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Does it matter if your freelancer invoices you through a company?

You took time and effort to find the right person to use as your freelancer.

You looked for the right person, the right skills set, even the right price.

You asked your friends who they would recommend and had some conversations with people who might fit

But how much time did you spend on checking out whether they are going to invoice you through a company or are working as a sole trader?

Before you rush into paying someone and letting them into your business –  please stop for one moment.

 

Running a business is not the same as having a company

 

I was about to contract with a Virtual Assistant.

I asked her – are you a limited company and she said YES!

So I checked the company name she gave me on the Companies House database.  The company wasn’t listed.

She wasn’t trying to deceive me.  She simply didn’t know that being ‘in business’ is not the same as having a company.

If you’ve never been in business before or never thought about it before it is not obvious.  But it makes a big difference when it comes to GDPR and contracts.

 

Checking the company exists is part of GDPR and contract compliance

If you are going to have a contract that is legally enforceable

Check first

– and you need one if you are sharing personal data and you want to do it lawfully under GDPR

– then there is no point having one with a company that does not exist.

You will be contracting into thin air!

If the company name you were given isn’t listed there – then this is not a UK company.

There are all sorts of possibilities.

 

It is OK to run a business without having a company

There is no legal requirement that you have to have a company in order to set up a business.   Your accountant is usually the person who advises you on whether this is right for you.   The people you pay will make their own decisions on what is right for them.

There are lots of business names that are not company names.

For example, our company is called Irenicon but sometimes we trade as KoffeeKlatch.   We would set this out as Irenicon t/a (short for trading as) KoffeeKlatch.   If you check our registration you will see our company exists.   There is nothing wrong with having one or more trading names.   This is to do with branding.

Some people trade without a company at all under their own name.  So if my new VA was called Jane Smith she is trading as Jane Smith.  There is nothing wrong with that.

The VA in question she was trading with another VA under a business name – let’s call them Friendly Virtual Assistants.  But they didn’t have a company.   It was Jane Smith and Amanda Black t/a Friendly Virtual Assistants.

She thought her trading name ‘Friendly Virtual Assistants’ was her company name.   So she gave me the wrong answer.

If I had issued the contract in the name of Friendly Virtual Assistants Ltd I would have been contracting into thin air – or possibly with another organisation by mistake!

 

What difference does a company make?

We all know what a person is.   A company is a different thing.  A company is a kind of imaginary person.

You can contract with Irenicon Ltd even though it is not me, or my co-director, or the shareholders.     You make a contract with the company.  The directors can leave the company and resign from the board and your contract with the company will normally still carry on.

To make it more complicated there is a special kind of company called a ‘personal service company’ where the owner and director and shareholder are all the same one person.  There are special rules about tax and other rights that apply only to personal service companies.  They are a sort of hybrid between company and individual.   We are going to see a lot of changes concerning how you pay this type of company (IR35).  We have blogged about this, and will be doing so again as we approach April 2020.

If you start by contracting with a company that does not exist you are going to find yourself legally naked to say the very least.

 

It is important to be clear whether your freelancer has a company

Here comes the science part.  If you contract with an individual (or a partnership) there are things you need to take care of that you don’t need to in a company.  And there are somethings the other way round.

Some organisations only contract with companies, and others don’t mind.   There are advantages and disadvantages either way round, but we write our team hiring  contracts to protect you properly either way.  All you need to do is check whether there really is a company or not.

Then chose the right options in your contract.   Simple really.

Why make it any harder than it needs to be?

 

Team hiring contracts for people who pay freelancers – with or without a company

If you are about to pay someone, now is a good time to check out our team hiring contracts.  If you are about to pay a VA, a Bookkeeper, a Web Designer, or a Trainer – you are going to need proper contracts for confidentiality and GDPR.  Why not download one of our contracts and get started.

For more information visit our Team Hiring page.  Every document we offer comes with support.  In a rapidly changing world – you will appreciate knowing we are helping you keep up with it all.

 

 

 

 

 

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