Helping Growing Firm Hannes Digital to Navigate From Sole Trader to Limited Company

Helping to Navigate From Sole Trader to Limited Company.Keredy Andrews of Hannes Digital has a story that will strike a chord with many freelancers. Her choice to become self-employed came after starting a family, when she needed more flexibility than her previous marketing agency employer could offer; as long as ‘enough money’ was coming in, the lifestyle was more important so she could balance all things that mattered. However, businesses grow organically, goals are transformed and company structures change.

Through a recommendation, Keredy appointed Adams Moore to take care of her Self-Assessment needs and Adams Moore then also hired Keredy to deliver SEO and PR services. She explains: “My skill-set revolves around words, and numbers send a shiver down my spine. After a stressful first year-end submission, I decided I really needed an accountant that I could trust to take my balance sheet and receipts, process everything compliantly, and also bring to my attention any potential tax efficiencies. Martin and I met to discuss his PR and marketing requirements and my accounting needs, and we both felt it was a good, mutually beneficial fit.”

Freelance feast or famine

Business was steady on the whole, but another frequent report from sole-traders hit home for Keredy on a couple of occasions: “I started looking for employed work on at least two occasions as the feast or famine adage is very real. This led me to the mindset of not turning down work, even when I was busy, but that then led to me unexpectedly managing a growing business, something I never aimed to have.” Fast-forward two years – after Keredy had a second child – word-of-mouth enquiries were coming thick and fast for ad-hoc project work, on top of having clients on retainer. Keredy was faced with more business than she could handle alone. Adams Moore advised Keredy about the options available and together they agreed that employing someone wasn’t the most secure and controlled approach, nor would a junior member of staff meet requirements. Working with other freelancers, however, would allow Keredy to assign work to people on an ‘as-required basis and to choose the best support based on each activity. She adds: “As I knew a number of other freelancers and was also part of a Midlands digital community, it made sense to work with the best person for the job when each job materialised. This also became a USP for Hannes Digital and messaging evolved to promote the client benefit of this approach; I could offer an agency experience, but at a freelancer’s hourly rate.”

Forecasting the change to limited

Forecasts revealed it soon would not be tax efficient for Keredy to operate as a sole trader, particularly because an online focused service firm, doesn’t have a huge range of expenses to offset. Adams Moore advised on the best way to prepare for a change to operations under Hannes Digital Ltd, which included carefully planned activity in line with her Self-Assessment tax return 12 months before the switch.

All of the questions, all of the answers

Based on years of experience, Adams Moore was also prepared for Hannes Digital’s shift and ensuing questions, as – understandably – business owners can be nervous of change and ‘doing something wrong’ in the process. The accountancy firm were prepared for Keredy’s queries and supported her through the administration and activity; “I felt like I had far too many stupid questions and needed hand-holding,” Keredy says, “but Martin and Sellena were more than happy to help. From advice on setting up a bank account, and a payroll for myself, to ensuring incoming and outgoing payments used that account on the correct date, I was given all the information. I also didn’t have to think about undertaking all the behind-the-scenes work with HMRC, as Adams Moore had it in hand.”

Adams Moore advised Hannes Digital on a whole range of areas for making a change to the business model, including:

> Opening a business bank account

> Moving money from the sole trader to business account

> When to optimally make the shift

> When to tell clients and service providers about the change

> Removing the ‘dormant’ status of the pre-registered company – Keredy registered the limited company at the same time as working freelance, so she could be sure no other company could take her brand name

> Submitting the business’ annual statement to Company House

> Adding company directors

> What shareholding should be allocated

> How director’s dividend payments work

> Setting up and managing payroll

> What directors’ salaries should be set at

> What’s required for pension legislation

> What the tax advantages of having a Limited Company are

Keredy concludes: “Without the support of Adams Moore, I would never have realised how beneficial a preparation phase was and I’m grateful for their insight and forecasts on the optimal time for me to change business structures. I’m confident both the company and myself as an individual are operating in the most tax efficient way, and feel safe in the knowledge that Martin and the team will continue to have my back. Whether I employ staff, rent an office or take my business to a new level in other ways, I know Adams Moore will guide me across the terrain and help me to make smart decisions.”