Most developers know how to initialise a repository, configure a CI/CD pipeline, and deploy a containerised application. However, building a legitimate business wrapper around that code often feels like dealing with legacy documentation—opaque, bureaucratic, and prone to critical errors if not adequately addressed.
For early-stage technical founders, the transition from a "side project" to a "legal entity" is a crucial step that cannot be skipped. Do I really need a limited company for a straightforward SaaS? Can I just run this as a sole trader until I have revenue? What legal headers do I need to include to protect my IP?
This guide treats business structure like infrastructure. We will break down the "legal stack" required to run a UK tech business, answering the most common queries about incorporation, liability, and asset protection without the fluff.
The "Legal Stack": Why Architecture Matters
Just as you wouldn't run a production database on a development laptop, you shouldn't run a scalable tech product on a personal legal structure. The default state for an individual making money in the UK is a "Sole Trader". While simple to set up (you just register for Self Assessment), it has a significant vulnerability: strict coupling between you and the business.
If your application accidentally infringes on a patent or leaks user data, a Sole Trader structure exposes your personal assets (house, car, savings) to potential lawsuits. There is no abstraction layer.
A Private Limited Company (Ltd) functions like a container. It isolates the application (the business) from the host (you). This separation provides limited liability, meaning if the company fails or faces litigation, your personal liability is capped at the amount you invested in shares (often just £1).
For any founder planning to sell software, take payments, or hold user data, a limited company is the industry standard for production environments.
When to git commit to a Legal Entity
Timing is a frequent point of confusion. You do not need a company to write code. You generally need one before you:
- Accept money: Payment gateways like Stripe require a legal entity for business accounts.
- Sign contracts: B2B clients often refuse to contract with individuals due to compliance risks (IR35).
- Hire staff: PAYE registration is cleaner under a corporate structure.
- Seek investment: VCs and angels invest in equity, which requires a company structure to issue shares.
If you are currently in the "building locally" phase—writing code, testing betas with friends, and generating zero revenue—you can likely wait. Once you are ready to launch or develop your first pound of revenue, you should execute the company formation process.
The Company Formation Protocol
Registering a company in the UK is surprisingly efficient compared to other jurisdictions. It is an API-like process where you submit structured data to Companies House, the UK’s registrar.
1. Naming Conventions
Your company name must be unique. Companies House rejects names that are "too like" existing ones. It also restricts sensitive terms. You cannot use "Architect", "Bank", or "British" without specific permissions.
Check availability using the Companies House beta search tool before buying a domain.
2. Director and Shareholder Configuration
- Director: The person managing the server. They have legal responsibilities to file accounts and follow rules.
- Shareholder: The owner of the instance. They hold the equity.
One person can be both the sole director and sole shareholder. This is the standard setup for solo founders.
3. Persons with Significant Control (PSC)
This is a transparency requirement. Anyone holding more than 25% of the shares or voting rights must be declared as a PSC. For a solo founder, this is simply you again.
4. Registered Office and Service Address
This is where privacy leaks often happen. Your Registered Office and Director Service Address are public records. If you use your home address, it will be visible to anyone who scrapes the Companies House database.
Security Patch: Use a virtual office address or a formation agent’s address service to keep your residential location off the public register.
Documentation: The README.md of Your Business
When you incorporate, two core documents are generated. Think of these as the config files for your legal entity.
- Memorandum of Association: A simple legal statement that the initial subscribers wish to form a company. It is historical and cannot be changed.
- Articles of Association: The rulebook. It defines how decisions are made, how shares are transferred, and the powers of directors. Most startups use the "Model Articles" (standard defaults), but if you have co-founders, you should override these with a Shareholders’ Agreement to handle vesting and dispute resolution.
Execution: How to Register
You have two primary methods to deploy your company:
Direct via Companies House:
You can use the government portal. It is cheap (£50) but bare-bones. It provides no error checking for your application and offers no privacy protection for your address.
Via an Intermediary (Formation Agent):
Most founders use a specialised platform. These services connect directly to the Companies House API but add a layer of validation and utility. They often bundle essential extras, such as digital share certificates, business banking introductions, and privacy services.
For example, company formation platforms enable you to search for your desired name, select a package that conceals your home address, and submit the application in just minutes. The approval process is typically automated, with the Certificate of Incorporation returning in 3 to 24 hours.
IP Protection: Securing Your Source Code
In a limited company, intellectual property (IP) ownership is straightforward if the company is set up correctly.
By default, code written by an employee belongs to the company. Code written by a founder before the company existed belongs to the founder. To fix this, you must assign any pre-incorporation IP (your MVP code, domain names, branding) to the company immediately after formation.
This is usually done via an "IP Assignment Deed". It confirms that the company owns the assets. Investors will grep your legal history for this document during due diligence. If the company does not own the code, the company has no value.
Post-Deployment Maintenance
Once your company is live, you have ongoing cron jobs (statutory obligations) to maintain:
- Confirmation Statement: A yearly check-in to confirm that your company details (directors, address) are still accurate.
- Annual Accounts: Financial reports sent to Companies House. Even if you made a loss, you must file these.
- Corporation Tax Return (CT600): Filed with HMRC to calculate tax on profits.
Failing to address these results will result in automatic fines and, ultimately, the forceful strike-off (deletion) of your company from the register.
Pro-tips
- SIC Code Strategy: You must select a Standard Industrial Classification (SIC) code during registration. For most SaaS and dev shops, 62012 (Business and domestic software development) or 62020 (Information technology consultancy activities) are the standard choices. You can change this later, but getting it right initially prevents confusion with banks.
- The "Bootstrapper’s Bank" Issue: Traditional high-street banks can take weeks to open a business account. Modern fintech banks (Monzo, Tide, Starling) often have APIs integrated with formation agents. You can frequently open an account simultaneously with your company registration, saving days of admin time.
- VAT Registration Logic: You are not required to register for VAT until your rolling 12-month turnover hits £90,000. Registering early is voluntary. If you sell to businesses (B2B), registering early allows you to reclaim VAT on laptop and server costs. If you sell to consumers (B2C), registering early instantly makes your product 20% more expensive for them. Choose based on your customer profile.
- Founder Equity Vesting: If you have co-founders, never issue 100% of the shares upfront without conditions. Use "Reverse Vesting". If a co-founder leaves the company after six months, they should have the right to buy back their unvested shares. This prevents "dead equity" on your cap table.
Conclusion
Structuring a UK business is not overly complex, but it does require precision. The goal is to create a clean, distinct legal entity that holds your IP, limits your liability, and prepares you for growth. By treating company formation as a critical infrastructure step rather than an administrative hurdle, you ensure your startup is built on a stable foundation, ready for whatever load you throw at it.
