I've been freelancing as a sole trader for about three years, mostly web dev and some consulting. Two of my regular clients recently told me they can only process invoices from a limited company now, something about their procurement system. One of them said it's been a company policy since last quarter. I don't have a company, I just invoice under my own name. I'm trying to figure out if this is common now or if I'm just unlucky. Do I need to actually incorporate, or is there some workaround? I'd rather not go through all the setup and accounting overhead if I can avoid it, but I also don't want to lose these clients. They're maybe 40% of my income combined.
Invoicing
My freelance clients are asking me to invoice through a company
This has happened to a few people i know. It's often more about their AP system than anything legal. Some firms literally cannot pay an individual in their vendor database anymore.
Could you ask them if an Umbrella company arrangement would work? You stay self-employed but invoice through the umbrella. Might satisfy their requirement without you incorporating. Worth a conversation with their finance team directly rather than just the contact who told you.
Incorporating isn't that bad honestly. I did it two years ago for a siilar reason. The setup itself took maybe a week and the annual filing is annoying but manageable. But it does change your tax situation and you'll need to think about how you pay yourself. If you're only doing it for two clients, weigh the extra accounting costs against the income you'd lose.
wait, they can't just demand you incorporate. that's a business structure decision. what happens if you just keep invoicing as yourself?
In practice? They just don't pay you, or they sit on the invoice indefinitely. It's not usually a legal demand, it's an operational block. Doesn't matter who's technically right if the money never arrives.
I've been on the client side of this. Our system literally rejects vendor records without a company registration number. It's not personal, it's just how the software is configured. Sometimes there's a workaround where procurement creates an exception, but you have to push for it and it takes weeks.
That's the thing though. Even if the software rejects it, someone at the client can usually override it manually. The question is whether it's worth the effort for them to do that for one freelancer. Most of the time they won't bother unless you're a significant spend.
Thanks for the responses. I think I'll try asking the client to escalate to their finance team first before I make any decisions about incorporating. If they won't budge I'll look into the umbrella option.
Not to complicate things but if you do incorporate,make sure you understand the difference between invoicing through a limited company and actually bing an employee of that company. The tax treatment is different and you'll need to file a separate return. A lot of people get surprised by the first year.
harrowgate9 makes a good point. I spent a lot of time reading before I set mine up and I still had to ask an accountant a bunch of basic questions. If you go that route, budget for a one-off seesion with someone who does this regularly.
I still think the umbrella solution is the path of leats resistance here. No registration, no annual filings, no separate tax return. You just pay a small fee per invoice. Did you ask the client about that?
I've seen umbrella companies that take a cut that ends up being more expensive than just incorporating if you're doing decent volume. Run the numbers on both before you commit ngl.