Contracting to Self-Employment

L.Jenkins

Just wondering if anyone has any experience in going from Employment/Contracting to Self-Employment/Sole Trader. I'm toying with the idea of setting up an IT Business, developing Websites, Mobile Apps and other Bespoke Software. Nothing on a massive enterprise level scale.

So has anyone made the jump into Business ownership?

Fenster

I've gone in the other direction, from self-employed to employee. Honestly? Self-employment is a huge pain in the ass. Your work-life separation goes out the window, and you have to wear *all* the hats: you're HR, PR, CEO, CIO, CFO, marketing, sales, accounting, QA and production.

14ned

Itzy wrote: »

Just wondering if anyone has any experience in going from Employment/Contracting to Self-Employment/Sole Trader. I'm toying with the idea of setting up an IT Business, developing Websites, Mobile Apps and other Bespoke Software. Nothing on a massive enterprise level scale.

So has anyone made the jump into Business ownership?

Contracting with your own company IS being self-employed! You pay PRSI at S-class, same as self-employed folk, and you'll get treated as self-employed by social welfare if you ever try to apply for Jobseeker's (short answer: don't bother, not worth the enormous hassle, they'll usually demand two years worth of every possible record and then discount your payment by 25%).

As a single person company, you'll need to find your own contracts, do your own marketing, most of your own accounts and VAT, and invest in your upskilling and training. You can source contracts through recruiters, but they'll take 15% and often the contract won't fit well with what you need to upskill for the future. I personally try to alternate between safe-but-boring contracts and risky-but-great-for-the-future contracts - the latter I source alone through contacts, no intermediaries.

In the early years you'll work 60-80 hour weeks building your business and learning how to do accounting etc. After five years trading, if you're any good, you'll be earning six figures but probably still doing a six day week (five days earning, one day upskilling). With a bit of luck and a good accountant, after fifteen to twenty years you should be able to retire on a healthy private pension.

The early years are a bitch, but there is a corresponding reward for the extra risk taken. That said, you are opting out of the social welfare system through the much lower PRSI, so you're on your own if things go wrong.

Niall

L.Jenkins

Some sound advice lads. I understand it will be hard work I'm willing to put it.

14ned

Itzy wrote: »

Some sound advice lads. I understand it will be hard work I'm willing to put it.

Well if you're really game for it, some more advice:

1. Take a basic bookkeeping course (OU does a 10 week distance one for £450). You can skip this if you got an A in Honours Leaving Cert Accounting, it's the exact same material. Mastering this will halve the real cost of any office or computing equipment you buy plus save 2k in accountants fees each year.
2. Choose a young accountant just starting out in their own business. They'll charge far less and give vastly better quality of service. They also know how to use email. Expect to pay no more than €1000 per year for final year accounts, corporation tax and VAT RTD. You'll do your own P30's and P35's and expenses and invoicing, this typically costs 2k fees per year, it's a big saving.
3. Expect to make a hefty loss first year you do this. I lost about 8k first year from mistakes and bad accounting and, quite simply, lack of good paying work as I had to do portfolio work to build the business. Put this another way: either have 10k saved, or get yourself on Jobseekers first. Jobseekers are actually pretty good about supporting you when starting a business, simply bring in timesheets of when you pay yourself and they'll subtract that from your Jobseekers.
4. With the new Companies Act 2014 making it so easy create your own company, don't pay someone for it. The CORE website even provide ready to go templates for all the documents you need. It's literally an hour of work to self incorporate since 2015.
5. Ulster Bank do fee free corporate banking for startups first two years. Normally they charge €120-€140 a year just for the account to be open.
6. Company credit cards are expensive - just use a Paypal account and SEPA transfers where you can, else pay out of pocket and expense to your company.
7. If you rent your house, bill a room to your company e.g. 25% of your rent, heat, electric, water, internet. Don't do this if you own your house, it's a nasty tax consequence when you sell. Consult an Accountant before you do this.
8. Leave as much money in your company as possible till end of year as when you take it out you must pay USC, PRSI, tax etc on it. Leaving it till end of year means you pay the entire year in January, but it helps hugely with cash flow. Do NOT pay the balance via P35, use the final P30 only else you'll attract a fine potentially.
9. If you have a wife or children over 18 and they have work experience in an office, they can be part time employees of your company with their own taxation. Make sure you consult an Accountant about this first.
10. Travel expenses not to an ordinary place of work are expensable, otherwise not. Remember your company can avail of the Taxsaver subsidised public transport and the Cycle to Work scheme.

All of the above should be taken as a hint and not relied upon in any way: I am not an Accountant!

Other than that, the very best of luck, and remember you can set up all the above stuff while still employed. Only when it's all ready should you make the jump.

Niall