The idea of being your own boss is attractive to many. If you have a skill that people will pay you for or you wish to sell a range of products, self-employment may be a viable option. There are different types of self-employment, along with perks and pitfalls to becoming self-employed, so it’s wise to familiarise yourself with these before proceeding.
Advantages of self-employment
Being self-employed means you have almost complete control over what you do, as well as when and for whom. You can develop your business at your own pace and in line with your own ambitions and beliefs, and you’re free from the constraints of working for someone else. A far more flexible lifestyle is the reality of many who work for themselves, which can be a particular advantage for parents or those who are carers.
Disadvantages of self-employment
Running your own business can be a huge responsibility, as you are in charge of every aspect, including your legal and financial liabilities. You may have to research and find premises from which to operate, and must take on all that comes with employing other people. Issues may arise that could affect your income or other circumstances, and your income may well fluctuate. This means that you will need to devote time to paperwork and other tasks that go hand in hand with owning a business, or you could enlist an accountant to help.
Types of self-employment
A self-employed trader can operate in a number of ways. The three main types of self-employment are a sole trader, partnership or limited company.
As the name indicates, a sole trader works alone. Their income is their own, as are any debts or liabilities.
Two or more people can form a partnership, becoming jointly responsible for a business. They may carry out different kinds of work or have differing shares in the business. Each individual’s share determines their income and liability.
When a limited company is formed and registered with Companies House, the business is treated as completely separate to the people who run it. Companies are subject to more rules, but they may also gain from various tax benefits.
Types of trading
There are also various ways to trade, including the following:
A license to run the branch of a business is purchased. The franchisee can then market and sell as they wish, with the backing of a brand that is already successful.
This is a realistic option for anyone who has a lot of experience and expertise in a particular field. Generally, such freelancers will use their existing contacts to drum up business.
This involves taking on multiple part-time jobs or projects with a variety of organisations.
Social enterprises, non-profit organisations and community or co-operative enterprises
A social, co-operative or community enterprise or non-profit organisation is a business with objectives that are primarily environmental or social. Any profits may be reinvested in the community or business, or are returned to members and employees.
As experienced accountants for the Goole area, we at Adaptive Accountancy are here to help the self-employed run their businesses successfully. Get in touch today to learn more.