Can I sell an iPhone app without creating a company?
April 30, 2012 3:29 AM   Subscribe

I've written an iPhone app. I'm in the UK. Do I need to start a company to sell it?

Even registering as a sole-trader seems to come with all sorts of consequences, such as having to self-assess your tax each year, which I've never had to do before.

I already have a full-time job, and I can't find any hard information about whether I also need to start a company and therefore register as self-employed as well in order to legally make money from selling my app.

I understand you are not my lawyer. Hints?
posted by Mwongozi to Law & Government (8 answers total) 4 users marked this as a favorite
Registering as a sole trader is probably the way to go unless you will be selling on a big scale and potentially giving up your day job.

Yes, you will have to self-assess your tax, but it's not that difficult. Register for the online system in good time. Make sure you keep a record of everything you spend on your app-building business, and every piece of income you receive from it. If you initially make a loss on the business, this could be offset against the tax you pay on your full-time employment, which could mean the taxman will owe you money. In addition, you won't have to pay tax on the money you spend on expenses for your self-employed business.

You don't have to register for VAT until your turnover from the business reaches something like £74,000. It might be worth having a quick chat with an accountant about your specific circumstances and which business type is right for you.

I'm not sure what you mean by "start a company and therefore register as self-employed as well". You don't need to register a company in order to be self-employed - being a sole trader fulfils this function. You will need to register your business.
posted by altolinguistic at 3:35 AM on April 30, 2012 [2 favorites]

(Unqualified advice follows :-)

Can you sell something to the general public and avoid the "consequences" of having to pay taxes (and fill in the paperwork that goes with that)? No, I don't think so. It is probably not a good idea to try to avoid that.

Although "most" people don't need to self-assess, that's only because PAYE covers the tax requirements for "normal" employees. As soon as you fall outside that narrow exemption you will have to deal with the tax system.

As to sole trader v.s. incorporating: no idea.
posted by richb at 4:01 AM on April 30, 2012

"Do you need to start" is different from "should you start". You "need" to declare the income regardless, if you expect the income to be sizeable then taking advantage of company tax benefits offsets the pain involved in the extra paperwork. Best thing is to find a friendly accountant and pay for a half hour chat.

My gut reaction if you've just written an app is no, don't bother, you are extremely unlikely to make enough money to incur significant tax or to make forming a company worthwhile.
posted by epo at 4:48 AM on April 30, 2012

If you're earning money from something, yeah, you should declare it as a sole trader. Honestly, it's easy. Especially if you've only got one other job. (I've done it with four sketchy part time jobs, and as a sole trader, if I can work out that mess if youve only go one job plus earning a wee bit from selling an app online, you'll be fine!) The HMRC website is pretty clear on how to do that.

Altolinguistic is totally right about claiming deductions.

And just because you earn below £6000 (or whatever the minimum annual income is) is doesn't mean you don't have to bother filing. You're obliged to declare what you made if you are a "trader". If you're unsure if you're a "trader" the HMRC website has a guide for people who sell items online, through classified advertisements and at car boot sales. This could include you?
posted by jujulalia at 5:09 AM on April 30, 2012

I've been doing the 'sole trader' thing now for 10 years. It's easy. I keep track of any money I earn outside my full-time job, as well as any outgoing money related to my self-employed activities (a bit of freelance web development, a couple of software products, so it's pretty much all income). It literally takes me 20 minutes once a year to fill in my tax return.
posted by pipeski at 5:14 AM on April 30, 2012

Not an accountant - but have been self-employed.

Gut reaction up above is irrelevant, if you make money in the UK then HMRC will want their cut. Anything else is tax avoidance, particularly if your tax free allowance is used up from your full time employment.

Its all fairly easy though (assuming we aren't talking anything more than a modest income - at that point, get an accountant) and HMRC certainly used to run open sessions to walk you through the basics of setting up.

Basically though - keep accounts showing your income from sales, write down your expenses (you can write off things you buy to assist with the business, a percentage of your internet costs, etc) and at the end of year, the difference is your profit.

Then declare that online through the HMRC and get a tax bill .Half an hour tops, once a year, if you keep records.

Don't be fooled into "registering a company" or the other stuff some websites claim you need - just tell the taxman you will be self-employed as well as employed. That's it.
posted by Hobo at 7:31 AM on April 30, 2012

You can sell whatever you like without having to be a company, however the major reason a lot of people set one up is from the threat of bankruptcy, legal action etc.

Say you'd accidently infringed on one of Google's patents, as an over the top example, and they sued you, you could lose everything, including your house on legal fees etc. If you were a limited company you could simply wind the company up and walk away from that situation.

Pay an accountant a few hundred pounds a year and he'll take care of all the paperwork. Worth it for the peace of mind.
posted by derbs at 8:03 AM on April 30, 2012

Something to note with VAT and the App Store: whatever you receive from Apple is in a category defined as "outside the scope" for VAT purposes. This sounds complicated -- and is, like most of Apple's tax arrangements -- but for app developers, it's actually more straightforward than selling software from your own website.

That's tangential to whether it makes sense to wrap your business in the protective framework of a company, and as others have said, it depends on whether the potential income (and liabilities) make it worth the extra paperwork.
posted by holgate at 8:10 AM on April 30, 2012

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