5 Tips to get Started as an Entrepreneur
There has been a surge of professionals who want to chart their own destinies. Across most occupations, they are realizing their skills are more valuable than their 9 to 5 jobs would make them believe. Whether you’re a nutritionist starting up in Seattle or a realtor in New York City, going independent brings out an empowering sense of control when it comes to decision making, dream chasing, mental well-being and even work-life balance. Along with pure ownership, there’s an ongoing opportunity to boost income as well.
Yet, the decision to ‘go independent’ can be a challenging one. Giving up the stability of working in an established organization can be nerve wracking. But it doesn’t have to be like this, and we can assure you that this decision can be the right one for you.
Here are 5 tips for professionals who are taking their first steps as independents.
1. Keep calm, you’ve got this!
Take the time to understand your motivations and ambitions to go independent. You now have all the freedom and flexibility to figure this out. You have made this decision because you can bring an essential service to the table that can help someone or even a business. Keep it simple and try not to overthink it. There are plenty of solutions for perceived blockers, so don’t let them bog you down.
For starters, keep reading this post!
2. To LLC or to not LLC?
One of the crucial decisions an independent professional will make is deciding on the right legal structure for their business. And you can be sure this will involve making a choice between setting up an LLC (Limited Liability Company) or not.
If you decide to go independent or have a side hustle, you are not legally bound to set up an LLC. You can hit the ground running as a ‘sole proprietor’ without having to file any documents with the state (besides getting the necessary licenses, permits and registrations). You won’t have to worry about formation fees or the expenses that come with hiring an agent to set up an LLC. Seems like a no brainer when this means less paperwork, less expenses and an easy, cheaper way to start your business.
However, without setting up an LLC, you open yourself up to risk — especially when it comes to your personal assets. The biggest advantage to setting up an LLC, is you legally segregate your business assets from your personal assets. God forbid, something goes horribly wrong – be it business debts, bankruptcy or even negligence claims, with an LLC you can run your business taking solace in knowing your personal assets are protected from any legal proceedings connected to your business. Essentially, you are eliminating personal liability while you run your business via an LLC.
As a sole proprietor you can potentially lose everything and we mean everything. Choosing between an LLC or not, really boils down to being better safe than sorry.
There are pros and cons to being a sole proprietor versus setting up an LLC and we will explore them in the future. From tax benefits to profit distribution, there’s plenty more to come on this topic.
3. Clients, clients and more clients.
Independent professionals are highlighting their expertise and willingness to help by creating content to win over potential clients. A simple 5 minute video tutorial, recorded on a webcam, discussing COVID tax benefits, shared on LinkedIn, saw one accountant gain 10 new clients (beyond his personal network) overnight… it was the first seed that left him wondering if he needed to continue working at his firm.
If you’ve chosen to go independent, chances are you are doing what you love doing. Package this love into a piece of content and share it. You have nothing to lose and everything to gain. Specifically, clients.
The lesson is – don’t be afraid to market yourself, don’t be afraid to highlight your expertise, don’t be afraid to leverage platforms full of people who need your help.
4. Get help with your tax filling
There is no doubt, tax filing is a massive headache, but getting it right could save you and your business money. Recent studies have shown that over 70% of independent professionals end up overpaying their taxes. Take this section as a brief 101 on how to tackle taxes as an independent.
Understand these forms during tax season (and make sure the Schedule C form becomes your BFF):
Form 1099: If you’ve just left an organization to go independent, you will be familiar with the W2 form issued by your former employer. Keeping things simple, the Form 1099 is the W2 equivalent for an independent professional, provided by the client base confirming the services rendered and money you have earned.
Form 1040: Determines your Federal Income Tax for the year.
Schedule SE: Determines your Self-Employment Tax.
Schedule C: This form is used to deduct your business expenses and we can’t stress enough, the importance of understanding how to fill this form so you are not overpaying your taxes. For example, if you’re an independent professional, chances are part of your house is doubling up as your office — it is legal for you to save tax based on the area of your house that you’re using for work purposes. The same deduction rules apply for the miles you rack up in your car as well.
When it comes to taxes, business expenses and asset usage must be noted in order for you to save big during tax season. You must be rigorous when it comes to saving your bills and recording anything you’ve spent or used to run your business. When March-April comes along, you will be grateful.
There are special perks you must explore when it comes to deductions as an independent professional. And Schedule C is the form where you can work that magic. It seems obvious when you read this, but over 50% of independent professionals don’t even think about factoring in the Schedule C step when it comes to calculating their taxable income and yes, they lose out big time.
5. Staying safe and healthy.
Health insurance is probably one of your primary concerns when it comes to going independent, especially with what is happening in the world. This automated perk that comes with being employed by an organisation is indispensable, even with over 60% of professionals believing their health has improved since they’ve gone independent. Now that health insurance is your responsibility, there are a few options you might want to consider.
If you are just about to make the decision to go independent and in the process of leaving your organisation, you might want to look up COBRA coverage as a temporary option — this allows you to receive health benefits from your former employer for up to 18 months after termination. This is generally considered a short term solution, as the individual takes on the premium costs from their previous employer, but it allows for some breathing space to stay protected while you transition to becoming an independent professional.
You’ll eventually want to weigh out your options between a customized (possibly cheaper) Individual Plan, whether you’d like to become an add-on dependent on your employed spouse’s or partner’s plan, or you might want to explore an Association Plan or a Small Business Plan.
Yes, health insurance is now your responsibility, but don’t let that detract you from quitting a job you’re unhappy with and from going independent. There are plenty of options to keep you and your family protected… just takes a bit of exploring to figure out what will work best for you.
That’s 5 check boxes you have to consider when you go independent. It might seem tedious at first, but we can assure you that you will soon start to reap all the benefits of going solo. You can’t put a price on freedom and flexibility when it comes to your career.