You may know your hollyhocks from your hydrangeas, but how well informed are you about the different business structures that are open to professional gardeners? If your gardening company is to succeed, you’ll need to choose the right setup for you and satisfy all legal criteria that comes with that.
In this article, from company forms to insurance, we’ll speak to you about the two business models most widely used by UK gardening companies, and discuss the obligations that come with them, and their financial pros and cons.
Forming a gardening business: what type of company is best?
British gardening firms can typically operate either as a limited company or as a sole trader. However, what does that mean exactly?
Limited companies usually hire workers and operate on a fairly large scale, while sole traders generally work alone or with the support of temporary contractors. As we will see, the decision between these choices will be focused on which types of customers the company wants to attract, which insurance and payment structures you are able to put in place, and, ultimately, which arrangement will help your company best.
For whom are you going to be gardening? If you’re going to operate with corporate clients such as hotels, industrial parks, and stately homes, you’ll most likely need to permanently hire several employees — in which case you’re expected to be working as a limited company. If you choose to operate on a smaller scale, serving private customers including homeowners and small businesses means you are a sole trader.
Being a sole trader doesn’t automatically mean doing all the work yourself, because you would have the choice of employing subcontractors to assist when required. Bear in mind that subcontractors are to be regarded as fellow sole traders, not as workers. When the essence of a subcontractor’s job to you is too close to normal jobs (e.g. full-time at set times), they may be entitled to an employee’s rights.
Limited firms can also use temporary contract workers, which can be a useful option given the potential for poor weather and short winter days to reduce the number of working hours.
Payments and benefits
Your company type will also influence how you pay employees/contractors, and what forms of insurance you choose to carry out.
Small companies need to register to run Pay-As-You-Earn (PAYE), which is the mechanism that HMRC uses to document employee wages and figure out how much tax they owe. The best way to do so is via the PAYE Online service from HMRC.
You will also need to set up PAYE if you are a sole trader using subcontractors who operate directly under your supervision, direction, or control (SDC). If there is going to be more than just you on the staff, you will still need to take out employer’s liability insurance, which covers demands for compensation from workers who have fallen sick or sustained injuries as a result of their jobs.
If you deal in public access areas, you need public liability insurance, which protects against lawsuits by members of the public who have been injured or have their property destroyed as a result of your activities.
Finally, taking out landscaping and gardening insurance for equipment is strongly recommended. The tools of a gardener’s trade are often costly, from cultivators and scarifiers to ride-on lawnmowers and hedge trimmers. This means damage to the equipment and theft can be major setbacks to a gardening business — especially one that just starts.
Not only might both of these forms of insurance rescue your business one day, but they may also be a requirement for having work, as many clients — especially corporate ones — will engage only completely insured gardeners.
Compatibility with your business
It is important to note that the type of company you select will affect your business directly. So, with that in mind, which choice makes more business sense better: single trader or limited company?
Most gardening companies would find that forming a limited company is the more financially beneficial long-term option while operating as a sole trader is the best way to reduce the administrative and financial obligations.
Limited company directors typically take a small salary and earn the remainder of their salaries in the form of dividends that are not subject to the National Insurance Payments, while sole traders are expected to contribute in addition to their income tax. Moreover, limited companies benefit from limited liability — which ensures that directors cannot be held directly liable for damages suffered by the company if it gets into trouble.
Operating as a sole trader, meanwhile, from an accountant and training perspective, is nice and simple. All you have to do is signup with HMRC as a sole trader, then file an annual tax return (payments are now made twice-yearly).
To read more on topics like this, check out the Lifestyle category.
Leave a Reply