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By miguel-ingles
- In Uncategorized
Many entrepreneurs from all around the world establish their businesses in the UK. This is due to certain economic and legal benefits that the country offers. However, in many cases, several inconveniences that can hinder the economic activities go unnoticed. In this article, I explain the pros and cons of forming a company in the UK.
Pros and Cons of Forming a Company in the UK: Advantages
Ease of Registering a Company in the UK
The process of registration of a business with the Companies House stands out for the little paperwork required and for its low registration fees. You can complete the process both online and by mail. The internet option will cost 50 GBP and that for messaging, 71 GBP. In addition, the digital process can take less than 24 hours and that by mail, about 10 days.
You should consider that not all corporations have to register with the Companies House. This is the case of sole traders and partnerships, which lack legal personality. On the other hand, companies with private or public limited company or limited liability partnership legal structures must sign up.
Easy Access to Financing for Forming a Company in the UK
There are many options with which a company can raise additional capital in the British country apart from bank loans. In the private funding part, we have angel investors and venture capital funds. In both cases, in exchange for the money they contribute, they receive shares of the business.
Additionally, the British government makes available to companies a series of financial subsidies and grants. However, the money that the companies will receive with these options will be less than with private financing alternatives.
At last, crowdfunding campaigns are also popular. This way of obtaining funds consist of raising capital without having to resort to large financial intermediaries, such as banks. Instead, individual donors (called backers) are the ones who contribute the money altruistically or in exchange for some kind of reward.
Low Corporation Tax
In comparison with other European countries, the Corporation Tax rates are lower in the UK. In addition, it also offers certain benefits to companies. For example, a company can deduct its ordinary expenses from its annual income or, if the company invests in research and development, it can apply for tax credits and reliefs. In this article, you can check the different rates of the British Corporation Tax.
Pros and Cons of Forming a Company in the UK: Disadvantages
Economic Uncertainty after Brexit
The UK’s departure from the European Union has caused uncertainty in the country’s trade and economic landscape. It is true that some measures have been taken to mitigate it effects and that many of the commercial agreements with Europe are still in force. Nonetheless, British companies face new barriers, such as the payment of tariffs or complying with new product safety measures.
High Operating Costs and Income Tax
The business hub of the UK is London. In the British capital, operating costs are high, so not all businesses can afford to cover the prices of renting an office, employees’ wages and other services. Some enterprises decide to settle in other cities, such as Birmingham. However, in the long run, this can lead to logistical problems.
On the other hand, just as the Corporation Tax stood out for its low rates, the Income Tax does the opposite. The percentages that citizens must pay may reach up to 45% of a person’s annual income. You can check the different sections on this website.
High Competition
As I previously mentioned, the UK, and especially London, is a hub for companies of all kinds. For this reason, it can be difficult for a business to stand out from the competition of its business sector.
In order to differentiate itself from corporate rivals, it is recommended to conduct market research to find uncovered niches. In addition, the directors should also devote resources to research and development to design innovative solutions to recurring problems. Finally, it is essential to design marketing campaigns that expose the benefits that can be granted to customers by using the company’s products.
In ukstartcompany, you will find information about how to establish, register and operate companies with different legal structures and business activities in the UK.