Becoming your own boss means that you’re free to run a business exactly how you want to, which is perhaps why so many people are looking to become self-employed.
According to the Office of National Statistics, the number of registered self-employed workers increased by 90,000 in the first quarter of 2019, reaching a record-breaking 4.93 million.
If you’re one of those looking to take the plunge and start working for yourself, you may need some help in working out how to do it. The truth is, it’s not quite as simple as just quitting your job and going it alone. There are several factors you will need to consider early on, which can ultimately affect just how big your business could grow.
Get the right insurance
If you’re employed by a business, work-related insurance probably won’t be something you’ll need to think about. However, becoming self-employed means that there won’t be anyone to fall back on in case something happens, such as your work injuring a member of the public, which could easily result in a lawsuit. Finding the right kind of insurance depends on the nature of your business—there are some policies you will legally need to have, and some that are just beneficial for your own peace of mind.
For example, if your self-employed business is big enough for you to begin hiring other members of staff, you will legally need to carry employer’s liability insurance, the same way that driver’s need to have motor insurance.
You may also get hold of public liability insurance, which essentially protects you from legal action if your work causes harm or damage to a third party or their property. This cover wholly depends on the job you do, and isn’t a legal requirement.
Subcontractors, for instance, may require their main contractor to have public liability insurance, and can even ask for proof, which typically comes in the form of a certificate. This will contain extensive information about the type of cover the policy provides, as well as who is insured, the insurance company, policy number, and the period of insurance.
Of course, if you’re just starting out as a self-employed trader, you may want to cut any non-essential costs altogether. However, in some cases, taking the financial hit of buying insurance can work in your favour by improving trust in your brand as well as covering you from accidents. As Tradesman Saver explains, public liability insurance certificates also contain details on the indemnity limit of your policy, which is the most the insurer will pay on a claim, as well as the business description, which details what activities you’re covered for.
If a client has requested that you hold public liability insurance—and wants to see proof—they will likely stipulate a minimum indemnity limit, and ensure that you’re suitably insured for the work they need from you. Having this information readily available can work to get you business from more high-profile clients for larger jobs, ultimately giving you a larger paycheck and boosting trust in your personal brand.
Understand your intellectual property rights
Intellectual property (IP) is about protecting your ideas, even before they’ve been turned into a physical product. Consequently, since they can’t be seen or touched, it can sometimes be difficult to remember that it’s actually incredibly important to businesses of all sizes. There are a few different types of IP that you will need to be aware of when going self-employed, such as:
- Patents: these protect the ideas behind new inventions, and the way they work, as well as what they do, and how they are made.
- Trademarks: these protect brands, including business names, products, services, logos, sounds, and even actions.
- Copyright: this protects works of literature, art, photographs, music, drama, software, databases, film, radio and TV broadcasts, sound recordings, and publishings.
Every business, regardless of size, has intellectual property that needs protecting. When you register your IP, it becomes guarded by law, giving you certainty that a business will be unable to copy your brandings or work—something which even self-employed workers need to be cautious of. For example, makeup artist Vlada Haggerty found that Kylie Jenner’s cosmetics company directly lifted and copied her work without crediting her. By protecting your IP, you’re able to legally fight against any company, regardless of its size, in the event that they copy your work.
Officially register yourself
How you register your business depends on your industry—for example, if you work in construction, you will need to register under the Construction Industry Scheme. For tax and National Insurance purposes, you must also tell HMRC that you’re becoming self-employed, to make sure that you will be paying the right amount.
This also includes determining and declaring your new business structure—whether you’ll be operating as a sole trader or a business. While you don’t need to register yourself as a business if you’re self-employed, you do need to register for Self Assessment, which allows you to pay your own taxes.
Being self-employed means that you will pay tax and National Insurance on your earnings in arrears, which means any money earned in the tax year is not due until the following January. This means carefully considering how you’ll be paying this potentially large sum of money—but, of course, you’ll have about nine months to prepare.
Remember, when you’re self-employed, you only pay income tax on your profits, not on your total income.