Is self-employment or a Limited company the best option for VAs?
Before I became a VA I had a very limited understanding of UK business structures.
I mean, why would I know much about it seeing as I'd been employed in the corporate world for 10 years at that point?!
So when it came to starting out as a VA I kept swinging between setting up as a sole trader and starting a limited company. I thought that surely if I planned to build a profitable business I should set up a limited company from the get-go? But what if that was actually quite complicated and I needed to pay for an accountant, something that I couldn't really afford to do at that point?
Well as this is a conversation I have with every VA I mentor I thought I'd break down the basics so you can make your own informed decision (of course with the disclaimer that I'm absolutely not an accountant and this is definitely not financial advice!)
So here you go - a whistle stop tour of UK business set-ups for VAs:
Self-employment (aka being a sole trader)
Easy to set up - just register online with HMRC
Straightforward self-assessment (easy when you keep good records throughout the year)
You're personally liable financially if your business gets into debt
Director of a Limited Company
Your personal finances are separate from your company's
You can potentially pay less tax than a sole trader
You probably need to hire an accountant to do your books
Most VAs choose the self-employment option as it's the most economical and the easiest in terms of HMRC obligations. It’s therefore always the structure I recommend VAs choose, and there’s not really any reason to change unless (or until) your earnings reach a certain threshold. If and when that happens, you can switch to a Limited company at any point.
So there you have it - hopefully a bit clearer than mud!