Plan for perfection
Even if you plan to work alone on a freelance basis, you should still treat your new situation as a business, therefore a good business plan is essential.
Setting out exactly what you’ll be doing, who your target customers and competitors are, how you’ll promote yourself and where you hope to be in five years time will help you think strategically and address any weaknesses in your plan before they become problems.
Bank managers or other investors will need to see this business plan if you want to raise money – in this case you should also detail exactly how much money you need, what it will be used for, and how quickly they can either have it back or start to see returns.
See this article on tips for writing the perfect business plan.
What’s in a name?
A good business name can make all the difference. Research what your competitors call themselves and think up something catchy that will stick in peoples’ minds. Whatever you choose, be sure to have it printed on all your stationery and open a business bank account in the same name.
Polish up your permits
Before you take on your first job, double-check what your license or permit requirements are. Some kinds of business, such as childminders and street traders, require a local authority license, while with others you must hold certain qualifications to trade.
Many businesses and self-employed professionals these days need to be able to show that they have insurance. Clients often won’t use uninsured services. Depending on the type of services you offer, you might consider taking out professional indemnity insurance as a starting point.
Look for somewhere that you can afford, that is close to your customer base and that complies with all relevant health and safety regulations.
If you’re working from home you may need to pay business rates and to obtain planning permission from your local authority, especially if clients or employees will be visiting the property.
Home-based workers also need to make sure that they inform their insurance company of the change of circumstances. Having home contents and buildings insurance will no longer be enough.
See also: Finding suitable business premises
Tax and tribulations
As soon as things are up and running, contact HM Revenue & Customs (08459 154 515) to register your business. Failure to do so within three months of going self-employed could land you a £100 fine.
You’ll need to tell them whether you’re operating as a sole trader, partnership, limited company, cooperative or franchise, all of which are dealt with differently for tax and national insurance purposes.
As a self-employed worker you now need to complete a tax return every year, which can be done easily online.
If you expect your turnover to exceed £67,000 per year, you’ll also need to register to pay value added tax (VAT). If your business activities involve paying out VAT on a regular basis, you can register for VAT at any level of turnover in order to start claiming it back.
Cover your back
Self-employment opens you up to a whole world of new risks, but there are plenty of types of business insurance out there to help you handle them. For example, you might worry about what will happen if you’re too ill to work, but you could take out business interruption insurance to protect you against such a scenario.
Professional indemnity insurance is often taken out by individuals whose work involves advising other businesses and consumers or carrying out services for them. Having this cover can protect your business against claims and legal costs arising from bad or negligent advice or services that you may have given.
If you use your car or van for work you’ll also need separate commercial vehicle insurance, or to at least amend your existing policy for mixed use.
When you get to the stage where you employ other people, you’ll need to take out employer’s liability insurance. This is a legal requirement and without this you face a hefty fine.
Employer’s liability covers your business against claims by employees based on accident or illness occurring in the course of the employment. This insurance doesn’t cover business owners, so you should think about taking out personal accident cover if your new role involves risky activities (such as working with power tools).