Policy makers and dual entity

I attended an interesting event at the RSA yesterday which focused on the needs of self-employed people in the UK.

The event was attended by a wide array of individuals, from MPs and economists to micro-business owners and freelancers.

There were a number of panel events during the day, and some enlightened discussions, but one issue stuck out for me throughout. All of the rhetoric and statistics around self-employment focus on the business, not the person who runs the business.

It’s vital for anyone involved in business — and especially anyone involved in the formation of business support policies — to understand that a business is a totally separate entity to the person who owns that business. This principle is well known to accountants, and is known as the ‘dual entity’ principle.

Dual what?

In our Understanding Your Business Finances workbook, Johnny Martin explains ‘dual entity’:

Irrespective of the size of the business, or its legal format, when an individual creates a business, for accounting purposes there are two distinct entities:

1 the owner

2 the business.

This is called the dual entity principle, in which the business exists as a separate entity from the owner.

So, a self-employed freelancer is an individual — their self-employment status is a different matter. Government policy is driven by the statistics around employment and growth — not the person and their personal circumstances.

The real cost

A rise in the number of start ups may be good news for statisticians and policy makers, but where are the statistics on earnings and the cost of living for the self-employed?

I may be wrong, but I doubt these statistics would attract such glowing headlines.