Going Incorporated: The Big, Bold Step

Today marked a big step for B J Hampson. Today I’m no longer B J Hampson. I’m now B J Hampson LTD. 

Yes, LTD. A limited company. I could have had B J Hampson Limited; you actually have to choose between Limited or LTD., just another way for bureaucrats to complicate matters as far as I’m concerned. They both mean exactly the same thing, so I chose LTD. simply because it’s shorter to write on documents! 

I don't know why today is the big day to go incorporated either. It’s the official start of the new tax year, but why this begins on April 6th, I have no idea. No doubt that’s a blog for another time. 

Anyway, back to the matter at hand. 

It seems momentous in one way, that I now get to add to LTD. at the end of my name and call myself an actual company. But at the same time, it’s absolutely unremarkable. In all honesty nothing much changes, except more paperwork. 

And yet, it just feels like a big step. It almost makes things a whole lot more real. 

It’s a choice many small business owners grapple with - especially those who predominantly work on a freelance basis. Should you go incorporated or not? 

Should you bother with all the additional hassle, paperwork and costs associated with incorporation, just to get three little letters at the end of your business name? Or should you stick with being a sole trader and keep things simple and effective?

I’m writing a blog about going incorporated, because I’ve just done it. Obviously, I think it could be a worthy step for many freelancers and small businesses in my industry. 

Here are my reasons for incorporating, and what it means to me. 

Not just playing around anymore

The term corporation comes from the Latin word Corpus meaning body. (Think corpse if you have a dark mind or if you’re not feeling particularly optimistic about your business.) 

Effectively, incorporating means becoming a legal body. 

That carries some gravitas to it. I’m not just playing around anymore; not just dossing about and pretending to work from home, as many of my friends (and some family members no doubt) think I do. My business suddenly becomes legal and real - it’s not just a Mickey Mouse endeavour anymore, it’s all completely serious and official. 

It also means that no one else can steal the name B J Hampson. It’s now legally mine. (Apparently this happens more than you might imagine - it’s certainly one creative way to spite someone you don’t like!) 

In reality, nothing changes. Of course my business is real and serious; I wouldn’t be making money and living off it if it wasn’t. But still, it just feels ‘proper’ now, if you will.  

A personal suit of armour

Being a proper legal entity also offers me some personal protection too. The business is now separate from my personal affairs. Separate accounts, separate cards, separate laws. Basically it means I can raise finance independently of my personal circumstances, and if things go tits up, I won’t lose my house or personal possessions. 

It’s nice to know this protection is there, but it wasn’t really a reason for incorporating. I don’t need to raise any finance, and can’t really see a huge need to ever do so for my current business; it just doesn’t need it. That’s the beauty of being freelance.

I’d also like to think I don’t see a future where things go tits up either.  

More money in the bank 

More realistically for most people, myself included, was the potential tax savings to be made with being a limited company. I’d crunched the numbers with my accountant, and going incorporated would save me a bit of money. Only a little bit right now, but still, every penny counts. 

I’ve also gone VAT registered too. As I don’t have much expenditure, I’m on a Flat Rate VAT scheme, which means I can actually keep some VAT for myself, rather than paying the tax man. Yeah. I don’t really get it either. VAT is silly. No-one really loses apart from the average joe. More on this another time too. 

Of course, laws and regulations change all the time, as the recent budget showed. So whilst it might be more efficient now for me to be incorporated, there’s no guarantee of that in the future; it’s a risk you just have to take. 

Trusted and reputable

The legal standing associated with a limited company is actually most effective at boosting legitimacy, in my point of view. That’s probably the factor that swung it for me. For no real reason, a limited company just has more credibility, more kudos to it. 

I suppose it goes back to showing you’re well established and serious. It’s not something that any Joe Bloggs will do, even though it wasn’t actually that difficult to incorporate. 

But the connotations of being a limited company can go a long way. I know one person who had a company refuse to do business with him, because he wasn’t incorporated. Again, no reason why. 

Personally, I think it’s something to do with the word freelance. It’s not a dirty word, per say, but there is something about it. It’s not permanent, not long lasting, or so it sounds. It’s almost a bit basic. 

It’s like anyone can be freelance; like it’s something you do when you give up on proper work and just think ‘sod it, I’ll do it on my own, and just sit in my underpants all day’. 

Anyone who works freelance knows that this isn’t the case. It’s so much harder than a 9-to-5 job, in more ways than one. But still, freelancer has those connotations that can see some businesses taking you less seriously, and not trusting your reputability. 

It’s total rubbish of course; I wouldn’t be where I am if I couldn’t be trusted and didn’t have a good reputation for the work I do. But now there’s almost an unspoken legitimacy and trust that comes with those three little letters - LTD. I am still a freelance copywriter, but it’s like now I have a company to back me up. 

Don’t worry though, it’s still the same old me.

The downsides to incorporating

Obviously, there’s quite a bit to think about when going incorporated, and like yin to yang, there are always downsides. 

Firstly, there’s a lot more paperwork. Company numbers, VAT details (though you can be incorporated without being VAT registered), corporation tax references, share holder agreements etc. etc. They just seem to keep coming through the letter box. 

I’ve had to get serious about filing and organisation. 

In fairness, the actual incorporating was fairly easy. The government and Companies House website was simple enough to navigate, and it’s clearly geared to being as simple as possible for sole traders and small businesses to make the move to limited. Those share agreements and legal mumbo jumbo are provided as templates, and if you don’t want any complicated terms you can just use these - perfect for freelancers who will just become the sole director and shareholder. 

But after that, there’s a lot more annual paperwork to do - corporation tax submissions and annual company returns, on top of your personal tax returns each year. You also have to pay your self a wage too. 

That means a PAYE system, and all of this means paying more money to your accountant. It’s a good job I like the girls who do my books, over at Mossley Tax Shop! 

There’s also a lot more stringent regulations. As the company is an official legal entity, I can’t just dip into the bank accounts when I need some money. Everything has to be kept separate and done by the books, with accurate record keeping at every turn. 

So is it worth incorporating? 

After day one of trading as a limited company, nothing has changed. Nothing.

When I send my first invoice out as an incorporated business, it will probably just be more hassle, as I have to add extra details to the footer and make sure it’s clear there’s a new bank account. 

But, already it does feel like people take you more seriously. It’s a sign of growth. A sign B J Hampson means business, and is here to stay. 

It shows I’ve got plans for the future, and lets me make B J Hampson more than just me. It’s a company that can grow and develop beyond me, and continue in perpetuity. That does make it feel special. 

So for me, it is a big step going incorporated. It’s not huge, it’s still just a stepping stone in the business journey, but it feels like a step up (despite the fact that not much changes). 

Perhaps more importantly, it’s another kick up the bum to keeping driving forward and explore new opportunities and side projects. 

Let’s see where we end up.  

What are your thoughts about being a limited company? What do the letters LTD make you think? Let me know in the comments below.