Protection as a Sole Trader

[StephenPJones]

Hi,

I'm looking to set up as a sole trader shortly (web services & consulting) and wanted to get some advice on protecting my home. I know Sole Traders are liable for all business debts, but can you protect an asset like a house? My turnover will be small to begin with so don't want to go down the added cost and associated time needed to run a limited company, but will need to protect my house should the worst happen.

Should I be considering putting the house in the wife's name, or trust for the kids etc. Just wanted to get some advice.

Thanks in advance

 

[Mark T Jones]

Protection from what?

If you don't take on debt (which would probably be PGd if you were limited) or open trade accounts then its really just professional claims, which you can insure

 

[StephenPJones]

Thanks Mark,

Yes, it would just be professional claims - say if a website goes down and trade is lost. I will certainly take out professional indemnity, but not sure if this is robust enough to protect a major asset like a house.

 

[Gyumri]

Yes, it would just be professional claims - say if a website goes down and trade is lost. I will certainly take out professional indemnity, but not sure if this is robust enough to protect a major asset like a house.

No insurance can be as robust as an Ltd which gives you peace of mind. Having an Ltd plus insurance as a backstop is the way to deal with potential claims in the future.

Otherwise you will always be potentially vulnerable as an individual.

 

[AvantageBroker]

Hi,

I'm looking to set up as a sole trader shortly (web services & consulting) and wanted to get some advice on protecting my home. I know Sole Traders are liable for all business debts, but can you protect an asset like a house? My turnover will be small to begin with so don't want to go down the added cost and associated time needed to run a limited company, but will need to protect my house should the worst happen.

Should I be considering putting the house in the wife's name, or trust for the kids etc. Just wanted to get some advice.

Thanks in advance

Why would you not setup a limited company - it is very easy and can even pay companies to setup for you. This atleast gives you some protection.

 

[fisicx]

Thanks Mark,

Yes, it would just be professional claims - say if a website goes down and trade is lost. I will certainly take out professional indemnity, but not sure if this is robust enough to protect a major asset like a house.

You get the client to sort out their own hosting (with your guidance). You use a staging site to build, test and demo the site. You get the client to sign off on both the staging site and live site. You then arrange retainer to manage the site if required. You have a contract that absolves you of anything if there is a failure.

If the website goes down and trade is lost it's not your problem. They can't take you to court because they agreed a contract that says it's not your fault.

I've been doing this for far too long to put myself in a position of responsibility. Make sure the responsibility belongs to the client not you.

You don't need to be a limited company. I managed for years as a sole trader.

 

[AvantageBroker]

You get the client to sort out their own hosting (with your guidance). You use a staging site to build, test and demo the site. You get the client to sign off on both the staging site and live site. You then arrange retainer to manage the site if required. You have a contract that absolves you of anything if there is a failure.

If the website goes down and trade is lost it's not your problem. They can't take you to court because they agreed a contract that says it's not your fault.

I've been doing this for far too long to put myself in a position of responsibility. Make sure the responsibility belongs to the client not you.

You don't need to be a limited company. I managed for years as a sole trader.

Whilst this can work in many cases, courts wont always agree with contract agreements - look at Unfair Contract Act. I have seen many times whereby contracts absolving all responsibility have been declared unfair and were not then relied on. There are many circumstances that push this situation either way but do you really want to go through all this just not to have that additional protection?

As you say, it worked for you so I am just curious.

 

[fisicx]

It's not an unfair contract - I've had it checked by a lawyer.

The hosting company looks after the hosting. Which means any failure can't be your fault.

The website belongs to the business owner. You effectively hand it over on completion. If they then want you to look after the site it's a different contract and the words say you are not responsible if updating wordpress or other platform, a theme or plugin breaks the site. This is quite reasonable. If they want to pay extra and you test each update on a staging site that's different.

All software products have a clause in their terms stating it's not their fault if your business goes pear shaped if the software fails.

Google has similar in their terms (so you can't sue if your site gets penalised). So does Shopify, Squarespace and others.

 

[AvantageBroker]

It's not an unfair contract - I've had it checked by a lawyer.

The hosting company looks after the hosting. Which means any failure can't be your fault.

The website belongs to the business owner. You effectively hand it over on completion. If they then want you to look after the site it's a different contract and the words say you are not responsible if updating wordpress or other platform, a theme or plugin breaks the site. This is quite reasonable. If they want to pay extra and you test each update on a staging site that's different.

All software products have a clause in their terms stating it's not their fault if your business goes pear shaped if the software fails.

Google has similar in their terms (so you can't sue if your site gets penalised). So does Shopify, Squarespace and others.

oh i see, that makes sense. Good explanation

The cases i have seen relate where a contractor removed their liability for the works carried out. There was a expectation that the contractor should have responsibility but this was building works so i appreciate software is very different.

Thanks - mind you, i would still incorporate xD

 

[fantheflames]

Welcome @StephenPJones! I think @fisicx has addressed this perfectly.

Make sure that you do not own any of your clients assets. If you give ownership to them, they are responsible and/or the third party. It can be a headache managing hosting for clients (and complicated if they leave), frankly it saves a lot of time and money so my advice is ensure that clients deal with their hosting.

You can provide set up and support, but best practice should be any asset is in their name/ ownership, and not yours.

 

[fisicx]

Assets are another thing to consider as @fantheflames suggested. Let the client source their own images. They will then hold the licence in their name not yours.

Also worth considering are the use of libraries. Whilst they may be open source that doesn’t mean they are actively maintained. A number of big sites have come unstuck through overuse of unsupported libraries and forks.

 

[StephenPJones]

No insurance can be as robust as an Ltd which gives you peace of mind. Having an Ltd plus insurance as a backstop is the way to deal with potential claims in the future.

Otherwise you will always be potentially vulnerable as an individual.

Thanks. I believe a Ltd Director can still be held personally liable?

 

[AvantageBroker]

Thanks. I believe a Ltd Director can still be held personally liable?

Yes, If they sign personal guarantees, tax issues from government, fraud etc - Corporate Veil isnt what it used to be but LTD does sufficiently reduce your risk compared to a sole trader.

 

[fisicx]

Thanks. I believe a Ltd Director can still be held personally liable?

But if you do as I suggested you won’t have any liabilities.

I build plugins for clients all of the world. I’ve never once had any legal action taken. I had one threat from the US but once the relevant clause in the contract was shown they shut up. Since then I’ve done three other plugins for them.

Really don’t get stressed about this.