can be registered at the same time that you register your business with Companies House.
4. Limited Liability Partnership (LLP)
If you want to conduct business with two or more individuals, you can form a limited liability partnership. An individual or company termed as a corporate member can also be a member. Below are the necessary steps you should take before opening a Limited Liability Partnership include:
- Choose a company name.
- Have a registered address.
- Have at least two members.
- Have an agreement that backs and shows the running of the Limited Liability Partnership.
- Register the limited liability partnership with Companies House.
Types of Business Visas in the UK
In the UK, you can decide to work as a freelancer, be self-employed, or even establish a business so long as you can work and live in the country legally. Meanwhile, as you are planning to establish your business in the UK, you need to also have an idea of the business visas available. Let’s move on!
If you plan to open a business in the UK as a foreigner, this visa is for you. However, before you apply for the innovator visa, ensure your business idea is unique and endorsed by an approved body. To be eligible for this type of visa, you must have at least £50,000 as money for investment.
You must be able to demonstrate where you got the money and also have enough personal funds to finance your personal needs. Before you either apply for, extend, or switch to the innovator visa, you must demonstrate that you’ve had at least £1,275 in your bank account for 28 days.
2. Startup Visa
The start-up visa is for individuals who have been endorsed by a UK higher education institution or organizations that usually assist UK entrepreneurs. However, you must demonstrate that your business idea is worth it in terms of uniqueness and it has the prospect of enlarging in the future. Application fees for this type of visa are between £350 and £370.
If you obtain a start-up visa, you can remain in the UK for not more than two years. The visa cannot be extended but can be changed into another visa while you’re still in the UK.
If you’re a leader in the academics, arts and culture, or digital technology sectors, the Global Talent Visa is just right for you. You will spend roughly £607 for your application. However, you are free to work in the UK for up to five years with a global talent visa.
Getting a Business Bank Account in the UK
To open a business in the UK as a foreigner, you’ll have to get a separate business bank account unless you’re a sole trader or partnership. However, to keep your accounting operations simple, you should open a separate bank account.
For taxation, all businesses and entrepreneurs in the UK must register with HMRC and be in charge of filing their tax returns. As a sole trader or partnership, all of your profits will be taxed. If you have a limited company or international company with UK branches, you must pay for corporation tax registration.
Your decision to open a business in the UK as a foreigner is great, and as such you will be contributing to the thriving economy. However, several initiatives specializing in different areas like finances, taxation, and business planning, can assist and support your UK business. All the best!