5 Things to consider when becoming Self-Employed

You've made your mind up and decided you'd really like work for yourself and achieve your dreams on your own terms.  But... Where do you begin?

Disclaimer,  details of this post should not be accepted as financial or legal advice it is offered for information purposes only. 

1: What Type of business will you be?

Sole trader,  the simplest option - its you running you business as an individual your profits after taxes are yours on the downside there is no separation between the personal you and the business you any losses or claims against the business can be taken from your personal funds.

Limited Company:  you have more paperwork and legal costs involved in the setting but on the upside a limited company is classed as a separate entity and your personal funds can not be linked to the business.

Partnership:  of two or more sole-traders working together,

When making your decision consider how you want to develop the business and how you want to grow/scale,  as well as what you are selling and who too  as some industries my work better being a company and vice versa.

2: What name will you trade as?

You can work under your own name or choose a trading name,  whatever you decide it's good idea to check companies house to make sure the name you choose isn't already in use - even if you go for the sole trader route as it will prevents clashes.

Its also a good idea to check domain names if you intent to have a website/email to make sure its available. The same for social media accounts if you want to use them to  market your business.

When choosing a name there are a few rules dos & don'ts with regard to words and punctuation that can/cannot be used,  for more info check https://www.gov.uk/limited-company-formation/choose-company-name?step-by-step-nav=37e4c035-b25c-4289-b85c-c6d36d11a763

If you choose a trading name as an individual, consider registering it a trademark (with the IPO) to stop it being registered by someone else as a company. 

3: Have a Business Bank Account.

If you set up as Limited Company, it is a requirement for a company to have it's own bank account because of it's separate entity status.

However,  It is a good idea and considered best practice as a sole trader to have a sperate business bank account.  This helps you keep your business and personal activities separate which in turn makes it simpler at tax time to identify your business costs.

4: Business Insurance and other registrations

Make sure you sort out insurance to cover your business and any equipment / premises.
The main insurances to consider are Professional indemnity and Public Liability and if you employ staff you will be required to take Employers Liability Insurance,  but there others and some may be specific for the industry so you will need to do your research to ensure you are correctly covered.
(a word of caution if you intend to work from home, check your home/building insurance as some policies don't cover you for business activities especially if you have business customers visiting your home).

Check your industry requirements do you need a licence to trade in your chosen field?
If you are going to be keeping personal data of clients you'll need to register with the ICO (Information Commissioners Office) and adhere to data protection & GDPR regulations.
If you decide to setup as a Sole-Trader,  register with the HMRC as soon as possible for payment of your Income Tax and National Insurance Contributions (You will need to ensure you complete your registration by the 5th October following the end of tax year in which you begin trading.

5: Keep track of your bookkeeping

Regularly tracking your income and expenditure helps you keep track of your money and helps you understand your profitability.
If you're confident and are able to spend time doing your own accounts you can use something as simple a cashbook as or a spreadsheet to help you keep track, or you can use accounting software a number of systems today are designed with small business owners in mind to be able to use a basic system.

However, you should bear in mind that when you're starting out you will be wearing a number of hats as you work in and on your business - you'll be the Sales and Marketing Manager, The Technician, The Operation Manager, The Finance Manager and the CEO -  you will be responsible for all aspects of the business and you may experience time pressure to ensure you can complete the work.  
If there is an area of the business that you think you may struggle to understand and do in the time you have available, consider outsourcing from the start.  Yes it will mean extra costs in the start-up phase of you business but don't think expense think investment  - if you invest the money on the areas you feel least confident of being able to do yourself you are investing in yourself and your business

As a Bookkeeper, I may be baised in favour of outsourcing your Bookkeeping, but I do urge you consider seeking the assistance of a Bookkeeper to support you and help you understand the accounting processes, a bookkeeper can also be your link between you and your accountant/tax adviser and help you negotiate your way around requirements of the HMRC

How can I help

As a your Bookkeeper, working virtually with a cloud-based accountancy system, I am able to help you keep track of you finances and understand your accounting records & reports.   Enabling you to know your profit, understand your tax liability, make informed decisions, plan your future and achieve your dreams

Book a free call with me  Capture your dream