Hey Dan,
Tough call. I am currently going through the same considerations myself, based mainly in the UK market.
There is nothing wrong with outsourcing your work. However, do consider the legal frame-work for doing so. As in that you don’t want yourself suddenly becoming an employer by default – that is if the “freelancer” working for you, only works for you.
Marketing/image wise:
I would not be concerned about telling client that you are using an extra pair of hands, but that you are taking full responsibility for their product.
Legal / contracts:
Setting aside the agreement with your end client, do consider using the following legal paperwork when using a third-party supplier:
- NDA: Non-Disclosure agreement – nothing that happens on the production leaves “the room”. Could also be of interest if you are using certain processes for producing films – as in that you don’t want a freelancer to “offer” your services.
- Contract for work: If the job is longer than one day make sure to have a signed agreement that states that the supplier is not employed by you, and that they will pay all their own taxes etc. (This does not absolve you from making sure that the supplier is legally allowed to work in the UK).
- Contract for non-compete: An agreement that ensures that the supplier does not approach your client(s) for a set period of time after the last job that they did through you. Although most suppliers are honorable, the client may not be. And it is tempting “to cut out the middle man” if the middle man is no-where to be seen…
Insurance / Legal entity:
Make sure that you are insured for 3rd party suppliers. I have an insurance that includes public liability, freelancers and/or employees and production costs + equipment.
If your productions starts growing you may want to consider setting up a Limited company to keep everything at an arms length. UK is one the countries in the world where it is very easy to setup a company.
However!: You will be doing a lot more paper-work and everything suddenly become more expensive. So expect the additional costs for a UK limited company to be anywhere from £750/year, but most likely around £2,000/year – this cost should maximum be about 2% of your total costs. If it is higher than that, then only do it if you are concerned about liabilities – which may be more cost effective to mitigate through having the right insurance policy.
Do note that most limited companies in the UK cannot get any loans or credit without the personal guarantee of the company director(s) – so read the small print of any contract you sign on behalf of the company.
With regards to HMRC there is nothing that stops you from continuing as a sole trader, whilst also being an employee of your Limited company – you would need to ask an accountant about the best way of doing this (will cost you).
With my last company I held on to my “Schedule D” registration as I was also working for other people. Not sure that exists anymore.
Hope this helps.
All the Best
Mads
@madsvid, London, UK
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