You may know your hydrangeas from your hollyhocks, but how clued up are you on the different company structures open to professional gardeners? If your gardening business is going to flourish, you’ll need to pick the best setup for you, and meet all the business and legal requirements that come with it.
From the company types to insurance, in this article, we’ll talk you through the two business structures most commonly used by UK gardening businesses, and discuss the obligations that come with them, and their financial pros and cons.
Forming a gardening business: which type of company is best?
Typically, British gardening businesses will operate either as a limited company, or as a sole trader. But what exactly does this mean?
Limited companies tend to employ staff and operate on a relatively large scale, whereas sole traders usually work alone or with help from temporary contractors.
As we’ll see, your choice between these options should be based on which types of client your business will serve, which insurances and payment systems you are happy to put in place, and ultimately, which structure will be most beneficial to your business.
Who will you be gardening for? If you plan on working for commercial clients like hotels, business parks and stately homes, you’ll most probably need to employ multiple staff on a permanent basis — in which case you should operate as a limited company.
You may prefer to work on a smaller scale, serving private clients such as homeowners and small businesses. In this case, you may prefer to operate as a sole trader.
Being a sole trader doesn’t necessarily mean doing all the work alone, as you’ll have the option to engage subcontractors to help when necessary. Bear in mind that subcontractors should be dealt with as a fellow sole trader, not an employee. If the nature of a subcontractor’s work for you is too similar to regular employment (e.g. full-time hours at set times), they may be entitled to the rights of an employee.
Limited companies too can use workers on temporary contracts, which can be a valuable option, given the potential for bad weather and short winter days to slash the number of hours gardeners can work.
Payments and insurance
Your choice of business type will also affect how you pay staff/contractors, and which types of insurance you need to take out.
Limited companies need to register to operate pay-as-you-earn (PAYE), which is the system used by HMRC to record employee earnings and work out how much tax they owe. The easiest way to do this is via HMRC’s PAYE Online service.
If you’re a sole trader using subcontractors who are working directly under your supervision, direction or control (SDC), you may also need to set up PAYE.
If there’s going to be more than just yourself on your team, you’ll also need to take out employer’s liability insurance, which covers compensation claims made by employees who’ve become ill or sustained an injury as a result of their work.
Another essential if you’re working somewhere with public access is public liability insurance, which covers against claims by members of the public who have been injured or had their property damaged as a result of your activities.
Finally, it’s highly recommended to take out equipment insurance. From scarifiers and cultivators to hedge trimmers and ride-on lawnmowers, the tools of a gardener’s trade are often expensive. This means equipment damage and theft can be major setbacks to a gardening business — particularly one that’s just starting out. Equipment cover can take the sting out of these challenging situations.
Not only could each of these insurance types one day rescue your business, they may also be a prerequisite for getting work, as many clients — especially corporate ones — will only engage fully insured gardeners.
Compatibility with your business
It’s important to remember though that the type of company type you choose will directly affect your business. So with this in mind, which option makes better business sense: sole trader or limited company?
Most gardening businesses will find that forming a limited company is the more financially advantageous option for the long-term, whereas operating as a sole trader is the better route for keeping your administrative and financial responsibilities to a minimum.
Limited company directors generally take a small salary and receive the rest of their pay in the form of dividends, which are not subject to the National Insurance Contributions, whereas sole traders must pay in addition to their income tax. What’s more, limited companies benefit from limited liability — which means directors are not held personally liable for the business’ losses if it runs into difficulties.
Working as a sole trader, meanwhile, is nice and simple from a formation and accounting perspective. All you’ll need to do is register as a sole trader with HMRC, then submit a yearly tax return (payments are now made twice-yearly).
Once you decide which company type to form as, you actually need to do it. This can be a time-consuming process though, so we’re on hand to help. Whether you’re registering as a limited company or sole trader, or need to register for VAT, acquire an accountant, and more, we’ve got a number of packages to suit your formation needs.