Making the leap from the office to self-employment isn’t easy. You need to be able to make quick judgement calls based on the little experience you have of how the freelancing world works.
In order to ensure you make the right choices, and give your business the best possible start, you need to plan how you’re going to approach freelancing.
Before telling your boss
There’s a few things you should have in place before you even think of letting your boss in on the big secret.
Some will argue that there’s no right or wrong way to go freelance, but there are ways you can keep stress to a minimum during the process.
Your priority when setting up a small business should be deciding the best business structure for you. The main debate between freelancers is deciding whether to operate as a sole trader of a limited company.
The business structure you choose will depend on what industry you’ll be working in, what kind of clients you expect to have, and how quickly your business is likely to grow.
All these factors will determine how your company should operate, in order to be the most tax efficient and flexible structure for your needs. If you’re struggling to find the right structure, here are some helpful tips.
Finances are a vital part of your business, and you need to know where you stand before leaving your current position.
Now’s the time to get a business bank account set up and decide on your budget. This will help you be more organised and won’t force you to spend hours trawling through bank statements to find you company expenditure.
Creating a detailed business plan will outline your ideas for the future and help you keep track of progress.
It might sound like a monotonous task, but if you’re serious about your future as a freelancer, you need to complete the business plan with everything in mind.
That means preparing for every eventuality – forcing you to think about what could go wrong, as well as what you hope will go well!
Not a necessity, but if you’re leaving the security of full-time employment, it’s good to know that you have something lined up that you can dive straight into.
Secure a contract before you head for the door to avoid dwindling away all your hard-earned savings in the first few months.
What you need to sort once you’ve spilled the beans
After you’ve built up the courage to tell your boss, you can start looking at the more detailed aspects of going freelance.
Your mission statement will be a few sentences on what you want your business to achieve. The idea is to force you to focus on exactly what your business provides, and why.
But be warned, mission statements don’t always go to plan. There are plenty of examples of mission statements that miss the point completely, and have resulted in even large brands becoming a mockery.
Create a memorable mission statement by sticking to these rules.
You need to put a lot of thought into branding; it can’t be something that’s cooked up overnight. A good branding technique will complement your mission statement and deliver it effectively to your target audience.
Choosing how you want your brand to appear to others can be a lengthy process, and the results are often better if you take time rather than make snap decisions.
VAT, NICs and taxes
The business structure you use will depend on what taxes you pay and how you pay them.
For example if your register as a sole trader you will pay taxes through the annual process of applying self-assessment.
However, if you operate as a limited company you may be taxed as an employee through PAYE, as well as complete a self-assessment.
You may also need to register for VAT if you expect your business to earn over a certain amount. You can find out more about registering for VAT here.
Hire an accountant
Bookkeeping, payroll, IR35. There’s a lot of jargon about in the finance world, which can be daunting for a newly fledged freelancer.
Take the weight off and ask an accountant to help with your business finances to keep you stress-free when tax season rolls around.
Hiring an accountant will save you time and money, not to mention giving you valuable business advice.
Get an instant quote from us today to see how TAP can help your freelancing business.
Are you making the leap from employment to freelancing? We want to hear from you! Leave us a comment below with your experiences, or you can get in touch on Twitter.
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About The Author
We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!