Forming your own consultancy company
With so many people being made redundant at the moment, many are considering taking their pay-off and investing some of it into setting up their own freelance business. Where your skills are readily transferable, it may be possible to set up as a freelance consultant and sell your services to a range of companies.
What makes freelance consultants different?
Consultants and trainers, by definition, provide advice and guidance to others requiring those skills for a short period of time. As such, it is important to make sure that when you set up your business you are protected from any potential claims due to negligence or incorrect advice. One way to do this is to set up a company and be the sole employee or officer where the corporate shell provides some degree of financial barrier in the event that you are sued.
The alternatives to setting up a company are to trade within a partnership (with someone else) or as a sole trader (freelance). These leave you fully exposed to the financial liabilities of your actions and, although it is possible to obtain professional liability indemnity insurance, the consequences can be significant.
Therefore, setting up a company can provide protection as well as an image of scale beyond the true size of the business.
If you have knowledge of corporate law and procedures, it is possible to set up a limited company from scratch for as little as £25. This will register the company and file the necessary legal returns to Companies House as to the directors and secretary. You will also need to provide a registered office address – and you may consider domiciling this at an accountants or lawyers office to ensure that the legal procedures are correctly followed for any notices that arrive. This can cost in the region of £100 per annum – particularly if the secretarial services are also outsourced to them.
Depending on the nature of business you are in, you may even consider buying an established business. Be wary though as the due diligence and warranties involved may not always discover or protect you from past corporate indiscretions.
Freelance – accounting
Finally, when setting up your own business or going freelance you will need bank account(s), VAT registration (if you anticipate your turnover will exceed the statutory amount, and someone to do the books of account. If your skill set is not in any of these areas, then the whole company formation, registrations, secretarial services, registered office location, name plates and accounting services can be outsourced for a first year cost of around £800. In the first year, this is a peace of mind and low cost option for the first time self employed consultant that allows them to fully focus on setting up their business and earning revenue.
Having gone through the Company Formation (for going freelance) process you are ready to trade. Try to avoid working for a single customer as you may get caught up in all sorts of potential arguments with HMRC about the nature of your work. As always, take professional independent advice before committing to anything of which you are unsure.
Going freelance as a way of running your own business, and taking control of your life