Sunday, May 19, 2024

How to Start a Business in London: Everything You Need to Know

Ready to start your own business?

London is a global hub for entrepreneurship, innovation, and opportunity. With a diverse market, supportive business ecosystem, and access to a world-class talent pool, it’s no wonder many people aspire to open a business in London.

With a gross value added forecast rate of 1% in 2024 and 1.6% in 2025, London

This city offers fertile ground for startups and established businesses alike, providing a launchpad for reaching a global audience.

This guide will cover all of the essentials you need to know on how to start a business in London.

We’ll explore the legalities of business formation in London, explore financing options, and guide you through the process of finding the perfect location to set up your business idea.

Whether you’re a seasoned entrepreneur or a first-time business owner, this comprehensive guide will equip you with the knowledge and resources you need to navigate the exciting journey of opening a business in London.

Let’s begin your journey to a successful business.

  • London generated over £90bn in economic output annually

  • The city of London has 615,000 workers

  • Home to a young, highly skilled, and international workforce across the UK

  • The UK has a ranking of 8 (very good) for ease of doing business

  • A corporate tax rate of 25%

(Sourced from CityofLondonTaxSummaries & WorldBank )

Business Culture in London

There are a few nuances that distinguish London’s business culture, and understanding them will help you develop relationships. When you’re thinking of how to start a business in London, see if you’re culture ready.

Communication

Londoners are known to be polite but quite direct in business communication, and they appreciate it when you reciprocate. Think of it as efficiency and simply getting to the point.

Skip the superlatives, flowery language and extensive small talk before discussing the important matters at hand. However, this doesn’t mean you should forget to keep your interactions formal and respectful.

You’ll typically be using titles and surnames until a familiarity or connection is made where it’s friendlier.

Business Etiquette

  • Arrive on time: As with any business landscape, Londoners place value in being on time for meetings and lateness will be perceived as rudeness.

  • Outfit: The overall attire leans toward a conservative style. For example, we recommend businesses in the law or finance sector wear suits.

  • Meetings: Keep it simple and professional. Set an agenda, exchange business cards in your first meeting and take notes to demonstrate you are listening.

  • Gift Giving: It’s uncommon to gift something elaborate in London’s business environment, but something small is appreciated after forming a strong work relationship.

Business culture is always evolving.

Small businesses starting off can learn by observing other professionals and getting advice from mentors based in London.

Networking

Small businesses and entrepreneurs will love the broad spectrum of networking opportunities in London. Events within specific sectors and associations are frequently hosted, which can be beneficial for gaining partnerships or knowledge.

Londoners will appreciate a genuine relationship over a transactional approach.

Legal Requirements for Starting a Business in London

Navigating legal requirements and understanding them thoroughly is a must if you plan to open a small business, enterprise, or any form of company. 

Your business plan should include extensive market research to safeguard your journey as ‘your own boss.’

Sole trader, partnership, limited company or another entity.

Use the official UK registrar to formalise your business.

Ensure you have industry-specific permits if required.

Complete your tax registration with HMRC.

Choose A Business Structure

As a new business, it’s paramount to select the right legal structure because this will impact taxes, personal liability, and administrative requirements. There are several structures you can explore, but we will cover the three main business structures you should consider.

Sole Trader

Commonly used by small businesses or solopreneurs, a sole trader is the easiest structure for opening a business in London.

The sole trader structure is used by dropshipping businesses with e-commerce stores or freelancers who are photographers, writers, graphic designers, and more.

Pros:

  • Easy to set up, with total control and very minimal paperwork.

  • Best for a small business owner with low risk or solo entrepreneurs testing their new idea.

Cons:

  • Your assets may be at risk if your business faces debt (unlimited personal liability).

  • Potential for higher income tax rates.

Overall, the sole trader structure is great for individuals who want to market-test a new idea or establish a small business with minimal risk.

Partnership

As a partnership business in London, two or more individuals are required to agree on sharing ownership, profit, and responsibilities. Pooling resources and expertise gives you an advantage, but you need to be prepared for jointly liable debts or potential disagreements.

Pros:

  • Share all costs and responsibilities to lower your risk.

  • Great for multiple founders wanting direct involvement in operations.

Cons:

  • All partners become liable for debt, and there is a chance of disagreement.

  • All earned income is split.

Limited Company

A step up from being a sole trader or in a partnership is the limited company structure. This enables you to create a separate legal entity for your business, which mostly guarantees the safety of personal assets from business debt.

Your business will be entitled to tax advantages and greater credibility from a client’s perspective, but keep in mind this comes with more administrative complexities and some financial information becoming public.

Pros:

  • Generally, it is more tax-efficient and creates an established image for clients.

  • Personal asset protection.

  • It is ideal for a business plan that wants to limit personal risk, strong growth and seek investment.

Cons:

  • The complicated setup process and your financial information may be publicly accessible.

There is no right or wrong structure when opening a business in London.

Select one that seems the most relevant to your current situation and factor in growth potential. Always refer to UK Government resources and Companies House for more information on registering your business.

Important Financial Considerations

The least entertaining part, yet most important, is the financial considerations when establishing your business in London. 

For sole traders simply testing an idea, they may refer to their bank account, but when starting a small business or larger, there is more to consider.

The most common expenses include:

  • Registrations

  • Licensing

  • Professional services

  • Initial operation expenses

  • Office space 

On average, the startup budget for launching is £5,000, and the startup spends around £22,756 in its first year. Your numbers may vary, but we have provided some key points for you to factor in.

Legal and Admin

Setting up a limited company in London with Companies House requires a fee, and this will vary based on how you submit the application.

It comes down to fees for registering trademarks or patents if you wish to protect intellectual property, with the prices varying based on the complexity. Even if you are a small business, we highly recommend speaking with a solicitor or accountant to navigate this tricky field.

Licenses and Permits

Businesses in London might need a license and permit, but this heavily depends on your industry. For example, selling alcohol or gambling will require specific licenses, and the cost can range from minimal to several hundred pounds.

It’s best to flesh this out in your early stages when formulating a business idea to avoid any penalties.

Physical Space

Are you operating remotely or working from an office space?

Rental costs fluctuate significantly across London neighbourhoods, and factors like location, size, and amenities must be considered. Some landlords might demand that you rent several months in advance. However, we will discuss flexible workspace solutions in more depth.

Website and Marketing

Your website is often a customer’s first impression, and many young buyers in London make a decision within minutes of looking at it. Designing a professional website can be a wise investment before officially launching your business, with common practices such as allocating funds for targeted online advertising and SEO.

Find the Right Office Space

How do you envision your office space in London? 

Perhaps you run a business in the financial sector and have a bustling central location that imbues credibility, or you offer inventory management software while operating in a coworking space.

Traditional Office Space

The standard office space is fantastic for creating a dedicated workspace where you can develop a team culture and have strong control over your branding, privacy, and office design.

However, for individuals who are fresh opening a business in London, such as entrepreneurs and small businesses, this will be costly. A commercial office space in the City of London averages a lease period of 5-10 years.

  • Are you financially ready to commit to this duration?

  • Does your business require a full office floor, or can you run it remotely?

An office space in London’s commercial hub will be very costly, and this comes with significant risk.

Virtual Office

The virtual office is an ideal solution if you plan to open a business in London while working remotely. It is exceptionally cost-efficient and provides essential business services without physical space. We recommend using a virtual office for market testing in London and for businesses that don’t need a physical office setting.

With a virtual office provider such as Servcorp, you receive:

  • Prestigious business address

  • Local landline number

  • Dedicated receptionist to answer your calls

  • Complimentary access to coworking spaces

  • Bookable meeting rooms

As a new business in London, the virtual office will ensure your business seems established and trustworthy to potential customers. If you’re unsure on how this workspace solution works, then check out our guide on how to expand your business with a virtual office.

Serviced Offices

Serviced offices offer a popular middle ground for new businesses in London. These provide furnished, professionally managed office spaces, often with flexible lease terms and access to shared amenities.

  • Reduced startup costs and commitments compared to traditional leases

  • Professional business address and reception services

  • Built-in networking opportunities with other tenants

  • Options for meeting rooms, IT support, and administrative services as needed

serviced office in London is the closest option to a traditional office space; however, a serviced office offers many included amenities for a commercial advantage.

Coworking Spaces

New businesses in London flock to coworking spaces because of their many advantages. Solo entrepreneurs or small teams that want a dynamic and affordable workspace will prefer this option.

London’s coworking industry is booming, and the shared office model is well-desired because of its community and collaborative traits. If you’re on a budget but still desire a workspace, we recommend using coworking spaces in London.

  • Cost-effective for businesses with limited space needs

  • Network with many professionals across different industries

  • Access to a range of amenities

  • Flexible leases and membership options

View coworking spaces in London to find a suitable option for your business.

Marketing Your Business in London

It’s not easy to market in a global commercial hub with a sophisticated consumer base. 

You’ll need to understand the nuances of the London market and experiment with methods of marketing your products/services using a strategy that works.

London’s diverse and cosmopolitan audience reflects a multitude of cultural backgrounds, income levels, and interests. Have a clear audience segmentation in mind before opening your business, and recognise that you are joining a fast-paced environment.

Consequently, because London is a saturated and fast-paced market, you will need a compelling message that develops trust. Seek testimonials and social proof—have this established as quickly as possible.

As with many first-world cities, most of London’s successful ads and shopping are conducted through websites. Their audience is early adopters of new technology and expects seamless digital marketing experiences.

Your willingness to adapt quickly and integrate technology will be important.

Additional Resources and Next Steps

Now that you know how to start a business in London, it’s time to put your business plan in action.

This is an exciting step, and there are many opportunities for those who are willing to take on this challenge. By following our guide and adapting your own strategy, you will be prepared to accomplish your business goals!

Need additional support?

  • London Chamber of Commerce & Industry (LCCI): (https://www.londonchamber.co.uk/) Access networking events, business advice, and resources for London-based businesses.

  • Gov.UK : (https://www.gov.uk/) Explore the government’s official site for information on business registration, tax requirements, and grants or funding opportunities.

  • Startups.co.uk : (https://startups.co.uk/) Discover articles, advice, and resources specifically tailored to startups in the UK.

  • Federation of Small Businesses (FSB): (https://www.fsb.org.uk/) Access support, legal advice, and a community for small business owners.

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Amy Menzies

Amy Menzies

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