Setting myself up as a company or sole trader?

jojeba

I'm a freelance writer, and have just started taking paid work.
Do I need to set myself up as a company or sole trader? I don't anticipate making anywhere near the amount of profit as to be taxed for quite some time but I assume I need to set myself up now?

I also run a craft business on the side - again, do I need to set up as a limited company? Again, have not made any profit yet either, and don't anticipate that happening for quite some time.

And I am looking for a day job as well... if I get work will this effect either of the above?

I really don't know much about this so please go easy on me!

Horace

First of all I would speak to Business Link who give free advice and courses for businesses - that way you can get some good advice on starting a business.

Initially, it may be better to start off as a sole trader as you will be able to register this with the HMRC and maybe ask for a class 2 NI exemption whereas as a Limited Company you would have to pay a wage, employ staff, pay their PAYE and your own as well as the corporation tax implications too. There is nothing to stop you becoming a limited company later when you have built up your business.

You don't register two businesses with the HMRC as a sole trader.

With regard to being an employee you possibly wouldnt be able to work in the same field as your self employed work because it could be seen as a conflict of interest.

Evilm

for something small I would say stay as a sole trader. However remember that if you run up any debts (which with freelance writing shouldn't be a problem) then you are personally liable for them as a sole trader. As a Limited Company they would belong to the company and therefore you would have less liability and issues in that regard.

If you were trying to go into a more inventory heavy business I would suggest Limited Company instead but in this case you should be fine as a sole trader.

Hammyman

jojeba wrote: »

I'm a freelance writer, and have just started taking paid work.
Do I need to set myself up as a company or sole trader? I don't anticipate making anywhere near the amount of profit as to be taxed for quite some time but I assume I need to set myself up now?

Yes. You have up to 3 months from beginning trading to register for self employed. Being a Ltd Company would reduce your exposure to company debts.

I also run a craft business on the side - again, do I need to set up as a limited company? Again, have not made any profit yet either, and don't anticipate that happening for quite some time.

Well if you've been doing it more than three months, you're breaking the law. The fact you make a profit or not is irrelevent.

And I am looking for a day job as well... if I get work will this effect either of the above?

I really don't know much about this so please go easy on me!

No. It would just alter how you pay tax.

Horace

The 3 month registration limit was removed by the HMRC this year.

Hammyman

Horace wrote: »

The 3 month registration limit was removed by the HMRC this year.

WRONG.

From:

http://www.hmrc.gov.uk/leaflets/se1.pdf

You must do this as soon
as you start or within the first three
months, even if you already use a
Self Assessment tax return.