How Do You Become Self-Employed?
There are a couple of ways to obtain the benefits of self-employment, but it’s by no means an easy road to travel. As an independent contractor, you may not have the same tax benefits offered by employers, but you have a lot more freedom in how you run your business.
Let’s assume you do have some business expertise – you know how to set up a company, do your taxes, and manage your own finances. However, if you don’t, you’re going to have to have to learn and understand all of that. Learning all of this through self-study isn’t for the faint of heart, and the amount of work required to do it well is beyond what one would expect from a typical part-time job. So, if you don’t have a business background, you’ll likely have to get that knowledge from an outside source, whether it’s through courses or mentorship.
If you’ve ever wondered if you would make a good freelance blogger, you likely fall into the category of someone who can work independently. If, on the other hand, you require a lot of structure and routine, you’re likely most comfortable working for another company.
Think of a Name for Your Self-Employed Business
You have what it takes to become an independent contractor. You’ve put in the time and effort to understand your market and the way projects are traditionally done. You know how to do the work, and you’ve successfully completed projects on your own. Now what do you need to succeed as an independent contractor in the 21st-century economy? Of course, you need to have the confidence to go out there and market yourself. But you also need to have a plan.
Choose a Self-Employed Business Structure and Get a Proper License
If you want to be an independent contractor, one of the first things you should do is attach yourself to a proper business structure. More than just an organisational structure to align income and expenses, this is a way for you to separate your personal assets from those of your business, and much more.
Being an independent contractor requires that you have the right business structure. If you want to report your financials separately from your business structure, then you need to be incorporated. Incorporation has other benefits, too. It protects owners from money judgments against your business by separating their assets.
However, there are also other business structures that can fit your needs. Sole proprietorship implies a single individual engaged in business. You have separate personal and business assets, but you maintain separate tax returns. That’s a good fit for you if you are the only one working for your business.
Open a Business Bank Account
Besides maybe licenses, taxes, and insurance, you’re most likely going to need a business bank account to establish your company legally.
Bank accounts allow you to deposit checks from clients or credit card sales as well as pay your employees. Normally, banks want your business to have been established legally for a certain period (often three months) before they open a business account for you. So don’t wait too long before creating your business!
When it comes to establishing a business bank account, you have a lot of options. Most local banks have a special department for business accounts (you can usually set up an appointment online or make an appointment at your local branch). If you’re not near a local bank, lots of banks offer business accounts online, often in addition to their online banking services. If you’re an older generation, I’m sure you can remember the days when you had to physically go to the bank to make deposits!
You may be surprised to learn that you don’t necessarily need a business checking account. A lot of freelancers and independent contractors prefer to keep their personal and business funds separate. That way, your personal funds are not at risk if clients don’t pay. If you have a similar mindset, another option is a business debit or credit card.
Advertise Your Independent Contractor Services
One of the biggest challenges facing independent contractors is finding good work. One way that independent contractors can find more work is by advertising themselves to potential clients.
First, you need to know your strengths and weaknesses. List all of the different types of services that you’re qualified to provide and estimate the demand for each of those services in your local area. Here are some common types of independent contractor services:
“Crisis management,” “A-to-Z” (anything), “quick launch” (launching into a new market where you have little initial demand), “startup consulting,” “knowledgeable, reliable, and credible” (having the trust of your clients because of your previous experience), “always on time” (getting things done on time), “highly creative” (your ability to come up with new ways to solve problems), and “top-notch problem-solver” (getting clients out of the fire when they have crises).
Although different independent contractors have a wide-range of talents, most independent contractors will specialize in one or two areas.