Setting up your own business.

Just to wade into this one again, I’ve heard cases where clients refused to consider tenders from business that were not trading as limited companies. That’s obviously pure crazy, but if you are working in a procurement department of a large company or public sector organisation, its not difficult to see how it can happen. 🙄

I’ve heard cases where clients refused to consider tenders from business

In my experience, such storeys are just excuses, business is about contacts, and if the procurement department need to get one of their “contacts” in, they set the rules accordingly.

and if the procurement department need to get one of their “contacts” in

and if when the procurement department need to inevitably get one of their “contacts” in

FTFY

Large companies and public sector can insist on limited companies so that they can check their published accounts to ensure that they are in a position/ have the resources to fulfill the contract and not bite off more than they can handle leaving the buyer back at square one and incurring more costs to find another suitable supplier.

Surely any company can insist on anything without giving reason? I didn’t realise there were rules.

Short of not giving someone the business because they is black, that’s pretty much right. They/you can do what damn well like. That’s capitalism

I’ve read earlier in the thread people not thinking its important to be VAT registered. In reality, it’s commercial suicide. A lot of companies will ask for a VAT number at the first point of contact, and if you don’t have one they’ll just think you’re a mickey Mouse outfit and wouldn’t touch you with a barge-pole

I’ve read earlier in the thread people not thinking its important to be VAT registered. In reality, it’s commercial suicide. A lot of companies will ask for a VAT number at the first point of contact, and if you don’t have one they’ll just think you’re a mickey Mouse outfit and wouldn’t touch you with a barge-pole

But of course it totally depends on the type of service you provide doesn’t it?

The OP is just an illustrator so is likely to be working with individuals or creative agencies (depending on the type of work he produces). I wouldn’t imagine not being VAT registered would put either of those groups off in the slightest.

VAT registration is a commercial decision below the threshold as Binners has described and the flip side of it like MF has described with the OP and her clients would begrudge paying VAT.

I think the OP’s strength will be in the product in an area where the name and style are more important. Most of the VAT and Ltd company comments have been written by people who work in that type of environment andf that’s where that attitude is applied.
If I want Ralph Steadman to illustrate my book, it’s Ralph I want irrespective of whether he’s a Ltd company or VAT registered, I also don’t want a Ralph rip off either.

If I want Ralph Steadman to illustrate my book, it’s Ralph I want irrespective of whether he’s a Ltd company or VAT registered, I also don’t want a Ralph rip off either.

You could use Gerald Scarfe. 🙂

Not if I want Ralph! Oh, you know what I mean… 😆

I have run two successful businesses as limited companies. One, my main source of income, is a business-to-business service provider, it’s got a reasonable turnover for its size, a handful of employees, nice offices, etc. It’s a limited company, VAT registered, properly insured, the works, and it has to be, there’s really no other way of doing what we do.

The other company was set up to handle the income from some creative writing and related merchandise that I did with a friend. It also handled quite a large amount of money for a while, was VAT registered, received international income, and dealt with several publishers, advertisers, and literary agencies. To be honest, knowing what I know now, none of that was necessary, and in fact it made life more difficult for us. The tax advantage was minimal and the hassle was quite significant.

Publishers and other creative industry organisations do not like dealing with people who set up as limited companies unnecessarily. In my experience they are generally geared up to deal with sole traders working as individual tax entities, and setting up as a limited, VAT registered company just causes them headaches without being of much real benefit to a small outfit. I don’t think we ever encountered a scenario where we couldn’t have proceeded without being a limited company or having VAT registration number.

So, in my opinion, based on what you’ve said you probably don’t need to be a limited company at all, and nowadays you don’t need to be VAT registered unless you’re turning over quite a bit of cash. At that point you can afford to pay a professional to sort out your money for you anyway.

Which brings me onto my single most important bit of advice to anyone setting up a business: talk to a good accountant as soon as you start making more than pocket money. Paying a good accountant is the best investment you will ever make.

A big thankyou to everyone who has contributed to this thread.

After reading through websites, i have set up an action plan and appointments with the correct people. I will be seeing a few accountants next week after getting local recomendations.

I think a sole-trader is ideal for me, while a LTD seems to have its benefits i dont feel they are going to help me in anyway. I have been commisioned by big name clients prevoiusly and i have not encountred any problems.

Thanks everyone for the encouragement.

David

For those asking to see work:

Graphic work, these were for a record label.

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Angelina Jolie, this drawing was for a tutorial. The completed drawing (top) is now in a private collection. The close ups show different types of graphite blending.

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Pencil portrait for a client.

Watercolour cat for a book illustration.

I have a new website which i will upload in about 4 weeks. It is based heavily around some illustrations for a book that is yet to be launced, so i am not permitted to publish those images as yet. My currently uploaded website is a bit… crap, i was pretty ill when i made it and i think it shows.

Loving the cat illy.

Catflees – can you email me your details – we occasionally need illustrations doing and I also have a long-held idea for a children’s book…

(My email is in my profile)

Be careful. I went from running a successful business for ten years to nearly going bankrupt overnight. The main reason was credit control, or lack of. When four of my largest customers went bust in one month I was left with a 98k shortfall to pay my bills.
When that happens you’re on your own, everything stops. Like in the movies when the wife has canceled all your cards and emptied your accounts.
That was end of 2009. I spent 2010 paying off people, and 2011 trying to get back on my feet.
This time around I’m going it alone, the banks wont touch me anyway. I choose my customers carefully and I decline politely work that isn’t worth taking.
Very tough being self employed in this climate, but my accountant reminds me that I’m covering costs and slowly getting back business whilst many others out there are not.
My plan is to be healthy and ready when and if the economy picks up.
Sorry about the doom and gloom posting, but it ain’t all roses.

Though, and this might sound silly. Selling or providing a product that people can see and want and think is nice helps.
I sell to electricains stuff the customer pays hundreds or thousands for but can’t ever see, never helps.

how about if you are running a very small business , arounf £11k turnover a year , and have a full time employed job .

is it worth registering with anyone ?

profit must be £8 to £9 k .

You must at least register with HMRC and declare on your tax return as a sole trader or you’re not paying tax on all your earnings.

Are you Greek?

as a sole trader i’ll give you my two bobs worth. register as self employed with hmrc. start work taking money spending money. use one current account for this and use it for nothing else so you can keep a record of your income and expenditure in one place. if your turnover ( the money you take gross in sales exceeds or exrapolated out theoretically exceeds 72k ps you ll have to vat register. you can vat register with a lower turnover but you have to charge vat on all your invoices.
do your books every couple of weeks/ month using a simplex account book ( staples etc) and at the end of the tax year or before the end of the summer give them to a tax advisor accountant / why/ so they can run an eye over them and claim for all your entitled. which in the main is evrything you buy to sell everything you buy to use ( tools) ( 10k allownace per year). you can claim ofr all business related fuel servicing proffesional fees accomadation phone bills.. the list goes on at the end of the year you may be pleasantly surprised how little tax you have to pay! you ll soon realise that been employed and paying 40% every week is a mugs game. good luck.

you ll soon realise that been employed and paying 40% every week is a mugs game

Never a truer word spoken. Honestly once you’ve been self employed for a bit you will never go back to being an employee trust me.

Not only do you pay much less tax as a self employed person but you’ll have the satisfaction of being master of your own destiny and making your own money.

As a freelancer I sometimes get to work back at one of my old companies. I can honestly say that I feel sorry for those still working there – grinding away day in day out to make the bosses even richer, and then paying lots of tax from their own salary in the process.

I realised I’d done the right thing going freelance when one of my old work colleagues asked me – how come you’re never stressed anymore. We were working late at the time. I didn’t have the heart to tell him that as a contractor not only is my daily rate twice my old salaried rate but I would also be billing the company for every hour worked over and above the standard 8 hour day. He on the other hand was expected to work his overtime for nothing more than a pat on the back and a vain hope of achieving a small pay rise at appraisal time, much like I used to do.

Not for me anymore!

I also have a long-held idea for a children’s book…

It’ll send them to sleep in minutes 🙂

Totalshell & Northern Star +1

Although I went/still am going through hell, I will recover and I’d never go back to being employed.
My lesson learnt was to never trust anyone too much when it’s your name over the door.

End of this year I have a small housing estate to supply which will be a nice earner and every penny of debt will be repaid by November so a nice clean re-start.

Catflees, lovely work. I wish I had the artistic side too when I see work like that but alas matchstick men are my limit of skill. Good Luck.

It’ll send them to sleep in minutes

If I could write such a book I would, in fact, be a very rich person.

😉

I also have a long-held idea for a children’s book…

My brother has just had his first hardback book published.
After being on numerous telly and radio programmes, winning competitions (regarding the book)and having a full 2 page review in the ‘Daily Mail’ last month. it’s taken 10 years.

Catflees – you are very talented.

Also speak to a good accountant who can advise what expenses you can put through the business (for example, if you work from home, you can claim a portion of power, heating, phone, insurance etc against business costs) which will lower your tax bills.

Be careful with this as you become liable for capital gains tax on the sale of the property (claim a tenth of running costs for business pay CGT on a tenth of the gain in property value).

Couple of months off, but you want to visit The Business Startup Show, at Earls Court http://www.bstartup.com/
Loads of seminars, loads of free advice, exhibitors offering every service you could need, 121 workshops, make contacts, networking & people like James Caan & Duncan Bannatyne speaking. And it’s all free. Absolutely brilliant!

Thanks everyone! 🙂

I would stay as a sole trader for as long as you can, the accounting process is far simpler than that for a LTD. As to VAT registration well that’s up to you, you may find that some of your clients need VAT invoices (so they can claim the VAT back), which means you in turn will need to be VAT registered – it’s pretty painless to set up and administer though.

However if you are going to be taking on significant risk (I.E opening large credit lines with suppliers, long payment cycle times with clients) it might be worth sucking up the extra administration that an LTD requires, as you will be more protected if someone decides not to play ball (a LTD company exists as its own entity and has its own debt, as a sole trader the company’s debt is your debt)

I’m currently in an odd position – I take a PAYE salary as a consultant at $big_firm, I am a VAT registered sole trader providing consultancy to other firms (low risk exposure, no need for an LTD), and I am also the director of a VAT registered LTD company (manufacturing – high risk exposure, LTD makes sense). I never planned on it being like this but that’s the way it has transpired. Needless to say I have a good accountant, I couldn’t juggle the paperwork myself.

The advice from my accountant was to set up, initially, as a sole trader and see how things go. It’s easy to set up and easy to get out if things go t**s up.