Lesson 1 of 7
Going self-employed: the basics
7 min read
Going self-employed changes your legal status, your tax obligations and your cash flow at the same time. Handling the first two properly is what makes the third survivable.
Choosing a structure
Sole trader is the simplest: minimal registration, straightforward accounts, and profits taxed as your income. The trade-off is unlimited liability - there is no legal separation between you and the business, so business debts are your debts.
A limited company is a separate legal entity. It limits personal liability, can be more tax-efficient at higher profit levels, and looks more established to some clients. It also brings real obligations: filings, accounts, director duties and usually an accountant.
Partnerships sit between the two. The right choice depends on profit level, risk, and your country's rules - and it can be changed later, so do not let the decision stall the start.
Register on time
Every country has a registration deadline for notifying the tax authority that you have begun trading, and penalties for missing it. Do it in the first weeks, not the first year. You may also need to register separately for VAT/GST once you approach the threshold, and for social contributions as a self-employed person.
Employed, self-employed - or neither?
Tax authorities test the substance of a working relationship, not its label. Who controls how the work is done? Can you send a substitute? Do you carry financial risk and provide your own equipment? Getting this wrong - on either side - creates back-tax liabilities, so if you work for one client full time under their direction, take advice.
Set up properly on day one
- A separate business bank account. Not optional in practice.
- A system for receipts and invoices from your very first transaction.
- A tax savings account you never spend from.
- Insurance appropriate to your trade, and a written contract or terms with every client.
Key terms
- Sole trader
- Working for yourself as an individual. Simple to run, but you and the business are the same legal entity.
- Limited company
- A separate legal entity that you own and usually direct. More admin, more protection, different tax.
- Unlimited liability
- Personal responsibility for business debts, which applies to sole traders.
- Registration deadline
- The date by which you must tell the tax authority you have started trading.
Quick check
3 questions. No pass mark — this is just to make it stick. Sign in free to save your score.
Homework
0/3 doneThree small jobs. They take minutes and they're what makes the lesson stick.
- 1
Make it personal
In two sentences, write what "Going self-employed: the basics" changes about how you handle your money this month.
- 2
- 3
Teach it back
Explain the main idea of this lesson in plain English, as if to a friend. Write the explanation you would give.
Sign in to save your homework answers and earn XP for them.
Your notes
Private to you. Jot down the bit that mattered, a number to check, or a question to come back to.
Sign in to keep notes against each lesson.
Related lessons
Want mySal to do this for you?
Put your own numbers in once and mySal works out your real take-home, deadlines and next moves.
Get started freemySal Academy is financial education, not financial advice. It explains how things work in general terms — it can't recommend products, investments or what you personally should do. For advice about your own situation, speak to a qualified adviser or your local tax authority.