When should you register a business?
In the US, you’re a sole proprietor the day you take your first paid client under your own name, with nothing to file federally. In the UK, you register as self-employed with HMRC once you earn more than £1,000 in a tax year. A company comes later, when the liability or the tax makes it worth the paperwork.
| United States | United Kingdom | |
|---|---|---|
| Starting under your own name | A sole proprietorship, with no federal registration | A sole trader, registered with HMRC for Self Assessment |
| When you have to tell the tax office | When you file: self-employment tax applies from $400 of net earnings in a year | Once you earn more than £1,000 from self-employment in a tax year, by 5 October after that tax year ends |
| Trading under another name | Many states and counties ask you to file a DBA (“doing business as”) | Allowed without registering, within the naming rules |
| A company of your own | An LLC, filed with your state, which keeps the business’s debts apart from yours | A limited company, registered with Companies House, with its own accounts to file each year |
| Sales tax or VAT | Usually not on services; it depends on the state and the service | VAT registration once taxable turnover passes £90,000 in twelve months |
In the US
Start under your own name and keep the practice’s money in its own account from the first payment. Ask the IRS for an EIN, which is free, so you can give clients that number on a W-9 instead of your Social Security number. Check your city or county for a local business license, and your state for a professional license if your work needs one. Expect to pay estimated tax quarterly once you’ll owe $1,000 or more for the year.
In the UK
Register for Self Assessment as soon as you know you’ll pass £1,000 in a tax year, which runs from 6 April to 5 April. HMRC sends you a Unique Taxpayer Reference, and you file a return each January for the year before.
When a company starts to make sense
Three signs, in either country: the work carries real liability if something goes wrong, profit is high enough that an accountant can show you a tax saving, or a client insists on contracting with a company. Pay an accountant for an hour when one of them turns up. Until then, a sole proprietorship or sole trader is how most practices of one run for years.
This is how the rules stand, in outline, for someone starting out. Your own circumstances can change any line of it, and an accountant who knows them is the right person to ask.
Work out what to move aside from each payment, from the first one.
How much to set aside for tax →Sources: IRS, Self-employed individuals tax center; SBA, Choose a business structure; GOV.UK, Set up as a sole trader; GOV.UK, Tax-free allowances on property and trading income; GOV.UK, VAT registration. Checked 2026-10-11.