Making the change from employed to self-employed is simultaneously exciting and daunting. What if it doesn’t work out? What if your business doesn’t survive?
Thousands of people make the empowering decision to become their own boss every single year. To make the process a little easier we have put together the following Self-Employment Toolkit to provide all of the information you need ahead of forging ahead in your own business.
Structuring your business
The first question most entrepreneur’s face is how to structure their business. When you begin working for yourself, will be you a sole trader, a limited company or a partnership? Getting to grips with which option is best for your business is key. In brief:-
You are the only owner of your business. You are entitled to keep all profits after tax and are liable for any losses.
Your business will be privately owned by one or more shareholders and managed by director (s) who will be legally responsible for its debts to the amount of capital invested. It will be incorporated and have its own separate legal identity.
Two or more people will share management and ownership responsibilities of the business and as such will share profits as well as losses.
Financing your business
With the largest expense for the majority of people being their monthly mortgage, it is important to plan ahead and ensure that domestic bills will not go unpaid once you become self-employed. If you need to raise capital to start your business, having a robust business plan in place will help you secure the funding you need from banks or investors.
It is vital that you keep business and personal finances separate. Not only will this make things easier for you when you are paying bills, it will also make compiling your tax return so much easier as there will be much less to unpick. Many start-ups begin by doing their own accounting and whilst this can be cost saving, it does detract from valuable time that you could be spending on building your business.
Enlisting a bookkeeper or accountant to oversee your business finances will not only save time and ensure your tax-returns are submitted to HMRC on time and accurately, but it could also save you money by ensuring that you receive any tax rebates that you are owed and take advantage of all of the allowances available to you such as Entrepreneur’s Relief for example..
Today’s digital accountancy packages are beneficial in many ways, from creating and storing invoices automatically to sending out payment reminders for you so that you do not have to waste time chasing payments from clients. Digital accounting systems let you easily manage business expenses by simply allowing you to snap and upload business receipts from your smartphone.
Within the next 12 months it will be an HMRC requirement for all small businesses to be practising digital accounting in order for it to streamline the forthcoming quarterly returns.
When you’re self-employed you may be out on the road, work from home, hot-desk in commercial office space, spend time at clients’ offices or rent your own premises. Whilst it may be tempting to set up in your own office straight away, only do so if the business can afford to do so. Office premises are not always essential unless you employ staff, so only take this option if it is essential.
Employment Law dictates that all employees are now entitled to a pension, so if you become self-employed and take on staff, bear this additional cost in mind. Whilst employing staff can help you build your business, it may not be vital right from the off. Depending on your trade, you may be able to enlist freelancers and consultants to undertake some work for you, in which case, understanding IR35 and contracting regulations will be necessary.
Once you do have a team, understanding working time and minimum wage regulations, PAYE and having the right payroll system in place for example, is vital, as is an understanding of Health & Safety Law.
Training and development of staff is also a lifelong and ongoing commitment for you as an employer, therefore this is another important area to build into your plan.
Whilst some businesses are lucky enough to thrive on word of mouth alone, this is not the case for most businesses. Having a detailed marketing plan in place will guide your business from start-up to success. Whether you opt for online, offline or multi-channel marketing, having a steady stream of leads or knowing where to find them is vital for the survival of your business. The majority of new businesses fail within the first 12 months, by adequately researching your target market, being savvy with social media, capturing as much customer data as possible and being creative with your marketing messages, your business is much more likely to win ongoing loyal business.
Even the most seasoned business professionals turn to mentors and advisors for expertise and guidance. Before you leap into self-employment, take advantage of a free no-obligation consultation about the next steps towards becoming your own boss.
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