Being self-employed means you’re working for yourself rather than for someone else. You’re self-employed if you are generating your own income, rather than receiving a salary or commission from an employer. This can be full-time or part-time – i.e. you can work for an employer some of the time and be self-employed some of the time.
You get control over your own work and life. You don’t have to take orders from anybody else; there are no owners or shareholders extracting value from your work; and you have the flexibility to fit your work around other commitments, like childcare. But it’s just you, and so the responsibility for success or failure is entirely yours. Depending on your personality, this might be an attractive or a terrifying prospect.
What to do
1. Decide what you want to do
Discuss it with family members. It’s hard work and there’s nowhere to hide. You’ll have to find your own customers and do all your own administration (or pay someone else to do it). If you want to provide goods and services to your community rather than freelancing with corporations, you might need some training.
2. Work out if it’s feasible
Is there a market for it? What are the benefits and pitfalls? Are you the kind of person to make a success of it? To make success more likely, maybe you could reduce your outgoings by downshifting first.
3. Decide whether to be a sole trader or limited company
Sole trader: if a self-employed person is a sole trader, it means that there is no distinction between the individual and the business. The person is the business, and so is personally liable for any debts, losses or assets accrued. Not so much paperwork as other options (although you do have to register with HMRC) and you can use your personal bank account rather than having to set up a business bank account, so it’s the easiest and cheapest way to start out. If you start off as a sole trader, you can easily switch to a limited company whenever you want to.
Limited company: you can start a limited company on your own. It means that you’re not officially self-employed, but if you’re on your own, finding employment for yourself and in control of your own work, then in reality, you are. This only works if you own all, or a majority of, the shares (or you set up a company limited by guarantee, with no shares) – otherwise you’ll be giving up control and ownership. You have to register your company with Companies House. One advantage of being a limited company is that it is a separate entity, and you are not personally liable for debts or losses; also, the ‘Ltd.’ at the end of your company name may appear more professional to some potential customers.
In partnership: two or more self-employed people can come together to form a partnership (which may just require a contract) or a limited liability partnership (LLP, which combines aspects of partnerships and limited companies) or a producer co-op, which involves a specific legal entity that enables self-employed people and small businesses to co-operate to market and sell their products and services.
For information about the advantages and disadvantages of becoming a sole trader or a limited company, see here, here and here; and here for a comparison of sole trader, limited company, partnership or LLP.
4. Start trading
Here’s government information about the legal responsibilities of setting up as a sole trader; here’s information about what you need to do when it comes to other ways of working for yourself, including as a limited company or in partnership; and here are various places that you can get advice and support, including on taxes and business plans.
You could be part of a network small businesses, including co-ops and the self-employed, that can help to provide a ready market of like-minded people who would prefer to purchase from and trade with other local, small-scale businesses where possible. They can commit to trading with each other locally – to be local consumers as well as producers, or ‘prosumers’, if you like. These kinds of groups could develop the basis of a different kind of economy, founded on sustainability and democracy, with collaborative credit as the means of exchange.