How do you check if your freelancer has a Ltd company?

Ltd company IR35 GDPR contractIs your new freelancer saying they have an Ltd company?

You were really busy in the first place. It took time and effort to find the right person. You looked for the right person, the right skill set, and even the right price.

Having the right contract just doesn’t come into the early part of your search.

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

Check out their status as a Ltd company

Having the right contract is really important to protect you (and your freelancer) from all sorts of complications and surprises. The right contract has to be appropriate for you and your freelancer, but it also has to be the right one for how they trade.

Recently I was about to contract with an outsourced Virtual Assistant and I asked her – are you a limited company and she said yes. So I checked out 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 the company name you were given isn’t listed there – then this is not a UK company.

There are all sorts of possibilities.

The name could be a ‘trading name’ of a company. 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.

In the case of 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. In reality it was Jane Smith and Amanda Black t/a Friendly Virtual Assistants.

What difference does Ltd make?

When Jane and Amanda trade as a partnership (or as separate individuals) they are personally legally liable for what they do in their business. Individuals may also be ‘workers’ with a full set of worker rights (in the UK and EU).

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. A normal company cannot be your employee or your worker. 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 even worse 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 a company and an individual.

It is important whether your freelancer has a Ltd 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 some things 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 basic 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 contract to issue to your new freelancer. You can find them here

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