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Starting Your Own Business - Carpenter

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Student loans are putting off teenagers studying at University.  In a series of articles/blogs, I explore what those wanting to be their own boss involves


The possibility of becoming self-employed is a dream for many people.  It brings with it the burdens of tax returns, paperwork and responsibility, but also freedom.  This articles touches upon the general points to consider about becoming self-employed as a carpenter.  Future articles will feature other specific areas/professions


Becoming Your Own Boss - Carpenter 


Working with wood is one of the original trades, but unless you mass produce or have a specific design, it is not one where your fortune can be made


The traditional carpenter will have the same approach to starting a business as a cabinet maker, fencing contractor or producer of window frames.  As the business expands into offerings such as fully fitted kitchens, other matters need considering.


If you decide you would like to start a business as a carpenter, here are a few things to consider


Commencing Trading


As with any new business, you need to decide on whether you will trade as a limited company or a sole trader


Sole Trader


There is nothing to stop anyone being a sole trader and once you start making something, you could ask to be treated as a sole trader by the tax man, provided you are planning towards your first sale.  


Once you contact HMRC will send you forms telling you what to do, but as your second job, you might instead decide this development time is still the hobby stage.


If you make a first sale, you will be properly trading and expenses upto that date will be offset against any profits made.  Up to the date of the first sale, you will also be trading and incurring time and possibly money, which becomes important for tax returns


You should consider notifying HMRC as soon as you start trading, but if this is your second job and you have not yet made any money, consider pausing that phone call and having a no obligation discussion with an accountant (do not sign up to anything nor start paying a monthly retainer)


If you do not make something straightaway and turn a significant profit, you also may not want to incur book keeper costs


Limited Company


A limited company is a piece of paper which can be owned by you and others.  The law allows the company to be seen as:


  • the organisation your customers contract with
  • your employer
  • the organisation responsible if anything goes wrong

If you are only making a few items, then this might not be for you.  It is not a cheap process to pay you arrange for a company to pay you and do the company’s tax bills


The situation is different if you make some money, when it can be the best thing to do.


Also, if something could go wrong and someone could get hurt, again it’s a good idea


If you are making a lot of kitchen cabinets or staircases, you should consider a limited company if you have lots of suppliers, because if something goes wrong, the supplier can only pursue the company.  


Make sure your customers sign up with the limited company and know that your company is their supplier, just in case the cabinet falls off the wall!


An accountant will tell you whether there is any sense in trading through a limited company for tax purposes as a carpenter


Trading Name


A trading name is helpful in giving you an identity, but you might not care and decide you own name is enough.  There is nothing wrong with this decision. 


When you sell something, you might want people to know you made it.  You may want to use your initials instead


From a legal point of view these are classed as the same


  • Jane Smith Carpenter 
  • Jane Smith t/a JS Carpenters
  • Jane Smith trading as JS Carpenters

Using just JS Carpenters will not enable you to be a party to litigation or easily have a bank account with just that trading name, as Banks like the name on the official form, so it would have to be Jane Smith trading a JS Carpenters


Also, your bank account should usually be John Smith t/s JS Carpenters.  This will enable you to receive and bank cheques in both your sole name and trading name


Design Rights


A simple design like a kitchen cabinet will not have any design rights, but if you design a wood chair with particular mouldings, they could have artistic value leading to copyright.  There could also be design rights if the style you adopt is sufficiently unique


Single Jobs/Commissions


If you are asked to make a single artistic piece, you should establish who is to own the IP rights to it, as it will likely be the commissioner.  You should set this out in your quote


Quoting and Estimates


Always give a written quote or an estimate for your work and try and get them to sign something.  If they will not sign something send an email saying that in reliance on the order you are now incurring expense as set out in the quote/estimate


When it's not possible to work from a standard price list, you have to give a quotation or an estimate instead. The main difference between a quotation and an estimate is this: 


  •  a quotation is an agreed fixed price
  •  an estimate is approximate price that may change

Invoicing


If you have a trading name, you can send out an invoice with the date and the work done.  Of course, you do not need to send out an invoice, but your bookkeeper will be very disappointed.  The invoice is evidence of your sale(s) and with these you can start preparing a full list of the profits


You need an invoice if you have to pursue the customer for the work, as it sets out what is due to you and what the work was for


Payment Terms


You need to agree beforehand how quickly you wil get paid once the job is done


Or you may agree interim invoices


Until the money is due you cannot demand payment, hence why it is best to:


  1. Agree beforehand when the amount is due;
  2. Once the invoice has been sent set out on the invoice the agreed due date


Retention of Title


Most carpenters will not hand over their product before it is paid for, but you might


You can retain ownership of property until it is paid for provided you tell the customer before hand


If you build a kitchen into the wall of a customer’s house, you will by conduct have transferred title, but not if the units are standalone and can simply be taken away.  Getting access is your only problem


I once heard of a carpenter who built some fences and when they were not paid for threatened to come and take away his wood.  Provided no animals escaped and no nuisance was caused, I reckon that would be a good way of getting back the wood, but the customers always paid


Workshop


Most people will start a carpentry business in their garage or in their home, but once you start trading properly, you could need premises


Always agree short term tenancies at the beginning and avoid any repairing obligations or hidden service charges


Insurance & Health and Safety


A decent insurance broker will find you insurance for your trading


When you start selling items, you will need to check whether you are compliant with any regulations for health and safety.  Items used in kitchens and fire hazards will need to be looked up


Sale of the Business


Unless you are looking to start producing items that can be made on a large scale, the sale of a carpentry business is not going to be easy, not least as you will be the sole employee


If you build a workforce and have a regular income/customers asking for joinery work, then you can build a portfolio worth selling


There are lots of opportunities for one off work, which is probably why selling a carpenters business is hard – one off jobs are not that easy to offer to a purchaser, as they may never return


Any carpenter wanting to build a business with a view to one day selling must either get regular contracts from large businesses or building firms or design a product that will be sold over and over again


Conclusion


One of the oldest professions, a carpenter is a valued member of the community.  They are unlikely to make much money and will work hard for their revenue, but have the usual aspects of any sole trader or company and a few extra regarding copyright


Keith Cutler
Solicitor Advocate
Hibberts LLP