A career in contracting usually starts with a few simple steps. Usually an individual benefits of a starting a company leaves their current professional position (this departure is often a voluntary action, but redundancy can also spur someone down the contracting route) and then decides to take the plunge into contracting. Professional workers and employees are increasingly choosing contracting as their line of work for a number of reasons: the ability to own, run and work for their own company being a highlight for those who previously held a position as an employee.
Being a limited company contractor certainly has its advantages over static employment in many cases. Among the numerous reasons, being able to dictate your own schedule and being subject to a lower tax bracket are top of many people’s list. As well as these perks, many professionals relish the opportunity to work for themselves, a career in contracting being technically a ‘self-employed’ profession, and one that appears attractive to most.
Being a company owner, shareholder and worker does bring with it many potential downsides however, these far surpassing the niggling annoyances that can come with employment. As a person in charge of a business, whenever any misfortune or error occurs professionally, it will undoubtedly be the contractor that must take the wrap, and most importantly foot the bill. As a result of financial instability in this sense, sufficient contractor insurances must be purchased in order to oust any potential vulnerability concerning company finance.
The first port of call for any budding contractor is undoubtedly professional indemnity insurance. As a form of cover, the policy protects any law suits resulting from claims of negligence being made against the policy holder. Negligence claims arise often within business, but usually the firm or corporation will hold some overhanging insurance that covers all of its employees. Obviously with contractors this cannot be the case, and because of this they must purchase PI insurance as a means to protect their financial assets should a negligence claim be made. Professional negligence can be as a result of an accident, error, mistake or misconduct, and fundamentally stems from the actions of the contractor resulting in a loss for the end client. This is the major factor that the professional indemnity insurance covers, although the policy does also happen to have added benefits.
As a limited company contractor, in the eyes of the tax office an individual working through a personal service company should be visibly operating as a business in their own account. There are many things that can aid a contractor’s position here, and professional indemnity insurance is one of them, adding value and providing representation that a limited company is working as a business in its own account (as opposed to an employee posing as a contractor).