Choose your business structure

Decide whether to trade as a sole trader or limited company. Many tech businesses choose limited companies for IP protection and investor appeal.

Business structure for tech startups

Limited companies are popular with tech businesses because they protect personal assets, make it easier to raise investment, and provide a structure for issuing share options to employees. However, sole trader structures are simpler for low-risk freelance developers or consultants.

Sole trader: Simplest to set up. You keep all profits but are personally liable for debts.
Partnership: Share responsibilities and profits. Partners share liability for business debts.
Limited company: Separate legal entity. Personal liability limited to investment, but more admin.
LLP: Partnership with limited liability. Must file accounts at Companies House.

Business structure affects tax liability, personal liability, and required paperwork. Professional advice is recommended when choosing the right structure.

Data protection essentials for tech businesses

GDPR compliance is critical for tech businesses. You must register with the ICO before you start processing personal data - this means from day one if you have user accounts, analytics, or employee records.

Core data protection principles

Personal data must be:

Lawful, fair and transparent: Have a legal basis and inform people how you use their data
Purpose limitation: Only collect data for specified, explicit purposes
Data minimisation: Only collect what you need
Accuracy: Keep data accurate and up to date
Storage limitation: Don't keep data longer than necessary
Integrity and confidentiality: Keep data secure
Accountability: Demonstrate compliance

Lawful bases for processing

You must have at least one of these legal bases:

Consent: Freely given, specific, informed agreement
Contract: Processing necessary to fulfil a contract
Legal obligation: Required by law
Vital interests: Protection of someone's life
Public task: Official functions or public interest
Legitimate interests: Your interests (unless outweighed by individual's rights)

Individual rights

You must facilitate these rights:

Right to be informed (privacy notices)
Right of access (subject access requests within 1 month)
Right to rectification
Right to erasure (right to be forgotten)
Right to restrict processing
Right to data portability
Right to object
Rights related to automated decision making and profiling

When to notify the ICO

You must notify the ICO within 72 hours of becoming aware of a personal data breach that poses a risk to people's rights and freedoms.

Step 1: Conduct a data audit to identify all personal data you process
Step 2: Document your lawful bases for each processing activity
Step 3: Create or update privacy notices for customers, users, and employees
Step 4: Implement data security measures appropriate to the risks (encryption, access controls)
Step 5: Establish procedures for handling subject access requests within 1 month
Step 6: Create a data breach response plan with ICO notification procedures
Step 7: Appoint a Data Protection Officer if required (public authorities, large-scale monitoring, or special category data)
Step 8: Maintain Records of Processing Activities (ROPA) if you have 250+ employees or high-risk processing
Step 9: Review and update data retention schedules
Step 10: Train staff on data protection obligations

ICO Guide to UK GDPR (opens in a new tab)

ico.org.uk

Register with the ICO (opens in a new tab)

Pay your annual data protection fee and register your business with the Information Commissioner's Office.

Open a business bank account

Separate your business and personal finances. Essential for limited companies, strongly recommended for sole traders.

Business insurance for tech companies

Beyond professional indemnity, consider cyber insurance (covers data breaches and cyber attacks), employers' liability (legally required if you have employees), and contents insurance for equipment.

UK businesses need different types of insurance depending on their activities. Some are legally required, others are contractually required, and some are optional but prudent. Understanding the differences helps ensure adequate protection.

Employers' Liability: LEGALLY REQUIRED if you employ anyone. Minimum £5m cover. Protects against employee injury/illness claims.
Motor Insurance: LEGALLY REQUIRED for any vehicle used for business. Criminal offence to drive uninsured.
Professional Indemnity: Required for some regulated professions under their profession-specific rules, including many solicitors, financial advisers and architects. Covers negligent advice claims.
Public Liability: NOT legally required but often contractually required by clients. Covers third-party injury/damage claims.
Products Liability: NOT legally required but essential for manufacturers and retailers. Covers claims from defective products.
Business Contents: NOT required but recommended. Covers theft, fire, damage to business assets.
Business Interruption: NOT required but recommended. Covers lost income when you cannot trade.
Cyber Insurance: Increasingly important. Covers data breaches, ransomware, GDPR fines.
Key Person: Optional. Compensates business if critical person dies or is incapacitated.

Choosing the right cover:

Do you employ anyone? Employers' Liability is legally required
Do you use vehicles for work? Business motor insurance is legally required
Are you a regulated professional? Check your regulator's profession-specific Professional Indemnity rules
Do you interact with customers or visit premises? Public Liability is practically essential
Do you sell physical products? Products Liability is strongly recommended

Start a tech business

Choose your business structure

Register with the ICO (opens in a new tab)

Open a business bank account

Get business insurance

Learn about R&D tax credits (opens in a new tab)

Understand IR35 rules

Register for Corporation Tax (opens in a new tab)

Register for Self Assessment (opens in a new tab)

Register for VAT

Set up PAYE when hiring

Sponsor overseas workers

Cookie consent and PECR compliance (opens in a new tab)

Explore SEIS and EIS for fundraising (opens in a new tab)

Explore other funding options

Start a tech business

Related journeys

Start a financial services business

Set up a limited company

Become a sole trader

Starting farming: complete compliance journey