Why do I need to register a company through Companies House?

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So, I’m getting ready to start a new jewellery business. I have been on Etsy for years, but am finally ready to take the plunge and do it for real as a proper company. To do that, it looks like I need to register as a company with Companies House. Does anybody know if this is optional, or why you actually have to do it?

Answers

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You have two options when setting up a new business - register a private limited company or register as a sole trader. To set up a company, you must incorporate (register) your business with Companies House. This is compulsory because, unlike sole trader businesses, companies are individual legal entities and there are certain reporting requirements you have to satisfy for both Companies House and HMRC on a regular basis.

The benefits of registering a company are:

  1. Limited liability - you will not be held personally responsible for any business debts. The only money you risk losing is the money you invest in the business. As a sole trader, your personal liability is unlimited.
  2. Professional reputation - companies are looked upon as committed businesses due to the level of compliance they have to adhere to.
  3. Integrity - Companies must disclose information to the public regarding business activities, finances, ownership and management, and legal compliance. This transparency increases trust and confidence.
  4. Tax advantages - Companies pay 20% Corporation Tax on business profits; sole traders pay 20-45% Income Tax and National Insurance. As a company owner, you can pay yourself tax efficiently by taking a director’s salary and shareholder dividends.

To run your business as a sole trader, you must register with HMRC for Self-Assessment (self-employment). Sole traders do not have to register with Companies House - you just have to send one tax return to HMRC every year and pay Income Tax and National Insurance on your profits.

a year ago
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I am tenant of housing association not registered at companies house despite it being a ltd company.

4 months ago
 

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