How to Be Self Employed: 5 Essential Tips
So you want to be your own boss. It’s an admirable goal, and can provide you with a level of freedom you won’t find with traditional employment. But being a successful freelancer or small business owner is about more than doing good work.
You also need to maintain your finances. If you’re not handling your taxes or your liability property, you could expose yourself to serious risk. And even when you’re your own boss, you need to maintain a work-life balance. Here are five essential tips for anyone who wants to be self-employed.
Here’s What We’ll Cover:
1. Form a Legal Entity
Unless you’re just moonlighting, it usually makes sense to form a legal entity. If you’re working by yourself, a sole proprietorship makes it easy to separate personal and business funds.
Alternatively, you might want to go into business with a friend. In that case, forming a partnership gives you both a legal right to the company. You'll also be able to easily separate personal and business income.
Finally, you may want to form a limited liability company (LLC) or corporation. Forming one of these entities will shield you from personal liability due to mistakes in business. However, you’ll also be subject to additional taxes and financial requirements. Sole proprietorships and partnerships are simpler by comparison.
2. Keep Work Time Separate From Personal Time
Separating work time from “me time” can be challenging for any self-employed person. But it’s especially challenging for freelancers who do most of their work from home. It’s easy to take a business call while you’re cooking pasta, or work on a proposal while wearing your underwear.
And anyone who’s ever taken a client call at the bar at 11:30 PM knows never to repeat that mistake.
Here’s the thing. When your personal life bleeds into the professional, your work suffers. Maybe it doesn’t suffer in obvious ways, but it suffers. So set an alarm, put on your pants in the morning, and don’t take a Zoom call on the toilet. You won’t just look more professional, you’ll feel more confident.
At the same time, working from home can have the opposite effect. If you don’t set boundaries with clients and business partners, you might find that you’re “on” 24/7. This leads to mental burnout, which is poison to both your personal and professional life.
Set normal working hours, and stick by them. Yes, you’re the boss. Yes, you may have to work the occasional evening to keep your business running. But unless there’s a proverbial fire, take a few hours for yourself every day. You’ll be more productive, and you’ll be happier.
3. Invoice Your Clients
Doing the work is sometimes the easiest part of the job. Sometimes, the hardest part is getting paid for your labor. Here’s the thing. Your clients are as busy with their day to day business as you are with yours. If you haven’t bothered to bill them, they probably won’t remember to pay you.
So don’t be shy. Keep track of all your business with clients, and send them invoices on a regular basis. Not only are you more likely to get paid, but you’ll have better records come tax time.
4. Respect Your Own Time
Self-employed individuals are usually on the hunt for work. Unfortunately, employers and clients know this. They will often throw out last-minute work with unrealistic deadlines. And when you need the work to pay your bills, it’s hard to say no.
Sometimes, it’s important to be available for an important client. But if you’re always available all the time, you may actually be lowering the value of your work. By saying “no” now and then, you show clients that your time is valuable. As a result, they’ll be more likely to respect your time in the future.
5. Remember Your Taxes
When you finally get paid, it can be tempting to spend your money as you would an ordinary paycheck. However, self-employed workers aren’t subject to tax withholding like ordinary employees. This means that you have to set aside a portion of your income to pay for taxes.
In most cases, you’ll also need to file quarterly reports. In addition, self-employed individuals need to pay self-employment tax. This is an additional Social Security tax over and above standard income tax.
Whether you're dealing with tax payments or calculating business costs, self employment can be a challenge. But when you're successful at running your own business, it's one of the best feelings in the world. So get out there and be your own boss. The sky truly is the limit!
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