Self Employment vs Limited Company

Discussion in 'education & employment' started by neonwilderness, Mar 21, 2018.

  1. neonwilderness

    neonwilderness What would Badgers do?

    I'm currently employed full time while also registered as self employed for freelance work. Long story short, the shit has hit the fan at my main job and I may not be employed next month so I'm looking into ramping up my freelance work to full time instead.

    I'm currently reading up on setting up a limited company rather than being self employed. Has anyone else done this? Am I going to need to pay an accountant, or would it be manageable on my own using something like Quickbooks?

    Is there anything else I should be thinking about?

    I realise this is a bit vague, but I'm just looking into options at the moment so this is a bit of a soundboard. Any advice would be appreciated.
     
    farmerbarleymow and Badgers like this.
  2. FridgeMagnet

    FridgeMagnet Administrator

    You may be thinking of being a sole trader rather than setting up a limited company (or going through someone else to effectively do the same). The latter used to be very popular basically because it was a tax dodge but it's nowhere near as popular now, and being a sole trader is pretty straightforward.
     
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  3. Supine

    Supine Rough Like Badger

    The best way to proceed will depend on a few things including how much you charge. I wouldn't advise trying to do the accounts yourself at the beginning. Lots of info here - it really helped me jump into the wonderful but scary world of self employment:

    Accounting / Legal
     
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  4. smmudge

    smmudge Sissy that walk!

    From a finance point of view I would say a big thing to consider is how much credit you will need to take to run your business day to day. If you don't need much then may as well be a sole trader. If you are taking multiple HPs/leases (perhaps if you start employing other people), large credit cards, loans etc. I would think it much better to go LTD. Not just because of the liability, also because if you have a lot outstanding lenders will not want to lend you more (as a private individual), even if you're paying everything fine, some lenders' criteria just can't see past that much credit. So it may start to affect you if you want something for personal use as well.
     
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  5. cupid_stunt

    cupid_stunt Dyslexic King Cnut the Great.

    neonwilderness and Badgers like this.
  6. newbie

    newbie undisambiguated

    there are a number of previous threads on here that have delved into this. You might have to become Ltd, or go through an umbrella company, if you're intending to sell yourself as a service to businesses, particularly if that service is bum on seat contracting.
     
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  7. UnderAnOpenSky

    UnderAnOpenSky baseline neural therapy

    An agency I do some occasional work for won't allow me to bill them as a sole trader, but will allow me it if a Ltd company (or use an umbrella) Why might they do that?
     
    Badgers likes this.
  8. newbie

    newbie undisambiguated

    because in some circumstances the 'sole trader' appears on the books as Ms M Mouse and no-one pays tax or NI, which upsets HMRC something chronic.

    It's a good few years ago now when a number of companies I worked for all got turned over at the same time and presented with massive back tax bills because lots of those 'sole traders' were found to be disguised employees. I was ok, deemed legitimate, and many of the ghosts got away with it, but the companies didn't, some went bust and others started demanding invoices from Ltd companies as protection.
     
  9. cupid_stunt

    cupid_stunt Dyslexic King Cnut the Great.

    Some of my clients will only deal with Ltd companies, or sole traders that are VAT registered, I guess for the same reason.
     
  10. Boudicca

    Boudicca Seaside Queen

    As newbie says, they don't want to be accused of using 'freelancers' who they should be on the payroll as employees.
     
  11. UnderAnOpenSky

    UnderAnOpenSky baseline neural therapy

    Ok, that makes sense I guess. I thought if you invoiced the company it was you they came after for unpaid tax.
     
  12. farmerbarleymow

    farmerbarleymow Sweetcorn, Seagulls and Wasps are Brilliant!

    I've no knowledge of self-employment, but hope you get yourself sorted out neonwilderness and are managing to deal with the threat to your main job OK. Never an easy situation to be in. :(
     
  13. newbie

    newbie undisambiguated

    At the very least the company pays Class 1 NI on employees, nothing on those who sell services but are not employees. They also break various laws by cheating such workers out of holiday and sick pay and so on.
     
  14. neonwilderness

    neonwilderness What would Badgers do?

    Cheers. It’s not completely dire just yet, I’m just looking into various options at the moment.
     
  15. telbert

    telbert Do you like sponge?

    Ive been considering forming a plc for some time now ( will be actualy doing it next week hopefully)and ive had some great advice from posters here. My main reason for working under a plc was to become more tax efficient and be able to grow my business with the least amount of hassle.Main things i needed help with were accountancy and insurances( ive had some ridiculous quotes for bookeeping so shop around. .Spend a few hours googling the info you need,its all out there.:thumbs:
     
  16. cupid_stunt

    cupid_stunt Dyslexic King Cnut the Great.

    A PLC?

    A Public Limited Company?
     
  17. MickiQ

    MickiQ Well-Known Member

    you probably mean a Limited company not a PLC if you really mean a PLC then you're doing it wrong, a PLC is floated on the stock market and its shares are traded.
     
    cupid_stunt likes this.
  18. telbert

    telbert Do you like sponge?

    Private Limited Company.
     
  19. MickiQ

    MickiQ Well-Known Member

    If you form a Ltd company you can then hire yourself as a employee and pay tax and NI on your salary, This can actually a good idea financially as well as socially useful, When I got made redundant and formed my own company I had already got 35 years worth of NI contributions but because I had been in a contracted out pension scheme for 25 of them I was only elegible for the lower state pension rate and have to put in 9 more years to get the top rate.
    As a company employee I've paid 2 more years of NI (at a modest sum) which has moved me 2/9th's of the way up the State Pension band.
     
    neonwilderness likes this.
  20. cupid_stunt

    cupid_stunt Dyslexic King Cnut the Great.

    That makes more sense.

    But, that's a standard limited company - Ltd. - not a PLC.

     
  21. MickiQ

    MickiQ Well-Known Member

    Then you mean an LTD or "Private Company Limited by Shares", when you set up your company you issue shares which have a fixed face value (mine are worth £1), you can issue shares to other people than yourself. I issued 10 (5 each to me and Mrs MickiQ) since dividend income is taxed independently of other income we doubled our tax allowances that way. You need to be totally confident in anyone you issue shares to since they then own a proportion of your company but I figured after 31 years and 4 kids if I ever split with her I would in be far more debt than the value of a few shares.
    Mr MickiQ has a job of her own but a former colleague of mine who also formed an LTD and who had a non-working wife hired her as his secretary and paid her a salary and pension.
     
  22. telbert

    telbert Do you like sponge?

    Ive used plc as an abbreviation for private limited company as we are talking about a private limited company,the same way that about 40+accountants and insurance brokers have used it while talking to me about a private limited company. I always took it to be an abbreviation for private limited company in this context, not public limited company.I'm not an expert in either private limited companies ,public limited companies or abbreviations.Hope that's cleared it up.:hmm:
     
  23. MickiQ

    MickiQ Well-Known Member

    enough nitpicking then, so you're going for it? I wondered what had happened since we last spoke.
     
  24. crossthebreeze

    crossthebreeze Well-Known Member

    If you still live where it says you're from when you click on your name, get in touch with PNE Enterprise - I got some very useful advice and training from them when I first became a sole trader several years ago (after being sent somewhere else by the jobcentre which was absolutely no help whatsoever), and am going back to them for advice next month once my part-time employment is no more.
     
    neonwilderness likes this.
  25. telbert

    telbert Do you like sponge?

    Unfortunately my work went a bit haywire and I had some very tempting PAYE offers sort of thrown at me out of nowhere that may have led me off in a different direction.Now know that most of them were nonsense and the ones that were genuine are not for me so I think i'm gonna go with the original plan now. Just need to get a few things sorted and I should be on my way.Although that doesn't mean I wont be asking for more info here.;)
     
  26. cupid_stunt

    cupid_stunt Dyslexic King Cnut the Great.

    Not trying to nicpick, but if you are talking to accountants and insurance brokers that don't understand the different between the two, you need to find different accountants and insurance brokers. :D
     
    Leafster likes this.
  27. MickiQ

    MickiQ Well-Known Member

    No problem mate all advice given for free and and all probably worth what it costs
     
    telbert likes this.
  28. telbert

    telbert Do you like sponge?

    So you honestly think that none of them know the difference between the two because they used the plc abbreviation?:facepalm::D
     
  29. Leafster

    Leafster From the FRow

    I have to say I'm surprised at an accountant using plc to mean a private limited company. I've been an accountant for...er... a very long time and I've never ever come across an accountant who did.
     
    cupid_stunt likes this.
  30. cupid_stunt

    cupid_stunt Dyslexic King Cnut the Great.

    Well my accountants, solicitors and insurance brokers have never used PLC when discussing a private limited company (Ltd.), but then they are all trusted professionals, I would be seriously worried if they did, considering the massive difference in legal terms.
     

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