How to set up an online business in the UK

Setting up an online business in the UK is an increasingly popular option for start-ups and established ‘bricks-and-mortar’ retailers. With more consumers now choosing to shop online, the UK has the largest e-commerce market in Europe and the third largest worldwide.

The Coronavirus crisis has further accelerated the shift toward online shopping, even amongst the traditionally reluctant demographics, resulting in e-commerce sales as a proportion of all retail purchases in the UK reaching an all-time high of 22.3% in March 2020.

• Our All Inclusive Package – register a company for £39.99

Starting an e-commerce business has obvious appeal, with minimal start-up costs and the potential to reach consumers all over the world. While many physical retail stores will gradually reopen as social distancing restrictions are eased, a return to ‘normal’ is a long way off.

Indeed, many of the changes we see in shopping preferences and behaviour are predicted to last, leading entrepreneurs and existing businesses to explore innovative ways to sell online, adapt to the changing needs of consumers, and stay relevant during these challenging times.

Whatever your reasons for wanting to set up an online business in the UK, whether you plan to sell on Amazon or through your own e-commerce store, there are several important steps you’ll need to take to turn your business idea into a reality.

1. Conduct market research

Conducting market research is an essential first step when starting any kind of business venture. The insight you will gain from this type of research is key to building a solid foundation and maximising your chances of success.

Effective market research will help you to:

• identify your target audience
• determine whether there is demand for your product(s) or service(s)
• identify and evaluate existing competition
• reveal gaps and potential business opportunities in the market
• identify, monitor, and respond to economic shifts and trends
• understand how your potential customer base feels about your products or services
• make informed decisions about product pricing, payment options, and delivery strategies
• establish how your prospective customers shop, how to reach and communicate with them, and how to sell to them
• identify potential problems and minimise the risk of loss
• develop effective marketing and growth strategies
• create a business plan

• How to sell on Amazon as a sole trader or limited company

There is much to learn about the market you’ll enter before launching your business. Still, it’s also important to utilise market research as an evaluation tool throughout the life of your business.

By doing so, you can track your progress, monitor competitors and economic trends, and respond to consumers’ changing needs and expectations.

2. Register your online business

To run a business in the UK, you must officially register a legal business structure. The two most popular options are sole trader and limited company. If you live in the UK, you can choose either structure. However, you will need to register a limited company if you are a non-UK resident.

A limited company is generally considered to be the best business structure because it provides several unique benefits, including:

• limited personal liability for business debts
• a professional and credible image
• the opportunity to minimise your personal tax liability
• can be set up and owned by one person or multiple individuals
• access to more tax reliefs and allowances

Company formation in the UK is an incredibly straightforward and inexpensive process. Everything is done online, there is no paperwork to sign, and all company registration documents can be provided in digital format, making it an ideal solution for non-UK residents who wish to register a UK business from overseas.

• An essential checklist for business startups

At Rapid Formations, you can register a limited by shares company from just £2.99 (excluding the £100 Companies House fee). The application form generally takes 10 minutes to complete, expert help and advice are available throughout, and most companies are registered (‘incorporated’) and ready to trade within 24 hours.

We also provide bespoke Non-Residents Company Formation Packages, which include a prestigious London registered office and business address, VAT registration, and a UK business bank account.

3. Set up a business bank account

Whether you decide to operate as a sole trader or register a limited company, you will need a business bank account. Whilst not a legal requirement, we highly recommend keeping your business finances completely separate from your personal finances.

First and foremost, a dedicated business bank account in your company name will assure customers that your business is legitimate. On a practical level, a separate business bank account will make it much easier to monitor cash flow, identify transactions, and maintain accurate accounting records.

Rapid Formations provides hassle-free and time-saving referrals to up to 8 leading UK banks, including Barclays, Tide, Lloyds, ANNA, NatWest, and Wise.

4. Create your website

The next step in the process is to create a website for your new online business.

Even if you only plan to sell your products through an online marketplace like Amazon, eBay, Etsy, or Not On The High Street, rather than setting up your own e-commerce shop, a website is still an incredibly important tool for marketing and promoting your business, providing important information about your brand and products, and reaching a wider audience.

There are two main options for creating a website or online store. You can either pay a professional web developer to do it for you or take the DIY approach using a website builder. The latter is the most affordable and popular solution for small businesses.

Whatever approach you take, your website must be secured using an SSL Certificate. Additionally, given that more than 50% of online traffic now comes from mobile devices and via mobile apps, your website must be mobile responsive.

If you choose to design your website, the key elements to consider are aesthetics, functionality, and user experience. It must be pleasing to the eye, easy to understand, and simple to navigate. Essentially, whatever the purpose of your site, users should be able to achieve it with minimal effort and zero stress; otherwise, they’ll simply go elsewhere.

Before you can launch your website, you will need to register a domain name. This will be your website address, so it is best to choose a short and simple domain that matches your business’s name or includes keywords that describe what you sell.

By doing so, your business will be easier to promote and find online, which will help drive traffic to your site. An appropriate domain name extension like .com or .co.uk is also important.

5. Choose how to take payments

If you’re setting up an online business in the UK, you’ll need an electronic payment system to take payments online. There is a huge selection of third-party payment processors, such as WorldPay, Stripe, Paypal, Shopify, and SagePay.

Many factors must be considered when deciding on the best payment processing solution for your online business, including fees and pricing options, ease of set-up and management, what cards and types of payments are accepted, and the provider’s reputation.

So, it’s important to research to ensure that your business’s needs will be met now and in the future.

What’s next?

Now that we’ve covered the basic steps required to start an online business in the UK, you’ll hopefully better understand the initial process and whether it is something you wish to pursue.

Whilst starting a new business in the current climate may feel counterintuitive, dramatic changes in consumer trends have created an entirely new kind of demand that none of us could have predicted.

Coupled with significant acceleration toward online shopping, the emerging changes in customer preferences and shopping behaviour present several commercial opportunities for innovative and determined retailers to close the sales gap through digital offerings.

If you are ready to register a company, look at Rapid Formations’ homepage. There, you can start the process by checking if your preferred company name is available to use at Companies House.