A Step by Step Guide to Starting a Business in the UK as an EU Migrant
Last year, a report issued by Rapid Formations, stated that European Union migrants generate an incredible £463 per second in revenue for the exchequer. Far from relying on benefits and social housing, EU nationals who chose to move to Britain make an overwhelmingly positive contribution to the economy.
Well-educated and hard-working EU migrants are finding that Britain contains a wealth of entrepreneurial opportunities. However, starting a new business in a foreign country can be daunting if you are unfamiliar with the rules and regulations you need to follow to get your enterprise up and running, so we have created this handy, step-by-step guide on how to launch your own business venture in the UK.
Step One – Cement your Immigration status
With the EU referendum vote looming, EU citizens who wish to launch a business in the UK may wish to obtain a registration certificate. Although having a registration certificate is not compulsory, it can make it easier to obtain certain services and benefits.
A registration certificate must be issued immediately on application and production of:
- a valid passport or national identity card, and
- proof of being a ‘qualified person’.
- a jobseeker
- a worker
- a student
EU nationals will acquire permanent residence after exercising EU treaty rights in the UK for a continuous period of five years. This will prove your right to reside in the UK for as long as you desire.
Having achieved permanent residence, an EU citizen can then apply to naturalise to become a British citizen after six years in the UK; as they would be deemed to be a permanent resident after five years and the law requires them to have held permanent resident status for at least 12 months.
Step Two - Decide how you plan to set up your business
If you are setting up a business in the UK you will need to decide how to structure your business. This is important for tax planning, as well as putting in place a model that allows you to grow your business at the pace you desire.
UK law provides the following business structure models:
Sole-trader is the simplest form of self-Employment and is easy to set up. You need to inform Her Majesty’s Revenue & Customs (HMRC) that you are a sole-trader but other than that there is no additional paperwork required.
Sole-traders are taxed on the profits they make and must submit a self-assessment tax return every year.
The main disadvantage of the sole-trader model is you are 100% personally liable for any debts and contracts taken on by the business. It is also difficult to obtain finance if you wish to grow your enterprise.
A sole-trader structure suits people who provide a specialist service such as plumbers, hairdressers or photographers.
Are you going into business with one or more others? Then setting up a partnership may be the best legal structure for your venture. In a partnership, each partner takes a share of the profit and expenses are shared. A self-assessment form must be filled out annually and each partner pays tax on his or her profit.
Like a sole-trader, a traditional partnership provides no limitation of liability, so if the business goes bust, you will be personally responsible to your creditors.
It is important that you and your partners draft a detailed partnership agreement, that includes a clause outlining a disputes resolution clause.
Limited Liability Partnership (LLP)
An LLP is a partnership which provides the partners with protection from unlimited liability. Introduced in 2001, it is an ideal set-up for the types of professions that normally operate as a traditional partnership, such as solicitors, accountancy firms and dental practices.
LLPs operate under the same profit-sharing and tax liability rules as traditional partnerships, but each partners’ personal liability is limited. Unlike a traditional partnership, accounts must be filed with Companies House anually.
A limited company has special status in the eyes of the law. These types of company are incorporated, which means they have their own legal identity and can sue, enter into contracts or own assets in their own right. The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.
By forming a company, you limit your personal liability. It is also the preferable legal structure if you plan to grow your business rapidly, as it is easier to obtain funding through investments, grants and loans if you are running a company.
A company can either be private or public. Public companies are large organisations that trade shares on the London stock exchange.
Rather than set up a new venture, you may opt to open up a branch of a well-established business. This is known as franchising.
A franchise is a joint venture between:
- A franchisee, who buys the right from a franchisor to copy a business format; and
- a franchisor, who sells the right to use a business idea in a particular location.
The advantage of buying into a franchise is you are already using a well-known business model and all the marketing and branding is done for you. The franchisor will normally provide in-depth training to you and your staff and provide you with an excellent support structure.
Banks are more open to lending to those who have invested in a franchise as they have a proven sales track-record.
Step Three – Choose the right advisors
When starting your own business, it is far easier (and more cost-effective in the long-run) to select the right advisors to help you manage the accounts, administrative and legal matters. As a business owner, your most valuable asset is your time, so use it wisely. Having a good accountant to work out your company accounts and taxes, outsourcing your administration work and having a good lawyer who you can trust to give you expert advice will go a long way to increasing your chance of success.
Launching a start-up business is hard work and long-hours, but the success of many EU nationals has demonstrated that the UK provides unlimited opportunities and excellent market conditions to make the initial struggle well worthwhile.