Dear Career Coach
I lost my job a couple of months ago and I want to use my experience to work for myself. I don't feel confident enough to set up a company yet. Any suggestions about how I can go about becoming self-employed?

Patrick, London

First of all, well done for wanting to test the market before you jump straight in. A lot of people rush to set up companies before understanding the implications and before really testing the product or service that they have in mind.

While, in some cases, you will need to have a company vehicle if you are going to be targeting particular clients or markets, it is by no means the case that you need to have a company in order to be self-employed. The type of business structure that you set up will depend on what you do, how much money you have available, as well as the industry you are in and how large your business is likely to become.

In the UK, being a sole trader is the simplest and most popular way to set up in business and there are around 2.8 million people who do so.

If you have a question for our Career Coach, e-mail us at  careers@ReConnectAfrica.com

But there are a number of key points to bear in mind as a sole trader and you should speak to an accountant to help you understand the tax implications of your choice of business structure.

However, to be a sole trader in the UK, you simply need to register with Her Majesty's Revenue and Customs (HMRC) and you can start trading immediately. As a sole trader, you do not need to complete the administrative and legal steps needed for running a limited company.

Also, as a sole trader, you will be taxed on your income under self-assessment rules and will need to complete a tax return each year, as well as pay national insurance contributions on your business profits. Depending on your turnover, you may also be required to register for Value Added Tax (VAT).

While it may entail less paperwork, bear in mind that a key difference between being a sole trader and having a company will be the level of personal risk to you. As a sole trader, your business and personal finances are considered the same for tax purposes. This means that if anything goes wrong with your sole trader business, you are personally responsible to settle any financial liabilities incurred, as there is no distinction between your business and personal assets. With a limited company, however, your business and personal finances are kept separate.

Do your homework before deciding which route to take as, for example, for people offering IT services on a self-employed basis, it may be necessary to set up a limited company.

You can find out more about how to register as self employed from the HMRC website or call the HMRC Helpline for the newly self-employed on 08459 15 45 15.

If you plan to work from home, check out Steve Gardner's tips for budding entrepreneurs and how to market your business successfully.

If you would like help with getting your business planning right, contact us to find out more about our business advisory services.

All the best!

Need some help to solve your career dilemma? Whether you are a recent graduate or a seasoned professional, our experienced careers coaches can work with you – on an individual or group basis – to help you get back on track with your career.

From online CV checking to face-to-face coaching, presentation skills training to making the right impact at interview, our careers services will help you reach your goals.

Contact us now to discuss your needs:  careers@reconnectafrica.com