Introduction As a Sole Trader or Contractor you will be faced with achoice of two methods of payment.
Youcan either set up a Limited Company or employ the services of an Umbrella Company.
If you have chosen to use an Umbrella Company this article will tell you what to look out for, what toask and ultimately help you choose the company that best suits your needs.
Why use an Umbrella Company? Some Umbrella Companiesoffer a free and instant set up, which means you avoid the initial costs of setting upyour own Limited Company.
You alsodo not pay unless you are working and there are no leaving fees.
If yourcircumstances change you don't need to complete a tax year or worry about anyfuture tax payments which you would have to cover if closing a LimitedCompany.
If you have a good businessidea but maths is not your strong point then an Umbrella Company can deal with allyour accounting matters such as payroll, VAT returns and general company accounts.
This leaves you free to go and earn money.
Services of an Umbrella Company You become and employee of the Umbrella Company and arepaid a salary plus bonus dependent on your earnings after allowing forexpenses.
It is important that you fully understand the service youare agreeing to so do not be afraid to ask questions.
If the offer is legitimate then the companywill be happy to answer your queries.
It is possible to find a company who will give you apersonal accountmanager so that you can be confident that your money isbeing dealt with in a responsible manner by someone you have built arelationship with.
If you have chosen a forward thinking Umbrella Company they willhave calculated your tax payments for the whole financial year whichmeans you will be spared a big tax bill at the end of the year, even ifyour earnings have fluctuated throughout.
Some Umbrella Companies will include Free PublicLiability Insurance, Employers Liability Insurance and Professional Liability Insurance which savesyou these additional expenses.
If you may need to apply for a loan or mortgage, makesure your Umbrella Company will write reference letters on your behalfwithout charging you for them.
Fees Most Umbrella Companies will charge a weekly fee between£15 and £30, and some will not make a charge if you have not earnedanything during that weekly period.
Youare advised to search the market for the best offer.
Other Umbrella Companies will charge apercentage of your earnings, but again, this can be negotiated - particularlyif you are earning at a higher rate.
Make sure you ask about hidden charges before settling with a company.
Who to choose As with most businesses, it is possible to register andset up without any qualifications or experience.
But when it comes to your money, it is important that it is handled correctly.
Make sure the company you choose has all the relevant documentation.
Most Umbrella Companies are run by, or in conjunction with, Chartered Accountants.
Such companies will be able togive you the peace of mind you need.
If you have asked all the questions and are happy with the answers then you will hopefullyhave chosen the best company for you.