There’s nothing wrong with starting small. After all, billionaire business magnates such as Topshop’s Sir Philip Green, Virgin’s Sir Richard Branson, and TV’s Sir Alan Sugar, James Caan and Duncan Bannantyne began their working lives as individuals trading in a self-employed business. These are some of the richest people in Britain, but many of them – including Richard Branson and Alan Sugar – started their business careers doing low-paid, unqualified work. Company formations are key here: Branson and Sugar would be nothing without Virgin and Amstrad.
Having taken the crucial step of company formation, a trader moves from being simply a self-employed worker to being in control of a company larger than just him or herself. As a company, your work – and you – will be viewed more professionally. People are more likely to trust a company, because however small it is, a company reflects someone behind the service who is serious about his or her work.
Company formations are taken for various reasons, most obvious that comes to people’s minds generally being tax purposes. This can be a useful aspect of the process, although you should talk to an accountant about this, as not all company formation automatically means lower tax. It will mean though, for instance, that you’ll be able to start paying yourself expenses, allocating yourself company cars and so on, without paying the same amount of tax that you would pay if buying those things independently.
The real advantage of company formation is ownership and financing. Again, it’s easy to return to Dragon’s Den to illustrate this point. However apparently hapless the contestants may seem, all of them have formed a company or are willing to do so. This is because in order to secure investment, you have to be prepared to give up a part of your business. Of course, that’s impossible when you’re simply trading as a self-employed person. But after becoming a company, it’s relatively easy to sell shares in return for financing. This doesn’t have to relate to multi-million pound deals; even if, for instance, you want to work with a family member, the easiest method by far of shared ownership is to form a company and issue shares.
Finally, company formations remove a degree of liability. Separating your business a little from yourself means that you are not wholly responsible for any debts incurred by the company. Thus it can work as a kind of insurance: if the company does badly, you’ll lose your investment, but hopefully won’t have to give up things in the rest of your life to pay company debts.
For all these reasons, company formation frequently makes good sense – any small trader or self-employed person should seriously considering it. There are packages available which take care of the process for you online, and come with a range of benefits – beyond complying with your legal obligations.