What Does "Starting a Business" Actually Mean?

“Starting a business” sounds bold and exciting, but what does it actually mean? For someone at the beginning of the journey, the phrase can feel vague. Are you a ‘real’ business only if you register a company? Do you need a business bank account? What if it’s just something you do on the side?

Let’s break it down. Understanding the types of business structures in the UK and how they affect you can help you start with clarity.

Starting as a Sole Trader

The most common and straightforward way to start in the UK is to register as a sole trader.

You’re the business. You keep the profits (after tax) and are personally responsible for any losses. You still need to register with HMRC, keep records, and file an annual Self Assessment tax return — but there’s less paperwork and no need for formal incorporation.

Typical use cases:

·         Freelancers, consultants, tradespeople, creatives, small online sellers

·         Low overhead, starting small, testing an idea with limited financial risk

Considerations:

It’s simple to set up, but you’re legally responsible for all debts. There’s no separation between personal and business finances. That’s fine if your risk is low, but becomes less ideal if you’re scaling up.

Forming a Limited Company (Ltd)

A limited company is a separate legal entity. You’re no longer “the business” — the company owns its assets and liabilities, and you operate as a director/shareholder.

This structure offers limited liability, meaning your personal finances are protected if the business incurs debts (assuming no wrongdoing).

Typical use cases:

·         High-growth startups

·         Companies seeking investment or external funding

·         Ventures with employees or significant risk exposure

·         More formal client-facing businesses

Considerations:

There’s more paperwork: registration with Companies House, annual accounts, Corporation Tax, director responsibilities. You may need an accountant. But it can also offer more credibility, better tax flexibility, and long-term advantages.

Running a Side Hustle

Not every venture starts as a “business” on paper. Sometimes it begins as a side hustle, an idea you test in your spare time while working or studying. That’s valid. In fact, it’s smart. Many businesses begin this way.

If you’re earning money through the side project (over £1,000 per tax year), HMRC still expects you to declare it, even if it’s informal. You might not register a company straight away, but it’s wise to track income, expenses, and prepare for basic reporting.

The key here is intent. A side hustle can stay small or grow into something more formal over time. Either way, it’s worth treating it with structure and care.

So… What Counts as "Starting"?

Starting a business doesn’t always look the same.

For some, it’s registering a limited company, pitching investors, or building a team. For others, it’s launching a product on Etsy, doing freelance work on weekends, or testing a service through word-of-mouth. The common thread? You’re exchanging value and treating it as more than a one-off.

Ready to Begin Thinking Like a Business Owner?

No matter how you start - side hustle, sole trader or company - it helps to think clearly about your foundations.

That’s what Business Startup Insight is for. It won’t tell you which form to choose. But it will help you understand the questions you should be asking — about risk, value, direction and readiness.

The book draws on 50+ years of hands-on business mentoring, across industries and business types. Whether you’re experimenting with an idea or launching formally, it’s designed to help you make better, more informed decisions from day one.

Get your copy today for just £9.90, and download the free Business Startup Assessment Notepad to help map out your first steps.