Should I start my own business?
Individuals are increasingly considering giving up employed work positions and going freelance full time.
A fresh start and can give rise to new ideas, new goals and new plans both at home and at work. And if you get that heart sinking feeling when you think about going back to work perhaps it’s time to take a look at your career options.
Today, an increasing amount of people are turning their backs on traditional permanent employment and opting instead to go it alone and work for themselves. And, with 99% of UK businesses believing a flexible workforce is key to their competitiveness, it really is a two-way street.
First and foremost, you might want to ask yourself why and ponder a few tough questions to help you decide whether going freelance is for you.
- Are you disciplined enough?
- Is there a market for your skills?
- Do you know your own strengths and your own limits?
- Are you flexible enough to adapt quickly to new clients and new projects that come your way?
- Do you have a business head to negotiate well on rates?
- Do you have a strong network of contacts and can you market yourself effectively?
- Are you organised to manage your workload and manage your finances?
Considerations for going freelance
Once you have done some soul-searching and are still keen to set up on your own then you might want to consider the following practicalities:
Choose your business structure
Are you going to work as a sole trader or form a limited company? The structure you choose will have commercial, financial and tax implications. Increasingly, the most popular trading model is the limited company option; being limited means that your business finances are separate from your own personal finances and so if you run into any difficulties with your business you will not be personally liable – you will only lose money from your business.
Most people initially choose to set up as a sole trader. Working as a sole trader brings much of the freedom that comes with a limited company but without the formality. However, a sole trader is still responsible for maintaining accounts and records but the income generated will be counted along your personal income, making the accountancy side of running your business fairly straightforward. But that does mean that your personal assets could be at risk if your business fails and there are debts to be paid. Whichever route you decide, find a good accountant to help you who specialises in managing the accounts for micro-businesses.
Choose a name and a brand
Before selecting a name for your business, a trading name if you are setting up as a sole trader or a limited company name there are some things to take into account. Firstly, be sure that it sounds professional and is inoffensive. By law, your business name must not include any sensitive words and if you are setting up as a sole trader you must not include limited company related words in your business name such as ‘Ltd’.
If you are setting up as a limited company you must check via Companies House to find out if anyone else has chosen that company name. If you are setting up a website it is easy to check for domain names via one of the domain name sites.
With your name chosen you might consider a logo along with business cards. If you have the technological savvy it is easy to design a logo and a website yourself nowadays but I recommend using specialists to do this for you; it’s not as expensive as you may think.
Getting your finances in order
Be scrupulous about keeping work and home finances separate. Setting up a business account will help you to manage your finances better and keep a track of your business expenditure.
One of the most important aspects of running any business is the accounts. Keep a record of all your invoices and payments and file them properly to save yourself additional hassle when it comes to sorting your tax at year end. It is important to keep on top of all your incomings and outgoings, business costs and overheads and know and understand your financial position.
Knowledge is power and understanding your finances will stand you in good stead and should put you in a stronger position than not knowing – you will be able to tackle anything head on before it becomes too big an issue if you have the facts. An accountant or book-keeper will be able to help you.
Register with HMRC
When it comes to making your business official it is important to register as self-employed with HMRC and register for self-assessment. As a sole trader you will be expected to pay income tax and National Insurance contributions and if you are a limited company you must inform HMRC because there will be corporation taxes to pay.
Get insurance in place
With freelancing comes lots of freedom to work on a wide and diverse range of projects. However, if something goes wrong at any time you could be in trouble if you do not have the right insurance in place. With independence comes responsibility and it is important that you consider the right insurance for you. Ask yourself do I give professional advice? Will I get paid if I am sick or injured at work? Do I employ my spouse? Do clients visit me at my premises? Do I have legal duties if I operate as a limited company? Do I need funds to defend myself against any actions taken against me, even if they are unfounded?
If you can answer yes to any or all of these questions, then it is important to consider taking out some business insurance. Talk to a specialist adviser about public liability insurance, professional indemnity insurance, contents insurance and business interruption insurance for times when you cannot work for one reason or another. Insurance can give you the peace of mind you need when you are working independently.
You probably think that business insurance is something that only large corporations need to worry about because they have more assets to insure, but this isn’t the case. Every business needs business insurance.
If you are going to run a business, whether it’s a small company or something much larger in scale, the most important thing to remember is that it is your responsibility as the business owner to know what insurance you need and how the various types of insurance cover you. Don’t wait until an emergency arises to find out you don’t have the right kind of coverage.
And remember, with some 5 million people working self-employed in the UK today you are not on your own and there is a whole host of advice and help available for anyone who is considering working flexibly. So, what’s stopping you going freelance full time?