Many employed persons are drawn to the idea of running their own business. This short article sets out a few of the pros and cons of this change in status.
One of the major advantages of being self-employed is the opportunity to secure more than one income stream. When employed, we normally work for one employer and thus all eggs are in one basket – lose your job and you lose your monthly income.
Self-employed persons have the opportunity to secure multiple customers – lose one customer and you will lose some but not all of your income.
To some extent, as a self-employed person, you may have more freedom to choose when you work although this can be a double-edged sword, business owners may get demands from clients out of hours and it may be difficult to resist their demands if they are big spenders.
Contrast these advantages with some of the less advantageous demands that may be made if you become self-employed.
As an employee you should have no personal, financial liability for your employer’s debts or guarantees. This may not be the case if you are running your own business. There are ways to organise your business structure to minimise these risks but adopting them comes at a cost.
You won’t get a payslip and have your taxes and NIC paid by deduction if you are self-employed. You will have to maintain proper accounts and make returns to HMRC to determine your liabilities.
If your turnover is over the present £85,000 registration threshold, as self-employed you may have to register for VAT and make regular, on-line returns to HMRC.
You will need to fund any investment required to set-up and run your business.
NIC contributions by the self-employed may not create sufficient State Pension funding and private schemes may need to be considered.
Instead of benefitting from benefits attached to employed status: holiday pay, statutory sick pay, most State benefits; you will have to guarantee these benefits for your employees.
Finally, as self-employed, you will have to budget and meet all of the costs associated with your business activity.
How we can help
We have been supporting new business set-ups for a number of years and can help you address all of these concerns. Running your own business may not be for the faint of heart, but with adequate planning and support, setting up and building a business can be immensely satisfying and rewarding.
Please call if you want to explore your options.