I'm a strong believer in that you should convert your passion into your profession. It's the greatest feeling of waking up in the morning and knowing that you're going to be doing something you truly like for the whole day.
The best way to start is to look into your hobbies and think if you could turn them into business. You could be into photography, interior design, translation or even fashion blogging - there's always a way to turn these into a full-time profession.
I know a good few students that were tired of searching the overcrowded and over-demanding job market and have set up on their own and also helped out their fellow students by taking them on board. Nowadays, entrepreneurs have become new rockstars. Whether you’re in for fame, extra income or testing out your business prowess, there are some legalities you should know about.
This time I'll tell you about types of businesses that you can register.
Probably the quickest and easiest way to get started on your own. As a sole trader you will be responsible for everything you make and also everything you lose. It also will come out of your pocket. However, if you're only starting or you're freelancing on the side as a hobby it could be the best choice for you. Yes, you can register as a sole trader even if you're in a full-time employment (provided that your contract allows it).
You can also choose a name for your business as a sole trader, however be careful not to add 'Ltd', 'Plc' or any other term to it that might suggest that you're affiliated with a government institution. To become a sole trader you have to register with HMRC for self-assessment.
Now, if you're confident that you're in for the long run with your freelance project and want to turn it into a decent business you might as well consider setting up a limited company. There are a good few potential clients out there that might only want to work with a Limited Company rather than a sole trader. And a business name with an 'Ltd' at the end always looks more professional.
In a limited company, your finances are separate from your own finances. Potentially, this brings you a better profit after tax and you can have an independent credit rating to which you can borrow money. However, this will require more paperwork as you have to submit reports for your company as well as yourself. The UK Government website has a step-by-step guide to help you register your Limited Company.
Working as a contractor under an Umbrella Company
If you only wish to dip your toes into the freelancing world and your mind gets boggled with all this paperwork that freelancing involves - try working on a contract basis under an umbrella company. There are many of them out there and they, basically, sort out all your paperwork like taxes, NI contributions and collection of payments from customers. It's very handy indeed, and, technically, you're going to count as an employee of theirs - so you don't have to worry about IR35 implications (I'll tell you about this in another post).
However, all of this doesn't come cheap as you'll have to pay an extra fee (which can be quite hefty in some cases) for umbrella company services. There are many such companies around with different plans available. Try shopping around before you choose.
Business Partnership & Limited Business Partnership
If you're thinking of setting up a business with a friend you might consider a partnership. In an ordinary business partnership you and your partner are responsible for losses and profit personally, and you can also share profits among partners. You will, however, need to nominate a partner to do an overall company assessment, plus each of you will have to do your own. And a Limited Partnership and Limited Liability Partnership is similar to Limited Company principle, only with partners being responsible for their investment in the company. Get more information about Limited Liability Partnership.
Small business & freelance accounting
I hope that this information helps you somewhat to make up your mind and venture on your own. In the words of Richard Branson: 'Screw it, just do it!' - as straightforward and truthful as it gets.
And Debitoor will be here to support your first steps and take the hassle out of your first accounting and invoicing. There's no complicated jargon, everything is simple and functional and still professional.
Best of luck!