There are many different tasks you can perform from a desk in your home. However, when it comes to making a profit from them – you’re drawing a line in the sand between just staying occupied and actually operating a real home based business of your own.
One handy benefit of a home based business is that you can remain in close proximity to your family, while saving the expense of renting a storefront or office. And, of course there’s a lot less time and travel costs involved when you’re not commuting back and forth to work several times each week.
Sure, part of the reason you want to work from home is to keep things simple. And though life as a Sole Trader is a long ways from the complex restrictions of a Limited Company, there are still many things to consider as you take your concept to a proper business starting point.
How to Determine Whether You’re Self-Employed
If you’re working for yourself, you’re a Sole Trader – whether or not you have a business bank account yet or have officially registered with the HMRC. Not sure whether this applies to you or not? Let’s take a look at what a self-employed person does:
- Runs the business operation themselves
- Takes responsibility for the failure or success of the venture
- Handles multiple clients at the same time
- Makes decisions of where and when, and how, the work is done
- Provides any equipment to complete the work
- Sells goods and/or services for a profit
Making Your Home Based Business Legal
Now that you’re aware that you are (in fact) trading in a home based business, let’s make sure you’re taking the legal steps toward accountability:
- Make sure your business name is unique – Give some deep thought to the business name ideas you are considering. Then check with HMRC’s business database to be sure nobody else has the name in use.
- Consider whether Sole Trader is the way to go – There are several business structures from which to choose, as alternatives for the self-employed. Check out the pros and cons of each, so that your enterprise is set up correctly from the beginning. Though it’s not impossible to change it up later, it is a complicated process and could be time sensitive.
- You are required to keep records – Keeping track of your business revenues and related expenses isn’t just smart, it’s the law.
- Check with your neighbourhood association – Make sure that you are allowed to operate a home based business. Generally, the worst case scenario is when you can only see customers by appointment. Mainly, the governing body is concerned that the residents’ quality of life is not affected.
- Register as self-employed with HMRC and VAT – You must file year-end documents reporting income and net profits, and pay taxes on same.
- Register as an employer when you hire staff – If you have employees (even if they work from your home office) HM Revenue and Customs must be informed. There are rules, such as National Minimum Wage and immigrant checks to comply with – as well as certain security background checks which may come into play. You must also get employers’ liability insurance, and maintain written statements of employment for those working more than 30 days.
- Handle your trade mark separately – Just because you register or are using a business name, doesn’t mean it’s protected as a brand. Search current trademarks first, then register your own trademark.
For your convenience, Linkilaw has created two downloadable e-books, giving you all the basic steps of startup as well as detailed logistics of HMRC registration so you can make sure your home based business is legally healthy.