Money might be an awkward thing to talk about, but you’ll never get off the ground without getting your accounts in order
Starting up on your own is a daunting task. It brings a lot of freedom, but also the stress of being responsible for your own livelihood. It definitely shouldn’t be a decision made overnight – your finances, in particular, need to be in place long before you can spread your wings.
With 25 years of experience in helping small businesses get off the ground with the help of local business accountants, we asked AIMS to identify a few of the big points that should be on your mind before you make any moves to go it alone.
Make sure you’ve got savings
Freelance work and consistent income don’t always mix. You’ll likely go through “feast or famine” periods, and you need to make sure you utilise the good to prepare for the bad. You should make sure you’ve got savings built up before you start freelancing, and be constantly adding to them whilst you work. Don’t forget about sick pay and pensions saving as well – it’s all on you now.
Incorporation or Sole Trader?
You’ve got two options for your legal status. The first is to operate under your name as an individual, with any assets and contracts being tied to you specifically. The second is to start a limited company – any agreements you make with clients will be with the company, not yourself, and any income will count as company assets. Both of these choices come with very different requirements and liabilities, so make sure you’re clued up (don’t worry – we’ve already started the research for you!)
Keep up to date with industry trends and changes
We don’t just mean keeping up with the latest styles – if you go into freelancing you will no longer have a manager and support team keeping you up to date. You will need to ensure that you keep up to date with any industry news, legal changes, accounting policies and other matters which will affect how you operate in the future.
Your continual education is also on your shoulders, so planning (and saving for) educational courses should also be done as regularly as you feel necessary. For a taste of some of the most useful courses available you can check the Be Scene calendar.
Hire an accountant
You might be thinking that because you’re a one-person operation, you’ve no need for an accountant. You’d be wrong. Everyone needs an accountant – taxes and legal business status aren’t simple. Would you know when you need to raise IR35 concerns? Are you familiar with VAT and the new obligations under MTD? Do you know how to structure your business in the most tax-efficient manner?
There are many tax and financial concerns that you might feel you can’t handle on your own – AIMS works by partnering you up with local business accountants that suit you. Having a professional on your side to manage the money side of things means that you can focus on building your business and doing what you do best.