Basic legal requirements to set up web design business in UK

You have two options in the UK, operate as a sole trader, or form a private limited company.

As a sole trader you pay special rate of income tax and national insurance, but you are personally liable for your work and any debts you take on board.

As a private LC, you would generally take a salary up to the national insurance start band and pay the rest in share dividends to minimise your tax burden. You just need to be careful of IR35, the rule that says words to the effect of "you must really be working for yourself, not indirectly for someone else". If you did fall under IR35, your tax burden would be much heavier.

The advantage of a private LC is your liability for it's debt is limited (thus the name) to the unpaid share capital, this is generally 100GBP by default. The disadvantage is the administrative overhead is more than for a sole trader.

The main insurance you'd require is professional indemnity insurance, which covers you for liability for costs resulting from problems in your professional work. Any insurance will also add general public liability insurance to that in the case of a limited company, that's compulsory.

We're a 2 person company, incorporated as a private limited company in the UK. The overhead is greater, though the accounting effort required in about the same for both. We use a piece of UK centric online accounting software called Free Agent. It's designed for small companies and sole traders, I can't recommend it enough, it's saved me probably 10-20 hours per month of time. It you don't intend to earn much, it's price tag much be an issue, although if you recommend it to 10 people who go on to use it, you get it for free. (I'm not trying to do this, I recommend against it, in fact, until you're earning enough).

For professional indemnity we found Hiscox Insurance to provide the cheapest cover we located. The price varies by your revenue and whether you work in the US, etc., but overall I could recommend them. But certainly do a search yourself.

I wish you luck, it's one of the toughest possible markets out there, you will need some angle on your business to stand out over others.

Be carefull - you enter a market that is dominated either by advertising agencies, or in competition with every student who thinks making a dollar more than at mcdonalds is good money. The result is that you will not make a decent amount of money here, OR will have to grow fast, which means you dont make web design as the boss.

This is pretty much one of the most worn out areas of IT servicing. Everyone thinks he can do HTML.

I can't speak specifically to UK laws, but if you were starting a web design company in the US I would recommend two pieces of legal work to get straightened out before starting business.

First, you will be professional liability insurance. The amount to get depends on the size of contracts you are working.

Second, I would work out a Service Level Agreement (SLA) that you are comfortable with. This will include language to describe how you will provide service, like how quickly you will call back and how you handle minor changes. Without a strong SLA an unhappy client can really drag you through some muck.

Those two items will help cover you from the legal side of things. There are plenty of other "to do" items in getting a web design firm up and running. You'll need a strong contract to go on top of the SLA if you want to take on large projects. You need a good online portfolio and you will need to find a good hosting partner.

Hope that helps!

Both ContractorUK and PCG offer good advice if you decide to go down the limited company route. If you join PCG (its not free) then you get some decent deals for insurance.

You may also have to register for VAT depending on your earnings if you form a limited company, however from the sounds of it you may not be earning that much (charging very low rates).

There are companies out there at the moment that specialise in knocking up websites, I worked with a guy that started out at one of these places. Literally, they would knock out a couple of hundred sites in a day (static pages), they also had a team of sales people. Unless you have very low living costs your going to find it pretty difficult.

Good luck though.