Setting up a business
Most young people who are freelancers don’t need to set up a company, but in some cases it could be useful for tax reasons. Or you may want to turn your freelancing into a business so that you can expand and employ other people. Read on for basic advice about your next moves.
Why set up a company?
Everyone is different and whether you decide to set up a company or be a sole trader is, in many ways, a matter of personal choice. A company seems more ‘professional’ than just being a freelancer – but to keep up appearances you need to be able to handle a certain amount of admin behind the scenes. For example, once you register a company you’ll be fined if you don’t complete annual tax returns and send a statement to Companies’ house.
On the other hand, the ‘limited’ in ‘limited company’ stands for ‘by guarantee’, meaning that your house, car, iphone and any other assets are protected should things go wrong.
And for some, a company could be useful for tax purposes. This article explains more.
Your first steps to setting up a company
It’s pretty simple:
- Choose a name
- Register with Companies’ House (or do it cheaply through a reputable business-set up company)
- Take note of when you should file your first accounts. Typically this is 18 months after the company is registered.
- Wait for your company number and certification to come through the letter box from Companies’ house.
- Hire an accountant, or make sure you’re confident filling in tax return forms.
You can find more detailed information about how to get a business started on the Gov.uk website. We really recommend you read this before you commit – once you’ve registered a business you WILL have to provide annual statements or risk a fine from Companies’ House. That said, it’s easy have your business ‘struck off’ if you’re panicking – there’s more information here.
Where to find basic business advice
Many business fail in their first year, but with good planning and business support this is avoidable.
The Prince’s Trust website has a great business plan guide with templates which you can download.
You should also google and find out what’s available in your local area, as many councils and local charities have schemes set up to support young people. The Kent Foundation is just one example.
Funding your business – grants, crowdsourcing, bank loans…
Again, funding is a major hurdle and to be successful you need to understand your options.
If you’re under 30, apply for a low-interest loan and support through the Princes’ Trust, or Shell LiveWire. These are highly supportive programmes with lots of advice and mentoring, so they’re a great option if you’re inexperienced in running a business.
Alternatively consider getting a bank loan – but make sure you are very clear about how much you’re borrowing and whether you’ll be able to pay it back. Before you accept a loan, reflect on how you feel about the level of risk and whether you’re comfortable. There are other places you can go to get credit which may be less risky. For example, Responsible Finance can help you find a loan with high levels of advice and support attached.
Kickstarter and other crowdsourcing platforms are a great idea. However, it can be hard to generate interest in a business that doesn’t have a charitable aim or something kooky or inventive to get the money rolling in.