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Starting a Business in the UK: Legal Documents You Actually Need

· 16 min

Note: The following scenario is fictional and used for illustration.

James Chen, 29, spent three months perfecting his sustainable packaging startup's business plan. He registered his limited company online, paid the £50 fee, and received his Certificate of Incorporation within 48 hours. Six weeks into trading, HMRC contacted him about missing employers' liability insurance—he had no idea it was legally required the moment he hired his first employee. The £2,500-per-day penalty shocked him.

Even more concerning: his accountant asked about his shareholders agreement. James had assumed the Companies House documents were enough. Without a private agreement protecting his 60% stake, his two co-founders could outvote him on major decisions.

According to STEP research, 69% of UK family business owners have no formal succession plan outlining what happens to their business after their death. With over 5 million small businesses in the UK, this lack of preparation poses significant economic risk.

This guide covers every essential document you need to start your UK business legally—from company formation to insurance certificates—so you can launch with confidence and avoid costly mistakes.

Table of Contents

Missing critical business documents creates immediate penalties. Late Self Assessment registration brings an automatic £100 penalty, increasing to £10 per day after three months. Operating as a limited company without incorporation exposes you to personal liability for all business debts.

Employers' liability insurance failures carry £2,500 fines per day. Shareholder disputes without proper agreements paralyze businesses—equal shareholders with no agreement often reach deadlock on critical decisions, destroying company value.

Around 40% of UK business owners lack any succession plan. Only 32% of family business owners have an up-to-date will. Without a will, business shares pass under intestacy rules to unintended beneficiaries, potentially forcing sale of viable businesses.

Choose Your Business Structure First: It Determines Everything

Your business structure dictates every legal requirement. Here's how the main options compare:

Factor Sole Trader Limited Company Partnership LLP
Setup Cost £0 (free HMRC registration) £50 (online) / £71 (postal) £0-£500 (agreement costs) £71 Companies House fee
Required Documents Self Assessment registration only IN01, Memorandum, Articles, PSC register Partnership agreement (highly recommended) LLP agreement, designated member details
Liability Unlimited personal liability Limited to company assets Unlimited personal liability Limited to LLP assets
Tax Income tax on profits Corporation tax (19-25%) + dividend tax Income tax (split among partners) Income tax (members self-employed)
Ongoing Compliance Self Assessment tax return Annual accounts, Confirmation Statement, Corporation Tax return Partnership tax return + individual Self Assessment Annual accounts, Confirmation Statement, member tax returns

Quick guidance: Start as a sole trader if testing an idea. Form a limited company if seeking investment or hiring employees. Use an LLP for professional practices. Companies House registers over 5.4 million active companies.

Sole Trader: The Documents You Actually Need

Self Assessment Registration: Register with HMRC by 5 October following the tax year you started. Registration is free. HMRC issues a Unique Taxpayer Reference (UTR) within 10 days.

Business Records: Keep records for at least five years—all sales, income, expenses with receipts, and VAT records if applicable. Paper or digital records both work.

Business Name: If using a business name, check the trade mark register and avoid "sensitive" words requiring approval.

VAT Registration: Register for VAT within 30 days if turnover exceeds £90,000. Voluntary registration is permitted below this threshold.

What You DON'T Need: Companies House registration, Articles of Association, shareholders agreements, or share certificates.

Limited Company Formation: Your Complete Document Checklist

Phase 1: Preparation

Check company name availability on the Companies House register. Secure a UK registered office address. Select SIC codes (up to four).

Phase 2: Companies House Registration

Complete IN01 form online (£50) or postal (£71). The form captures: company name, registered office, directors, shareholders, people with significant control, SIC codes, and share capital.

Memorandum of Association: Legal statement confirming founding members agree to form the company. Auto-generated during registration under the Companies Act 2006.

Articles of Association: Define internal rules (gov.uk guidance). Most companies use Model Articles provided free by Companies House. These are public documents.

PSC Register: The PSC register identifies anyone with over 25% ownership or control. Maintain from day one.

Director Appointments: Need at least one director aged 16+. From November 2025, all directors must verify identity before appointment.

Phase 3: Post-Registration

Certificate of Incorporation: Official confirmation your company exists. Online applications receive certificates within 24-48 hours.

Share Certificates: You must issue these to shareholders within two months. Companies House doesn't create them.

Typical Timeline:

  • Monday: Submit IN01 online (£50)
  • Tuesday: Receive Certificate of Incorporation
  • Wednesday: Issue share certificates
  • Friday: Open business bank account

The New Identity Verification Requirement (November 2025)

The Economic Crime and Corporate Transparency Act 2023 requires all directors and PSCs to verify identity from 18 November 2025.

How to Verify:

Create a GOV.UK One Login account (free). Upload UK passport or biometric ID. Verification usually completes within 24 hours. You receive a unique verification number.

Alternatively, use an authorized corporate service provider (accountant/solicitor) for in-person verification. Costs £50-£150.

When Required:

Existing directors must provide verification number with their next Confirmation Statement. New directors must verify before appointment. You cannot register a company without verified identity.

Shareholders Agreements vs Articles of Association: What's the Difference?

Articles of Association (Public, Required)

Public document filed with Companies House governing internal management. Most companies use Model Articles provided free. Customization costs £100-£500.

Shareholders Agreement (Private, Optional)

Private contract between shareholders covering dividend policy, exit provisions (drag-along/tag-along rights), dispute resolution, non-compete clauses, deadlock mechanisms, and reserved matters requiring unanimous approval. Not filed publicly. Solicitor fees: £500-£3,000.

When You NEED One:

  • Multiple shareholders (especially 50/50 splits): Prevents deadlock
  • Investors involved: They always require one
  • Different contributions: Protects all parties when capital and expertise contributions differ
  • Family businesses: Clarifies management and succession
  • Sweat equity: Vesting schedules protect committed founders

Key Clauses:

Drag-Along Rights: Majority (75%+) can force minorities to sell on same terms.

Tag-Along Rights: Minorities can join majority shareholder sales.

Pre-Emption Rights: Existing shareholders get first refusal before external sales.

Leaver Provisions: Defines treatment of departing shareholders (good vs bad leavers).

Reserved Matters: Major decisions (selling company, large debt, issuing new shares) require unanimous approval.

DIY vs Solicitor:

Use online templates (£50-£200) for two equal shareholders in simple businesses. Use solicitors (£500-£3,000) for 3+ shareholders, investors, IP concerns, or family members.

Business Insurance Documents: What's Legally Required

LEGALLY REQUIRED:

Employers' Liability: Mandatory from first employee. Minimum £5 million coverage. Penalty: £2,500/day. Display certificate where employees can access it. Keep old certificates for 40 years.

Motor Insurance: Required if using vehicles for business. Class 2 insurance covers business use. Minimum £300 fine for non-compliance.

RECOMMENDED:

  • Public Liability: £1-5 million coverage. £100-£500/year. Many clients require proof.
  • Professional Indemnity: £250,000-£10 million. £300-£2,000/year. Essential for consultants.
  • Product Liability: £1-5 million. Required by most retailers.

Keep insurance certificates, policy schedules, and employers' liability certificates accessible.

Licenses, Permits, and Industry-Specific Requirements

Most UK businesses don't need licenses. Specific industries do:

Food: Register with local authority 28 days before trading (free).

Alcohol: Premises license (£100-£1,905) and personal license (£37+). Apply two months before opening.

Childcare: Register with Ofsted. £35 fee.

Taxis: Vehicle, driver, and operator licenses from local authority. £150-£500.

Healthcare: CQC registration for medical practices and dentists.

Professional Registrations: Financial advisors (FCA), solicitors (SRA), accountants (ICAEW/ACCA), gas engineers (Gas Safe Register).

Check Requirements: Use GOV.UK license finder. Penalties for unlicensed trading reach £20,000.

Employment Documents: What You Need Before Hiring

Before First Employee Starts:

Employers' Liability Insurance: Mandatory. £2,500/day penalty without it.

PAYE Registration: Register with HMRC before first payday (free).

Workplace Pension: Set up scheme within 3 months. Minimum 3% employer contribution, 5% employee. Penalties start at £400.

For Each Employee:

Employment Contract: Required on day one. Must include job title, salary, hours, holiday (minimum 5.6 weeks), notice period.

Right to Work Check: Check before start. Penalty: £20,000 per illegal worker. Keep copies for employment duration plus 2 years.

Starter Checklist: P45 from previous employer or completed starter declaration.

Ongoing Compliance:

Payslips: Required on/before payday showing gross pay, deductions, net pay.

P60: Provide by 31 May (annual tax summary).

Records: Keep pay records (3 years), tax records (3 years), right to work checks (employment + 2 years).

Business Succession Planning: The Document Most Entrepreneurs Forget

Without a will, intestacy rules decide who inherits your business shares—ignoring partner interests, employee livelihoods, and business continuity.

69% of UK family business owners have no succession plan. Only 32% have an up-to-date will. Less than 30% of family businesses survive into the third generation.

Intestacy Consequences:

Limited company shares: Children may inherit voting shares in trust, creating deadlock. Unmarried partners inherit nothing—shares pass to parents, forcing business sale.

Sole trader: Business dies with the trader. Goodwill and client relationships lost.

What Your Will Must Cover:

  • Business shares/ownership with clear beneficiaries
  • Executors with business knowledge
  • Business Property Relief planning (100% IHT relief, capped £1m from April 2026)
  • Letter of wishes covering key contacts and continuity
  • Life insurance in trust to fund shareholder buyouts

Your Business Launch Document Checklist

Sole Trader:

  • Self Assessment registration (by 5 October following start)
  • Business records system
  • VAT registration (if turnover >£90,000)
  • Industry licenses (if applicable)
  • Employers' liability insurance (if hiring)

Limited Company:

  • IN01 form + director identity verification
  • Certificate of Incorporation + share certificates
  • PSC register
  • Shareholders Agreement (if 2+ shareholders)
  • Corporation Tax, VAT, PAYE registration
  • Business bank account
  • Industry licenses (if applicable)

If Hiring Employees:

  • Employers' liability insurance
  • PAYE registration
  • Workplace pension scheme (within 3 months)
  • Employment contracts + right to work checks
  • Monthly payroll + annual P60s

Ongoing Compliance:

Sole traders: Self Assessment by 31 January

Limited companies: Annual accounts (6 months), Confirmation Statement (annual), Corporation Tax (12 months)

Succession Planning:

  • Will covering business shares
  • Executors with business knowledge
  • Life insurance in trust (for shareholder buyouts)

Estimated Costs:

Sole trader: £100-£600/year Limited company: £1,200-£7,500/year First employee: +£100-£1,080/year Business will: £99.99 (WUHLD) vs £650-£1,500 (solicitor)

Frequently Asked Questions

Q: What legal documents do I need to start a business in the UK?

A: The documents required depend on your business structure. For a limited company, you need an IN01 form, Memorandum of Association, Articles of Association, and from November 2025, identity verification for all directors. Sole traders simply register for Self Assessment with HMRC and keep business records. All businesses may need additional documents like business insurance certificates, licences, and employment contracts if hiring staff.

Q: How much does it cost to register a limited company in the UK?

A: Online company registration with Companies House costs £50 as of May 2024, while postal applications cost £71. Same-day registration is available for an additional fee if filed before 3pm. These fees cover the basic incorporation documents (Memorandum and Articles of Association). Additional costs may include business bank accounts, accounting software, and professional services.

Q: Do I need a solicitor to create business formation documents?

A: No, you don't need a solicitor for basic company registration. You can register directly with Companies House online for £50. However, solicitors are recommended for complex situations like custom shareholders agreements (£500-£3,000), partnership agreements involving multiple parties, or businesses with intellectual property concerns. Most straightforward limited company formations can be completed without legal assistance.

Q: What's the difference between Articles of Association and a Shareholders Agreement?

A: Articles of Association are a public document filed with Companies House that governs your company's internal management and basic shareholder rights. A Shareholders Agreement is a private contract between shareholders that covers detailed matters like dividend policies, exit provisions, dispute resolution, and director appointments. While Articles are required by law, Shareholders Agreements are optional but highly recommended to protect all owners' interests.

Q: When do I need to register for VAT as a new business?

A: You must register for VAT if your taxable turnover exceeds £90,000 within any 12-month period. You can voluntarily register below this threshold if it benefits your business, for example if you sell to VAT-registered businesses and want to reclaim VAT on purchases. Registration must be done within 30 days of exceeding the threshold to avoid penalties.

Q: What insurance is legally required for UK businesses?

A: Employers' liability insurance is legally required as soon as you employ anyone (except close family members). The minimum coverage is £5 million, though most policies provide £10 million. Failure to have this insurance can result in fines of £2,500 per day. If you use vehicles for business, you also need commercial motor insurance. Other insurance types like public liability and professional indemnity are not legally required but highly recommended.

Q: Do I need identity verification to start a business in the UK?

A: Yes, from 18 November 2025, all directors and people with significant control (PSCs) must verify their identity with Companies House. This became a legal requirement under the Economic Crime and Corporate Transparency Act 2023. You'll need to verify via GOV.UK One Login using a passport or biometric ID, sometimes with a live selfie. This applies to all new company formations and existing directors.

Q: How long does it take to register a limited company in the UK?

A: Standard online company registration typically takes 24-48 hours. Same-day registration is available for an additional fee if you apply before 3pm UK time. Postal applications take longer, usually 8-10 days. Once approved, Companies House will issue your Certificate of Incorporation, which you'll need to open business bank accounts and begin trading.

Q: What happens if I start trading without registering my business?

A: For sole traders, you can start trading immediately but must register for Self Assessment with HMRC by 5 October following the end of the tax year in which you started. Late registration can result in penalties. For limited companies, you must register with Companies House before trading using the company name. Trading as a limited company without registration is illegal and can result in personal liability for business debts.

Q: Should a business owner have a will, and what documents are needed?

A: Yes, business owners absolutely need a will to ensure business succession and protect their families. Without a will, your business shares could pass under intestacy rules to unintended beneficiaries, potentially forcing a sale or causing family disputes. Your will should include clear instructions for business shares, appointment of executors who understand the business, and consideration of business property relief for inheritance tax. Only 32% of UK family business owners have an up-to-date will, despite 69% lacking any succession plan.

Conclusion

Starting a business in the UK requires careful attention to legal documentation from day one. Your business structure determines every subsequent requirement.

Key takeaways:

  • Sole traders need Self Assessment registration and business records; limited companies require Companies House registration, identity verification, and ongoing compliance
  • Employers' liability insurance (if hiring) and business motor insurance (if using vehicles) are legally required
  • Specific industries face strict licensing requirements before trading
  • Employment triggers multiple obligations: insurance, PAYE, pensions, contracts, and right to work checks
  • 69% of UK family business owners have no succession plan—creating massive risk when owners die unexpectedly

Missing a single required document can destroy years of hard work. Without a will, intestacy rules distribute your business shares without regard for continuity, partners, or family needs.

Need Help with Your Will?

As a business owner, creating a will that properly addresses your business interests is essential for protecting everything you're building. The guidance above helps you understand how business succession works and why having a comprehensive will matters from the moment you start trading.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete will (legally binding when properly executed and witnessed) plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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