There are numerous reasons why self-employment is so appealing and attractive. Along with a great deal of freedom and flexibility in terms of choosing when and how much to work, there’s a good chance you’ll have chosen a pleasurable, rewarding occupation too. However, as any self-employed individual will tell you, to enjoy these benefits, you’ll have to overcome various legal and lifestyle obstacles, including tax and legal forms, as well.
When deciding how to trade as a self-employed individual, your business can take one of three legal forms.
Sole Proprietor— The easiest way to start a business is to go it alone. Most home based businesses are best ran as a sole proprietorship both for personal and tax reasons.
Corporation or Partnership — a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law. This is much more costly but depending on your business may be the best option.
Limited Liability Company (LLC) — This gives the organisation a separate identity to employees. You can be a single member LLC or have several members in your LLC. Some may be just members and some may be employees.
You can also be self-employed with a Franchise — Buying the rights to franchise a business, which has been established by someone else.
Finance and tax
Regardless of your type of business, keeping accurate financial records is crucial to comply with tax rules and stay afloat. Sole proprietors and partnerships can keep their own books, but a limited liability company will most likely need an accountant’s help.
Accountants can also help with income tax, as a self-employed individual is responsible for this. Annual income taxes due will depend on the type of business and how much revenue it generates each year. For help with tax issues or to request relevant legal forms, you can contact the IRS. Also many community colleges have Small Business Centers that offer free consultations in person and many helpful resources on their websites.
We’d all like to be our own boss in an ideal world. Self-employment can bestow this power and authority upon you, but there are still certain lifestyle implications to contemplate and consider:
Balancing work with social life — You’ll probably end up working more hours if you’re self-employed, which could have an impact on your social life. Being successful is important, but you still need to switch off and relax as well.
Working from home — Although this sounds like an ideal scenario, working from home is tricky. Often it’s hard to motivate yourself and ignore other distractions. Relationships between your partner or housemates can also become tense.
Future finances — Taking time off is easy (in theory!) when you’re self-employed, but you won’t receive paid leave for sickness or holidays. What’s more, you’ll have to make provisions for your own pension fund.
The freedom of self-employment is the ultimate aspiration for many people. It’s an adventure, but there are several legal and lifestyle implications to consider carefully before you embark upon it. To do that first is to set yourself up for success. Fail to plan and you plan to fail, as they say.
*This article was written by Amy Tyler*