Individuals who are planning to start their own business know that they will need all the help that they can get. ?There are so many things to be considered, particularly in the early days of the business, that it can help to have experienced advice on hand as well as someone there to shoulder some of the company?s daily administrative burden. ?In the current economic climate, more and more people are looking to leave the job market to work for themselves, so receiving a helping hand could be a very welcome prospect. ??
What is an umbrella company?
An umbrella company is an organisation that the freelancer or contractor will join as an ?employee.?
Even though they are running their own business, finding their own clients and planning their own workload, freelancers are officially classed as employees of the umbrella company. ?This way, the company can deal with much of the administration of the business, including income tax and national insurance. ?These are dealt with on a PAYE basis, so there is no need to worry about a tax return at the end of the financial year. ?The umbrella company will also be able to explain which expenses can be claimed legally as part of the contract in order to help the freelancers maximise their income.
The umbrella company will also appoint an account manager to each freelancer.? This individual will be happy to talk through any issues that may arise and explain the process in detail. ?This is a level of support that is not available to those who choose to become a limited company right away.
How does it work?
Each week or at the end of a short-term contract, the freelancer will complete a timesheet and send it in to the umbrella company. ?The staff there will then present the client with an invoice and deal with the financial side of the business. ?They are responsible for chasing monies owed, including expenses, and will pay the freelancer once they have deducted tax, national insurance and the agency fee.
For those who are just starting out, this allows more concentration to be placed on developing the enterprise, finding new contracts and sales and ensuring that the business is on its feet before considering becoming a limited company. ?It is also the ideal solution for those who want to undertake some freelance work while looking for a permanent job, as it saves a great deal of administrative work on short-term contracts.
Those who try to deal with tax and national insurance during the initial days of the business will find that there is a lot of information to wade through. ?Simply handing this matter over to experienced administrators to deal with instead can be an attractive prospect.
Starting a business can be a daunting task, and it is issues such as taxation that put many people off making the leap from employee to business owner. ?With the umbrella company as a stepping stone in the middle, making the transition is so much simpler. ?In fact, many people have found it much easier to get their new ventures off the ground this way.
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