How to start a business - what you need to know

Starting a business can be daunting, even with shows like The Apprentice and Dragon’s Den making it look glamorous. While it comes with challenges, running your own business can also be hugely rewarding. Think more freedom, creativity, and ultimately, the chance to do what you love.

If you’re looking to join 4.39 million people in the UK who are self-employed, it helps to know the key steps to start a business.

A step-by-step guide on how to start your own business

From planning your idea to setting up your legal structure, registering with HMRC, and managing your finances, this guide covers everything on how to start a business. 

1. Get a plan in place

Ever heard the saying “by failing to prepare, you’re preparing to fail”? 

Putting a solid business plan together can help you work out whether your idea is a sensible one. It forces you to think critically about what you're offering, who your customers are, how you'll reach them, and what your finances will look like.

Your plan can also convince investors, partners, or potential employees that your business is viable and likely to be profitable and successful.

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2. Choose your structure

Choosing the right legal structure affects your tax, liability, and registration process. The most common options are:

Sole Trader

• Easy to set up and manage.
• Register online via Gov.uk or by phone with HMRC.
• Once registered, you remain self-employed until you choose to stop, no yearly re-registration needed.

Limited Company

• Choose between a Private Limited Company (Ltd) or a Public Limited Company (PLC).
• Most freelancers, contractors, and small businesses opt for a Private Limited Company. PLCs require at least £50,000 in share capital, two directors, two shareholders, and a company secretary.
• With Crunch, you can form a company online in around ten minutes. Companies House often finalises it then within hours. 

Once your company is set up, you can calculate dividend tax, capital gains tax, and plan your first tax return using Crunch resources. For a deeper dive, check out our guide:

3. Choose a name for your business

Choosing a business name is a big step and it can actually be a fun one. You’re not limited to using your own name either. Your business name can be almost anything, as long as it stays within the rules.

You only need to register an official company name if you’re setting up as a limited company. That said, many businesses choose to trade under a different name regardless of their structure.

When picking a name, it’s worth thinking ahead about your online presence. Is it easy to spell and remember? Would someone naturally search for it? And just as importantly, is the website domain available? Getting this right early can save you a lot of hassle later on.

There are a few rules you need to be aware of and your chosen business name may already be taken, so our article ‘How to come up with a great company name’ is a good place to start. It’s worth checking Companies House to see if any other business has the same name. Making sure that nobody else has the same name is vital for trademark reasons and you also don’t want to confuse your customers.

4. Register your business 

Your choice of how to structure your business will have an impact here since each legal structure requires a slightly different registration process.

Sole Trader

Registering as a sole trader is the simplest route, which only requires you to choose a business name and register with HMRC as self-employed for your annual Self Assessment (which is how you’ll pay your tax). Once this is done, you’re all set. 

Limited Company

Registering and setting up as a limited company is a little more complex, as there are a few more hoops to jump through.

You can form a company online at Companies House, or save yourself the hassle and use our Crunch Formations service. Want to see if your company name is available? Click here to check it out.

5. Think about insurance

While not necessarily a legal requirement (although it is in some industries – something else you’ll need to check out), it’s probably worthwhile exploring the different business insurance options available as - despite involving an initial outlay - some investment here can save you considerable cash.

Business insurance comes in many shapes and sizes - you can’t just buy “business insurance” and be done with it. You’ll need to pick and choose what policies are a good fit for you and your business. Professional Indemnity, Public Liability and Employers’ Liability are just some examples of covers that you might want to consider.

Professional Indemnity Insurance

This covers you if a client suffers financial loss as a result of your professional advice or service. For example, it could protect you against a compensation claim from a client for negligence or mistakes, covering the potentially expensive legal costs.

Professional Indemnity Insurance is not required by law but is recommended for more risky professions, as it will basically cover you for any mistakes you might make.

Public Liability Insurance

Although not required by law, this kind of insurance is essential if members of the public will be interacting with your company in some way - from customers receiving deliveries, to clients visiting your office or work premises. If you work from home and meet clients at your home office then you should also consider getting this insurance. A Public Liability Insurance policy will cover you if someone is injured in some way by your business, or if you damage third party property when carrying out work.

Employers’ Liability Insurance

You’ll need to get this if you’re employing staff, as it will cover your legal liability for injury or death to employees, including claimants’ costs and expenses. Employer’s Liability Insurance, for instance, is compulsory for any business that has one or more employees, whether they are permanent, part-time or temporary.

Other insurance

Aside from these common policies, there’s also things like tax liability cover, legal expenses, and contractor sickness cover that might appeal depending on your circumstances.

You might also want to consider life cover to protect yourself or your loved ones should the worst happen. 

If you think you might need cover, we've got a great partner, Qdos, who offers a range of bespoke insurance packages designed to protect your business against any accidents or unpredicted circumstances. They also offer a 15% discount to all Crunch clients.

6. Build up your online presence

Create a Website

Even a simple WordPress site gives potential customers somewhere to find you, learn about your services, and make contact. Domains are cheap, and platforms like WordPress, Wix, or Squarespace make setup straightforward.

Although it is possible to start a business without a website, it can offer other challenges. If you’d like more information, we’d recommend checking out our article “How to start a business without a website”. 

Social Media

Set up separate social media business pages on Facebook, LinkedIn, and Twitter. Keep your personal and professional lives distinct.

Connect with Peers

Networking can open doors to leads and collaborations. Many events and meet-ups have moved online, such as Facebook Groups or regular virtual meet-ups, making it easier than ever to connect with other self-employed professionals.

7. Boost your rankings

You probably know that appearing at the top of search engines for certain terms can be extremely lucrative in terms of traffic and sales since you’re what people see when they’ve already made the decision to hire or buy.

To get there you need to ensure your content is rich, engaging and informative while connecting with peers to ensure you have links on other websites too. You can regularly update your blog, add your business to Google Places, or invest a little more money and enlist a freelance SEO expert to help.

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8. Enhance your reputation

When people search for a product or service online, they utilise the wealth of information at their fingertips and delve a little deeper than if they were shopping on the high street. They’ll research you and your brand, see if you deliver what you promise and have knowledge on the area you’re trading in. 

This is why it’s not only important to blog on your website  (or guest blog on other websites) with informative articles and advice, but also to encourage feedback and reviews online to confirm your position as a leader in your industry.

9. Manage your finances

Getting your finances in order early will save you plenty of headaches later. Here are some tips to consider: 

Be transparent

Anyone can be investigated by HMRC. Depending on what you’ve done, you could face anything from penalties and fines to jail time. Transparency isn’t just best practice for your taxes, it’s best for your business, too. It forces you to keep track of all the money that’s coming in and going out. You can then use this information in helpful ways, like planning business strategies or reducing the amount of tax you need to pay.

Keep records updated

Set aside an amount of time each week to do your books - maybe even set yourself an alarm on your phone or a recurring calendar booking. Remember, as soon as you let your accounts get out of hand, a backlog will begin to form that could deteriorate into a massive (and potentially very expensive) headache.

Use your numbers

Tracking is one thing, learning from them is another. Look at your income and expenses to spot opportunities to save or grow. Crunch Knowledge and HMRC have plenty of practical guides to make this easier.

10. Get paid

One of the biggest challenges you’ll face working for yourself is balancing your income and outgoings - what’s known in the business world as “cash flow”. Clients, especially more high-profile ones, are renowned for not paying up on time.

The first step is to make sure you send out a proper invoice. We’ve got some handy invoice-templates for you to download for free. Or our free invoice software is great for sole traders, you can send and save invoices and client details to make your invoicing quick and hassle-free.

At Crunch we offer great value accountancy packages for limited companies or for sole traders, coupled with all the advice and support you need from our expert client managers and accountants. Our software makes it easy to issue invoices anytime anywhere and set up automatic payment reminders, plus much, much more.

The key to getting paid on time is to be proactive. Here’s a simple timeline to help you stay on top of outstanding invoices:

To help you out, here are some handy late payment reminder letter templates you can send out to your tardy clients.

Please note, however, that these letters are a basic guide and your company may have other procedures to deal with defaulting customers. If so, include these in your requests for payment. If your contract includes provisions relating to the transfer of assets or intellectual property these should also be included.

Stop reading this and get on with it!

In terms of the initial paperwork that’s about it – at this point, the only thing left to do is to get out there, generate some leads, and start building your business. Starting a business can be daunting, but you’re on the right track by getting stuck into some research.

Belief and hard work will go a long way in this endeavour. Just remember that Rome wasn’t built in a day - starting a business from scratch is a tricky old task, but completely worthwhile when you start to build up some steam. 

Don’t forget, our Knowledge section contains even more handy articles, downloadable guides, and free tools and resources to help you and your business thrive.