Some little girls dream about owning a pony, or becoming a princess…

I wanted to own my own company.

Ok. Truth be told, I have always wanted to become Ariel from the Little Mermaid, and who knows, maybe one day I’ll achieve that goal. But until then, I’m happy sitting as the CoE (Chief of Everything) at Alice Hollis Ltd.

Getting a head start

Way back in the mists of time I was formally introduced to the world of business at Long Road Sixth Form College. Sitting in my first lesson I was full of excitement and anticipation as Stuart Bathan, tutor extraordinaire, held my hand as I took my first step into this new world.

Two years later, I earned my AVCE (equivalent to two A-Levels) in the subject. And started my next adventure – a four-year sandwich course at Sheffield Hallam University studying Business and Marketing.

And then jumping feet first into my career, I made sure to grab every opportunity to see what it takes to make a company tick, how the whole strategy thing works in practice. And I’ve taken every opportunity to receive coaching. Choosing to work in startups and small organisations meant I was closer to the top (at times it’s only been me and a couple of other people), and I was fortunate enough to sit on the senior leadership team of a couple of SMEs.

So essentially, what I’m saying is that I didn’t just wake up one day and decide to start a company. It’s a puzzle I’ve been trying to figure out for the last twenty years.

My journey from sole trader to Ltd. company

Becoming a freelancer in 2015, there were so many unknowns. Plus I had a newborn in tow, which as any new parent knows, completely turns your world upside-down and inside out.

Before having children, my Grandad had laughed when I said I was going to be a working mum – he told me it can’t be done. For this comment alone, I was determined to prove him wrong!

So I set out as a sole trader while I found my feet…

Then after a year, I’d managed to build a business that gave me a healthy income, while affording me a decent work-life balance with plenty of precious time to spend with my son. The natural next step was to turn limited.

Setting out on a fact-finding mission, I attended The Business Show. Talking to several accountants and HMRC, I figured out the process for making the transition, and what my responsibilities were as a Director. But everyone was so negative, telling me I didn’t earn the magic number that made it a financially viable option (and before you ask, no, I don’t know what the magic number actually is). They essentially said I would just be signing up for mountains of paperwork.

So I left feeling deflated and resigned myself to continuing as a sole trader.

Welcoming my second son a year later, I was pretty much forced to close my business down – there’s very little support and few options available for self-employed people who choose to start a family.

Returning to work a year later, my focus was purely on re-building my business from scratch…

And another year later, I had successfully done this, in the process figuring out exactly what services I wanted to offer, and who I was best placed to help…

I was eager to start the next challenge.

So I signed myself up to attend a seminar all about setting up a business, while getting your ‘adulting’ hat on to get your finances in better shape for the future.

Mind-blowing!

Being an active member of the freelance community, the sole trader vs. Ltd company question is debated often, and I always follow the conversations with great interest.

But this time was different. Having attended the seminar, I was full of excitement/fear for my, and my family’s future. I’d then spoken to a financial adviser to get my personal affairs in order, and then spoken to my husband’s accountant for some general business advice.

I could feel something inside me shift. It finally felt like the time was right to realise my childhood dream and create a ‘proper’ business. I wanted to do something for me; something I could be proud of, and that would make my family proud of me. I wanted to create something that would help to secure my family’s future.

So I went Ltd.

The process of setting up a Ltd. company

We all have our own personal reasons for thinking about going Ltd. Here’s what I learned about the process in making the transition…

Decide whether you’re a sole trader or limited company

There are pros and cons to each type of business; a sole trader is typically simpler, because you pay your tax and National Insurance after completing a self-assessment form. Limited companies involve more admin and are more expensive – but there are clever, tax-efficient ways to pay yourself through the company.

Register with Companies House

If you decide to take the plunge and set up your startup, you need to register with Companies House and pay a £13 administration fee. To register, you’ll need the following information:

* if you want to put a large amount of cash into the company, do this as a Director Loan as it’s easier to get the money out, tax-free, at any time.

Register with HMRC

You will also need to register with HMRC for pay-as-you-earn (PAYE) so you can pay yourself / your employees. Once registered, HMRC will provide you the references, which you need to keep safe.

Things to think about…

  • Who will run your payroll? You? Or an accountant?
  • What day will you make salary payments?
  • How will you track staff who are paid hourly?

Register for VAT

If your turnover exceeds a certain threshold, you must register for VAT – for 19/20 this is £85k turnover per year.

But…

You may still choose to voluntarily register for VAT once you consider the following:

  • Is your business likely to exceed the threshold in the future? If so, it might be worth registering now, rather than having to suddenly increase your prices by 20%.
  • Do you have large expenses, such as equipment purchases? If so, you can typically claim VAT back.

Once you’re registered for VAT, you will need to make quarterly/annual filings, depending on which scheme you’re on. To make this really simple, you may want to consider using an accountancy software package.

Open a business bank account

Once you’ve registered your business, you must open a business bank account. To do this, you will need a certificate of incorporation. And you’ll usually be asked to identify the directors and anyone that owns over 25% of the business – this can make it a time-consuming process so start it as soon as you have the certificate.

When choosing which bank to open your business account with, think about…

  • Whether you want/need access to a highstreet branch
  • Online functionality
  • Rates for taking cash out of the business
  • The bank’s reputation

And don’t forget to check out the new challenger banks that are entering the market – many are designed specifically for freelancers/startups/sole traders to give them a better service and preferential treatment.

Decide how you will track sales and expenses

You will need a mechanism in place for your ongoing bookkeeping. This could be a simple spreadsheet, or a software package, such as FreeAgent of Xero.

Make sure you know how to pay tax efficiently

As previously mentioned, setting up as a limited company does have its perks when it comes to paying tax. Paying yourself a salary up to the NIC threshold means you’ll stay within your free personal allowance. You can then take additional cash as a dividend, which gives you the first £2k free.

Also, don’t leave tax-free money on the table, such as mileage, expenses and director loans. Make sure you know what you can claim.

The smart way to go Ltd.

So yes, I did a lot of research into becoming a Ltd. company. I attended a lot of events, and did a lot of homework…

But in the end, I figured that there’s a reason people train for years to become specialists in their field – so I hired an accountant to do it all for me.

Yes, I’m perfectly capable of following the process to set up my business. And yes, I’m perfectly capable of doing my company accounts and keeping the tax-man happy. But the reality is that between keeping my clients happy, being a mummy to my gorgeous boys, being a wife to my incredible husband, and being a housewife, I’d rather not have to find the time to do all this additional admin.

Finding Martin Brooks from Gold Stag Accounts, on the recommendation of Dave Smyth from the freelance community, is up there with one of the best moments in my life…

Martin was the first person, in a long time, to make me excited about owning a business.

He spoke to me like a friend, answering all my questions simply in language I understood (as opposed to accountancy jargon!).

He freely gave this advice, pointing me in the direction of credible sources of information if I wanted to find out more.

He made the whole process seem not-scary.

He did everything for me, while holding my hand and taking me along for the ride so I felt fully involved.

And he continues to support me…

Because he understands the world of freelancing. And he understands what an amazing thing it is to go Ltd.

Till death us do part

The only way I can think to express the reality of becoming a Ltd. company is to liken it to getting married. When you marry the love of your life, nothing actually changes, but it feels different, special, sacred. It’s the same when you become a Ltd. company; nothing actually changes, but it feels better than you ever dreamed possible.

Only you know what feels right for you and your company. And if you have any questions, or need someone to hold your hand along the way, I highly recommend you talk to Martin!


Photo by Raphaël Biscaldi on Unsplash