Becoming a freelancer is one of the most rewarding yet challenging things you could ever do and there are many reasons why people want to start their own business.
It might be that you're sick of working in an agency or for someone else and you'd love to be your own boss. You may also be dreaming about working from home after years of commuting. Or you could be a graduate, struggling to find a full-time job. Whatever your reasons for wanting to go freelance, we've put together this 'step-by-step' guide to help you take the leap.
This article is more about how to actually get set-up rather than finding those all-important first customers. Something we feel isn't covered as much. If you need help with finding customers, then please read this helpful 'generating new leads' article. In the meantime, here's how to go freelance:
Ask yourself why
Before you take the leap and go freelance. ask yourself why you want to start your own business. Running a business is no easy task. It's challenging and tough going but can bring a wealth of rewarding benefits. You can be your own boss, work from home and eventually decide who you want to work with. Sit down and write the pros and cons of going freelance. Really think long and hard before you make your final decision because freelancing isn't for everyone.
Consider your business structure
When setting up a new business, you have to decide if you're going to be a sole trader, limited company or partnership. You need to choose the business structure you will trade under and of course, understand the obligations and responsibilities you will have as the business owner.
If you've always been confused by company structures, then read this article to learn the differences plus pros and cons between the two most common structures: sole traders and limited companies. Also read this article from Business Link on legal structures.
Choose a business name
When choosing a name for your small business, whether it's a trading name as a sole trader/partnership or a limited company name, there are various things you should take into account before making your decision. First and foremost, make sure it's professional and inoffensive. Legally, your business name mustn't contain any sensitive words, and if you're a sole trader or partnership, you mustn't include limited company-related words such as 'ltd'.
If you're a limited company, you must check that your proposed name is unique and available via Companies House by using their free WebCheck service. Here, you'll be able to see if anyone else has your company name. If you're a sole trader, then you must do some research online and via phone directories to make sure your trading name is as unique as possible.
If you're going to have a website for your business, check available domain names via any of the domain name registration sites, like 123-reg.co.uk. For SEO purposes, consider adding in your key service to the domain name... for example. my own business Boomerang has Boomerangpr.com as its domain name.
Branding & Logos
When first starting out, it's important to have a logo/branding for your new business. Something that will differentiate your business from everyone else's. Get some basic stationery sorted out, including letterheads, business cards and compliment slips. You'll especially need a logo before you approach a bank and set up your own business account, something I'd strongly advise organising as soon as possible.
Get a business bank account
To keep invoices and payments in order, I'd recommend setting up a separate business account as a priority. The bank you choose is likely to book you an appointment with one of their business managers and they'll simply require a few things to get you set up, including: a letterhead with your logo, business name and address; photo ID such as a driver's licence or passport and proof of address. And that should pretty much get you started. If you're a limited company they may need to see additional documents.
Accounts & Book-Keeping
One of the most important aspects of running any business is the accounts, so set up a financial record-keeping system immediately. Keep records of all of your invoices and payments at the end of every month. Make sure you file these properly to save yourself any hassle further down the line. When sorting my own invoices, I save Word documents or PDFs like this: '123_01_11 Client name.doc' under a file called 'Accounts'. So this has the Invoice Number; then the month/year and then the client name. This is a great way to keep everything in the right order and easy to access at any time.
Next, find a decent accountant. They'll cost you money at the end of each financial year but they'll be a life saver when it comes to organising your taxes. When it's time to sort your tax, simply print out all of your invoices from that financial year and put together all of your bank statements. Don't forget to include receipts, payments and any other business costs or overheads, including travel. And it's important you place your logo/business name on all official documents and stationery.
Taxes, NI and VAT
In terms of making things official, you'll have to register as self-employed with HM Revenue & Customs (HMRC) if you're a sole trader and you'll be expected to pay income tax and National Insurance contributions. Or if you're limited company, you must tell HMRC if it's liable for Corporation Tax, pay any Corporation Tax due and file a Company Tax Return on time. If in doubt, check out the HMRC website. Or just get your accountant to sort all of this for you.
Next, you'll need to contact HMRC to register for VAT if you expect to have more than £70,000 turnover a year. Not sure about VAT? Read this 'introduction to VAT' to understand how it works.
Working from home?
If you're going to be a homeworker, it's important you contact your local authority to find out whether you need to pay any business rates. You should also take into account that working from home could have implications on your mortgage, home insurance and even your tax situation. It's not necessarily as straightforward as you might think, so check things out before you take the leap.
And those are our tips on 'how to go freelance'. But if you have any more nuggets of advice, please comment below. I'm certain I've missed things out. In the meantime, fill out this helpful Business Start-up Organiser by Business Link. It'll ensure you're properly set up.
