The different types of self-employment can be broadly summarised as sole-trading, freelancing, and starting your own company, charity or social enterprise. Entrepreneurship comes in different sizes too – from a side-hustle to another job, to a smaller ‘lifestyle’ business or ‘cottage industry’, to a ‘scalable’ business with big plans for growth.
- No organisation to set up, just register with HM Revenue and Customs (HMRC) as self-employed
- No need for formal accounts, just keep your own records for a quarterly and/or annual HMRC self-assessment form.
- You keep all the profits, but if you lose money, it comes directly out of your pocket.
- Usually used for informal or sporadic work with low liabilities.
See our guide to Freelancing if you’re planning to win contracts from clients to deliver work as an individual. Many freelancers are sole-traders, or have set up a company, but some choose other ways of working (such as through an Umbrella Company).
Starting a company
- Need to choose a legal business structure (usually as a limited company)
- Register with Companies House, file accounts, send an annual return (often involves using an accountant), register for VAT (only over a certain level of takings)
- The general benefit of starting a company is that it protects your assets as an individual: if the company loses money your assets are safe as a director
- Company accounts published through Companies House
Starting a charity or social enterprise
- Different structures to decide upon: a cooperative, a community interest company (a special type of limited company), a charity or charitable incorporated organisation, an unincorporated association or an industrial and provident society.
- Some require registering at Companies House, some through the Charities Commission.
- Requires same diligence and detail as starting a company, but in the case of a charity you look to fundraise for your costs, and for a social enterprise you look to use your profits for a social good.