Monday, October 10, 2022

could legal company forms help protect my mental wellbeing?

The date of my publishing this post on my blog (Oct 10th) marks World Mental Health day - a time when there are floods of other posts, tweets, emails, etc being circulated, so I don't expect that this will catch too many people's attention, but I've always stated that this blog is in part my 'thinking aloud space' - and this post relates to me 'thinking aloud' about an aspect of my mental wellbeing, and how I try and best manage it.

Firstly - as background to to the title of this post, I've always said that I prefer being a sole trader instead of incorporating myself as a limited company (as conventional wisdom would suggest I should)

This isn't just because I try and be unconventional, but also in remaining a sole trader, I have to pay more tax on my income and earnings that a company director or salaried employee would (and I think that paying tax is actually a good idea). It also means that technically, I've unlimited personal liability - I can't easily "wash my hands" of a problematic contract by simply dissolving a company (in whose name the contract etc, would be, meaning that nothing of the fall out would legally stick to me). As such, it forces me to try and take greater care in how I approach my work and also hopefully sends a message to those I work with that in seeking to establish trust and rapport with them, I'm willing to make myself very vulnerable personally. This element of personal risk is something I also try and further manage through my professional insurance policies, and how I seek to structure and maintain relationships with each person and organisation I find myself working with.

But it's world mental health day, so I'm taking this opportunity to revisit the above position about my not being incorporated to review it from a new perspective - my mental wellbeing.

As a sole trader, parent, carer, etc etc (we all have multiple identities - some of which are more secret than others...), I'm very conscious of trying to best manage my own health and wellbeing, including my mental health. And this list of roles I hold each brings its own tensions, stresses, anxieties, etc that aren't always easy to 'turn off' - but I've always sought to harness what some might see as negative or harmful emotional states that arise from them, to generate responses that help motivate and keep me moving forwards.  

Now, from time to time, I try and take stock of how I'm doing in managing the above - always with a view to trying to see if there might be ways to change a practice or habit that could help  further mitigate or reduce a recognised stressor in/on myself.

And it's the idea of company forms that I'm currently trying to consider to this end - a limited company exists as a 'person' separate to me. It's therefore that person, not me, who would sign contracts, agree terms and conditions, etc - so in the event of the worst coming to pass in my delivering a piece of work (the client decides to sue me), then I could give notice of dissolving the company, and not be concerned about the spectre of potential personal bankruptcy.

However... that's something of a 'nuclear option': I'd only be able to use this fall back position once, because if so 'activated' in that worst case scenario, then all my other business activities linked and associated to and through the company would also cease to be.  And if I then recontacted everyone in my current/original guise of being a sole trader, it would look like I was trying to duck responsibilities, be unethical, and generally exhibit the sort of behaviours that as a society, we decry when we see some larger corporates doing...

And then there's the question of how I'd mitigate the risk that having such a legally distanced structured from the people I'm working with might mean in terms of my becoming complacent in my relationships with them - one of the main reasons I'm currently maintaining my status as a sole trader.


So, on balance, I'm not sure that having identified this option I can actually adopt it - in theory it would offer me an assurance against the 'worst case scenario', and so help reduce a stressor and anxiety. But in practice if I ever needed to enact it, it would mean that I'd have to shut all my work down and not be able to easily restart working in the way I am now - in much the same way that if I were sued as a sole trader (and my insurance providers felt I'd not acted with sufficient degree of professional conduct with the upset client in order to cover the claim), I'd not be able to easily restart working in the way I am now. 

'Killing' a company that I owned could also impact on my personal credit rating (in the same way that getting personally sued might also) - so that consideration also balances itself out.


But it's an interesting perspective on the question that every sole trader and freelancer faces at some point - of whether to incorporate themselves as a limited company; but from a very different starting point. A perspective that seems timely with it being world mental health day.

However, as will all of my 'thinking aloud' posts that I make here in this blog, I'd be interested and keen to hear what holes people might be able to pick in my above 'workings out', and if there's anything that I've missed in thinking this through?  

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