What it means to be an independent contractor

The tendencies of modern business are changing rapidly. Many of them give a lot of advantages as well as benefits to people. Nowadays, owing to the expansion of the Internet professionals have an opportunity to work independently. Imagine, no need to spend hours in an office, waste time in traffic on the way to work, you can just do the job in cozy home environment.

employee vs contractor
Employee vs contractor

So, what else but a laptop and a good deal of desire do you need to become a self-employed person? Are ready to become one of them? What about taxes and how to start? Let’s go! 

Why Employers are Interested in You

Well, if you are looking for a self-employed type of job, your reasons are more or less clear. You want some freedom, or you want a part-time job or you just like being by yourself. However, why are employers interested in hiring you? There are several reasons.

Banggood WW

First of all, it is much cheaper to hire a contractor rather than a full-time employee. Thus, an employer can save significantly on taxes. Plus, they pay you only when you work. If you do not, they will not lose money. In addition, it is not necessary to provide you all the tools and think about paying leave allowance, for instance.

Are You a Self-Employee?

Today many people are not sure whether they can register themselves as self-employees or not. There are several ways to understand whether you are ready for that or not. You can say that you are one of them if you:

  • Decide by yourself where and how you work
  • Equip yourself with proper tools to do your work
  • Finish any work on time
  • Provide services or sell goods to make a profit
  • Run any type of business
  • Take responsibility for success or failure of your business
  • Work with more than one client at a time

Now let’s try to understand how you can start your own self-employed activity.

Pick Yourself a Name

Just like in any other type of business it is a good idea to choose yourself a name which describes you best. One aspect is to remember that it should be attractive in terms of marketing. Perhaps, you will want to print the name on invoices or business cards. This is why it should sound and look professional. Using your personal name is not necessary at all. Find any fictitious business name, it is really easy and most importantly not expensive at all. 

On the other hand, it is necessary to remember that your trade name must not include one of the following:

  • Limited
  • Limited Liability Partnership
  • LLP
  • LTD
  • PLC
  • Public Limited Company

What is more, there are other aspects to remember about. For example, your trade name must not be offensive. It must be the same as the trade mark which you have chosen. If your name includes «sensitive» words or expressions, you can have difficulties in registering it. 

In fact it is safe enough to choose a simple but quite catchy and creative trade name to describe your business.

Time to Talk about License

Getting a license does not seem to be that important when you have one or two clients on the Internet. However, as you your business grows things change. For example, certain employers will not be able to pay unless you have a license. In addition, government may fine you, if you earn a lot without paying taxes. What is more, certain cities will let you do your business only, if you have got a license. 

Why so much fuss around it? The answer is filling out forms and paying fees. In most cases it will not cost you much to have it all done. No matter where you work (even if you do it from home), you still need to get a license. 

What will happen, if you work without license? At first, you will have to pay several fees and do a lot of routine type of things. 

In case your turnover exceeds $100,000. A voluntarily registration is possible in case you sell something to other VAT-registered businesses. If you deal with construction types of business, you need to register with HMRC for the Construction Industry Scheme. It is good for you in case you are a contractor or a subcontractor.

To sum it all up, you are going to need a license, if you:

  • Keep records of your sales and expenses
  • Pay Income Tax on your profits and Class 2 and Class 4 National Insurance
  • Send a Self Assessment tax return every year

Getting Some Help 

Well, there are aspects dealing with which is far from being simple. If you are a great designer, it is not necessary that you are good at calculations. However, you will have to keep records, think about your own tax payments and fill out various documents. Are sure that you can do it in a right way? 

If not, then it is a good idea to hire yourself a professional skilled at taxes. This person will help you start your own business, will explain whether you should be a sole proprietor or a professional LLC. 

Once you hire one of such professionals, you are likely to make quarterly payments. It is necessary, if your gross income is more than $3,000. In case, you do not operate with a lot of money this step is not necessary. 

Note that, taxes are the core benefit of yours, if you are an independent contractor. You can save big sums on business expenses which is not possible for «traditional» employees. In addition, there is such an option as a tax loss. It means that you can lower your income tax due.

Thus, being a self-employee is a good decision in terms of convenience, comfort and of course finance. The whole process includes a certain portion of routine things and filling out documents but it is worthwhile. As a result, you pay lower taxes and the only person you depend on is you.