Weigh up the pros and cons of a UK entity set up versus using a global PEO partner when expanding your business internationally.
When expanding your business into a new country such as the UK, you will need to set up an in-country entity. Establishing a foreign subsidiary can be an incredibly time-consuming and costly task for most businesses. However, using a PEO can be a cheaper, more effective alternative for businesses expanding into the UK. Here we look at who needs to set up an entity, how to set up a legal subsidiary and how a PEO can help you expand into the UK without a legal entity.
Who needs to set up a UK entity?
Put simply, any business that has a physical presence in the UK needs to set up a legal entity. Businesses must file the documents to register an establishment within one month of opening their business in the UK.
Businesses that don't have a physical presence in the UK do not need to set up a legal entity.
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How do I set up a subsidiary in the UK?
The answer to this will vary from business to business and depending on what type of entity you require. But as a general rule to set up a UK entity you will need to:
- Choose your company type and ensure this is accurate for what your business does
- Obtain a UK business address
- Appoint a company secretary
- Open a UK business bank account
- Decide on a company name and ensure it is available
- Produce appropriate registration documents
- Register your company at Companies House and with HM Revenue and Customers
- Get a Certificate of Incorporation
- Register for a VAT Number
- Register with National Insurance. You will need this to pay social security contributions from employers and employees
In addition to the above, foreign nationals trying to establish a business in the UK will also require an entrepreneur visa. This is not easy to acquire and has a complex and lengthy application process in itself making UK entity set up more challenging for prospective businesses.
UK entity laws
In order to ensure the compliant operation of businesses in the UK, subsidiaries are regulated by The Company Act. In addition to ensuring companies have all the relevant registration documentation listed above, The Company Act also regulates on taxes, company accounts and company owners.
Meanwhile, any changes to company information must be logged with Companies House within 14 days of the changes being made and directors must prepare reports each financial year.
As you can see, compliance with UK entity laws is an ongoing process. First, initial registration processes must be met and then compliance must be maintained throughout a company's operation within the UK. Compliance requires an in-depth knowledge of The Company Act and UK entity laws which can cost you considerable time, money and resource. Meanwhile, non-compliance causes an abundance of risk for your business including fines, penalties and even the possibility of being unable to operate in the UK.
The benefits of setting up a UK entity
The UK has one of the world's most diverse business landscapes as well as a strong economy both of which make it a popular location for business expansion. Setting up a legal entity in the UK establishes your company's intentions for a long-term, fruitful investment in the country.
Meanwhile, legal subsidiaries in the UK are subject to relatively low corporate tax rates meaning your global business can reap the benefits of Britain's thriving industries and attractive talent stream without being penalised by harsh tax laws.
Why use a PEO partner instead of setting up a legal entity?
Setting up a legal entity is a costly not to mention risky venture. From initial registration to continued compliance, UK subsidiaries need to be able to dedicate repeated resource, money and time to setting up an entity. This is on top of the day-to-day logistics of expanding your business into the UK.
By outsourcing your UK business expansion to a PEO or EOR, you can start reaping the benefits of the UK's thriving business network without the burden of a legal entity. This provides more flexibility for expanding businesses as well as saving you much-needed time and resources. Likewise, opting for a PEO over a legal subsidiary doesn't limit your business opportunities. Instead, it lets you focus on the key aspects of business growth knowing that the legalities of tax, national insurance, onboarding employees, work permits and employment contracts are handled compliantly.
At Leap29, our UK PEO team have in-depth knowledge and first-hand experience of the UK business market meaning that they can be fully relied upon to navigate your expansion in the UK taking into account The Company Act and the latest post-Brexit legislation.
If you want to find out more about how our PEO Services in the United Kingdom can support your global expansion, call our experts today on +01625 788154 or email [email protected].
What Our PEO Clients Say
"For the last few years, we have worked very closely with Simon and the team at Leap29 on a number of different projects in multiple countries across the globe. Leap29 have been a fantastic partner for us and are always willing to think with us to find the best solution. The communication with the team at Leap29 has always been excellent and Simon, in particular, is great to work with! They come highly recommended from us!"
Peter Yerardi, data.ai
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