Remember, a business name is the name you trade under. Someone who is self employed (EG a sole trader) doesn’t have to have a business name (you can trade under your own name, instead). A limited company can trade as itself, or under a business name.

Rules for displaying your name

If you do use a business name, there are rules you must follow. Essentially, you must disclose the name and address of the person or company behind the business name.

Rules for sole traders

You need to declare your (and any partners’ if you’re in a partnershp) name and addresses on:

• Things like orders, invoices, letters and receipts - any business documentation in other words.
• Any website that the business operates.
• The place where you run the business (EG where you deal with your customers or your suppliers).

Rules for limited companies

You need to show your limited company name outside every place of business - even if this is your home (EG if you’re a director and you run the business from home).

You need to give the company name on all paper and electronic business communication - so letters, invoices, emails, orders and so on. You need to give your registered address, registered number and place of registration on all letters, emails and orders .

If you have a website, it will need to give the full compnay name, registered address, registered compnay number, and place of registration. You would also need to declare if the company was being wound up.

You don’t NEED a business name if you’re a sole trader or partnership - you can just trade under your own name. If you choose a business name, there are rules to follow when choosing one.

And if you’re a limited company, there are even more rules when choosing a name - plus you can trade under a different business name to your company name.

The rules on choosing a business and company name are all explained below. You should also check our advice on using business and company names.

Tips on choosing a business name

• What type of name do you want? Do you want something with your name in (Smith and sons), something that describes what you do or where you operate (Hackney Home Decorators) or something abstract (Orange, for instance).
• Make it memorable. Whatever you choose, try to make it easy to remember (Smith and sons probably doesn’t cut it …)
• Can you say that again …? Try to avoid anything that’s difficult to say or to spell. And short names will often work better than long ones (think about them appearing in adverts etc).
• Do you want a web address? If you want a website, make sure you choose a business name that still has that domain name free. If you end up having to use a strange extension like .biz or .ltd.uk, you won’t get easily found in search engines. Try to get .co.uk - and don’t get round the problem by abbreviating your name (EG Platinum training solutions is at www.platinum-ts.co.uk, which isn’t necessarily obvious).
• Test it Try it out on a few people - not just family and friends. Wander round a local cafe, ask people for help, tell them the company name and ask them what they think it means / conveys etc.
• Think about the future. It you call your company after your local village, what happens when you want to expand?

Choosing a business name - sole traders and partnerships

If you choose a business name (rather than operating under your own name(s)), then:

• It can’t be offensive
• It mustn’t contain the words Ltd, PLC etc (so you can’t imply your a limited company as you’re not).
• It must comply with the rules on senstive names (so no pretending you’re the National Federation of Charities).
• It mustn’t be the same as an existing trade mark or another local or national company (you can’t trade as Marks & Spencer, and you can only trade as A1 decorating in your town as long as there isn’t a business called that already there). Check the phone book, Companies House and the lists of trade marks.
• You must follow the rules on using a business name.

Choosing a company name - limited company

The rules are stricter for a limited company name. All the ones above apply - except the one about Ltd. You must have Limited / Ltd at the END if you’re a limited company.

You have to register a company name and it has to be unique - so you need to make sure there isn’t an existing company with a similar name (and, for instance, just one letter different may not be sufficient).

This is a stricter requirement than with business names, where you can get away with similar names as long as you don’t trade in the same area.

You can see the full rules for company names (and check the register for existing names) at Companies House. But remember, you can trade under a different business name to your company name as long as you follow the rules.

Example of similar names

This is the example Companies House gives of similar names.

If the name ‘Hands Limited’ is already registered, then these would be rejected:

• H and S Limited (or Ltd)
• H & S Limited (or Ltd).

This is separate to registering at Companies House (although Companies House will tell HMRC as well, you must do it yourself anyway using the right form).

Introduction pack

HMRC will send you an Introductory Pack. This will include various forms and notes. It will also have form CT41G - New company details.

Send this to your Corporation Tax office a soon as you can - you must do it within 3 months.

What CT41G aks for

The form’s not that complicated It asks for:

• Your company’s registered name and number
• The registered and business address(es)
• What your business does
• Your accounting year (talk to an accountant before setting this).
• Directors’ name and addresses.

You can also tell HMRC if the company is dormant (ie not trading yet).

Appointing an accountant or agent

Get things wrong, and you could end up paying too much tax sooner than you need (or too little, too late - which can mean a penalty).

Fortunately, you can get an acccountant or other tax adviser (what HMRC calls an agent) to sort all this our for you.

You’ll need to tell HMRC about your agent. He (she or it) can then file your returns for you - however, you are still legally responsible for getting the inforamtion right, so you’ll need to check returns etc.

To authorise an agent, you can do it online (if you register for the HMRC online services - which is a good idea as youc an sort out your VAT that way, too) or by downloading form 64-8 and posting it.

You must pay it within 9 months of the end of your company’s corporation tax accounting period (although you get an extra 3 months to file your corporation tax return).

Your corporation tax accounting period

You pay corporation tax on the taxable profits you earn in each corporation tax accounting period.

This is usually a 12-month period that matches your company’s financial year - although they can differ when you start up (when your corporation tax accounting period may be longer than 12 months) or if you change your financial year dates.

Your taxable profits

Your taxable profits are your profits before tax minus any relevant allowances, charges, reliefs and losses.

Corporation tax rates

There are two rates of corporation tax in 2009-10:

• Lower rate - 21%
• Upper rate - 28%

The lower rate is paid by companies whose taxable profits are less than £300,000.

The upper rate is paid by companies whose taxable profits are more than £1.5 million.

Between those two figures, marginal rate relief is available (this is to avoid companies paying 21% tax on £299,999 but 28% if they made £2 more profit (£300,001).)

You can see a table of current and past rates and limites on the HMRC site.

Keeping records

Get an accountant to do your corporation tax for you. It will be much simpler.

Either way, you need to register the business with HMRC - this is a legal requirement. If you do use an accountant, you can tell them who it is.

Flat rate VAT scheme rates

Don’t forget, you get a 1% discount in the first year.

Business rates

If you’re tapping away at a computer in your spare room, you’re unlikely to have to pay business rates. The main test is whether the area you’re doing your business is also used for domestic purposes.

Licences and permissions

Even if you work from home, some types of business require local authority permission - acupuncturists and childminders, for instance. Citizens advice has lists of what activities need licences in England, Wales and Scotland.

And if you’re going to make a lot of noise or do building work to accommodate the business. Talk to your local planning department (start at the government’s Planning Portal - the government’s one-stop-shop for planning).

Allowable expenses

You can claim some of the costs of running your business from home. These costs are either fixed costs or running costs and include rent, rates, heat, light, utilities, broadband, repairs and insurance. However, it’s only the business part of the costs you can claim (you can’t just halve it between personal and business use).

See this guidance from HMRC if you’re a director of your business (ie you’re set up as a limited company). You need to use this advice if you’re self employed.

The area is a bit of a minefield - many people starting out in business may want to limit themselves to claiming £3 a week (see this guidance from HMRC).

Whatever you do, talk to an accountant. And be careful - don’t try to make out half your home is an exclusive office or there will be implications for business rates and even capital gains tax when you sell your home. There’s a guide to expenses here.

The questions isn’t that simple (it costs more to run a limited company, for a start), and there are other considerations, such as your personal liability for the business’s debts.

But a limited company is likely to give you more flexibility to pay yourself in a tax advantageous way.

That’s because if you’re self-employed as a sole trader, YOU are the business. If your business is a limited compnay, it is seen as a separate legal entity. With a limited company, you can choose when to pay yourself a dividend (deferring it to a later tax year, for instance).

Also, if you pay yourself a dividend (as opposed to just a salary), you can reduce your national insurance bill.

All in all, for an income of around £50,000, you might save £3,000 to £4,000 in income tax and NI, but pay an extra £500 to £1,000 in fees, be being a limited company.

The best advice here is to talk to an accountant.

Which one you choose will dictate what sort of records you have to keep and submit, your liability for the business’s debts, and how you manage tax.

Company: pros and cons

Read more about starting up as a limited company.

The pros

• Your liability is limited to whatever money you’ve put into the business.
• You may be treated more seriously as a business, although this will depend on your area of business (most people won’t care if their window cleaner is a limited company, for instance).
• You may be able to arrange tax advantages compared with being a sole trader.

The cons

• There is more administration to carry out in terms of paperwork and filing. You’re likely to end up paying professionals like accountants to do this for you.
• There are legal obligations on directors, and you can be fined if you don’t carry them out.

Partnership: pros and cons

You can set yourself up as a standard partnership or as a limited liability partnership (LLP).

The pros

• They are easier to set up and run than a limited company.
• If you do down the LLP route, your liability is limited.

The cons

• The extra benefits of an LLP are offset by some extra duties. There are more forms to fill in, and some members will have to shoulder extra responsiblity as the ‘designated members’.
• If you’re a standard partnership, your liability is NOT limited - you can be pursued for the partnership’s debts.

Sole trader: pros and cons

Read more about starting up as a sole trader. You’ll need to register as self employed.

The pros

• You are your own boss - you make all the money, and you make all the decisions.
• Less form filling means you will spend less on accountants bills.

The cons

• You are responsible for everything - including any debts the business runs up.
• You have fewer options to minimise your tax bill.
• In some industries, you may not be treated as seriously as a limited company.

How and when to register

You should do this straight away, or you risk a penalty.

There are three ways to register: a form, online or by phone.

Pros and cons of self employment

Advantages of self employment

Self-employment is the easiest way to start a business - there are far fewer reporting requirements for a sole trader than a limited company, for instance. And accounting is much easier (and hence bills for accountants are lower).

Disadvantages of self employment

However, if you’re self employed then YOU are the business. Its profits are your income (so you may not able to easily minimise your tax bill). Its debts are your debts. And its mistakes are your mistakes - you can be sued and made personally liable if something goes wrong.

More information

For more information on the rules about income tax, NI, administration and so on, either read the advice on being a sole trader or a member of a partnership.

There are some cases where HMRC won’t treat you as self-employed.

What you must do

• Register as self employed with HMRC.
• Get a bank account so you can keep your business income and spending separate.
• Keep records of your income and spending (keep all the paperwork, and record it in a spreadsheet)
• Submit an annual tax return each year.
• Pay class 2 and class 4 National Insurance Contributions (NICs).

What you might want or need to do

• Decide on a name for your company (if you don’t want to trade as just your own name)
• Get business cards, headed paper etc printed.
• Think about using an accountant (especially if you’re employing staff who you need to pay PAYE for).
• Register for VAT if your turnover is expected to be over £68,000 (2009-10).
• Get permission or a licence from your local authority for certain types of business.
• Take out any relevant insurance (EG public liability insurance or employer’s liability cover).