Please note that whilst the below article does speak to tax, it should in no way be considered financial advice – instead merely the thoughts and opinions of someone who cares!
Establishing your makeup business formally can seem daunting if you’ve not done it before. However, it’s actually pretty straightforward, and can be accomplished without too much stress. Here’s what you need to know…
A legal what now…?
In the UK formalising your business requires you to decide in which legal structure you want to operate. This isn’t as frightening as it sounds, it simply helps you (and the government) to decide:
- what paperwork you have to fill in when you start
- what you’re liable for in terms of tax
- how you pay yourself from the profit that your business makes
- what you’re responsible for if the business falls into debt
As a freelance makeup artist there are really just two options to consider – operating as a soletrader or setting up as a limited company.
Which one you choose will depend on a number of factors that may or may not include:
- Your desired simplicity of business
- Whether your target clients are going to be happy working with a soletrader or whether they will only do business with individuals operating as limited companies
- The amount of risk you’re likely to take on whilst you’re operating (more on this later!)
- Whether you’re earning enough to benefit from a switch from income tax to corporate tax.
So which way to go? Well that decision can only be made by you, but here’s some of the differences:
To set up as a soletrader you simply need to contact HMRC and register for self assessment. This can be done over the phone or on-line, and if you are already operating should be done by October 5th after the end of the tax year (5th of April) for which you want to submit a self assessment.
Setting up as a limited company is a little more complicated as you’ll need to register your company with Companies House, following which you’ll receive a certificate of incorporation detailing when your company was formed and it’s number (as well as confirming that it legally exists). This again can be done on-line and complete and in-depth guidance on how to do this can be found at the gov.uk website.
It’s worth bearing in mind that regardless of which route you choose it’s not irreversible, and you have the option to switch at a later date should you so wish.
But what’s this about risk? And responsibility for debts? What the…?
Again this will very much depend on the type of show you’re running and concerns the amount of debt you’re likely to accumulate during the course of running your business.
For example, if you’re setting up a salon you may choose to take out some loans to cover setting up shop and buying inventory. If in a worst case scenario things go wrong, then soletraders would be personally responsible for repaying debts. Limited companies on the other hand are entitled to a level of personal financial protection.
Most freelancing makeup artists however aren’t going to be taking on a great deal of debt to finance their business and that being the case can be perfectly happy operating as a soletrader.
Okay you’ve registered you business, the future is bright! The last thing you want to do is start thinking about what could go wrong right? WRONG!
Once your business is legally registered with the government, it’s also important to make sure you have appropriate insurance, protecting both you and your clients should things ever go a bit south. Worse case scenarios are rare but can happen! What if a…
- Client had an allergic reaction to your makeup?
- You accidentally burn your client’s wedding dress with an iron?
- Someone tripped over your kit and injured themselves?
It’s sensible therefore to have public liability insurance, which will cover you against costs arising from such situations. As with all insurance, shop around paying attention to both price and what’s actually covered. Sites such as SimplyBusiness.co.uk allow you to compare insurance providers. You can also find specialist providers that with offer optional kit cover, which may not be so important in the beginning, but once you’re carrying around £1000s in makeup and flying all over the world with it may be worth a look see.
Getting your business “formally” set up and insured can be quite daunting to start with, but is a relatively straight forward process once you get started. Each can provide peace of mind too, giving you comfort that you’re operating both legally and safely.