You get paid a percentage of the value you bring to your employer, and though you may do well, the truth is that you’re only receiving a portion of the real value you’re getting to your job.
Also, as an employee, you have limitations in decision-making. Depending on the type of structure and organization you’re working in, the lack of control over the direction of your work can cause real consternation and worry.
However, one of the more significant advantages to working independently, whether as a freelance contractor or entrepreneur, is the freedom of decision-making that it brings. It pays to be your own boss as an entrepreneur, small business owner, or startup founder.
Of course, there is a risk involved with being self-employed, but there are tremendous upsides to offset the risks. Of course, there are tremendous upsides to offset the risks. You just need to know how to do things effectively.
Many employees dream about the upside that you don’t need approval for the type of decisions that need to be made. The downfall is that if something doesn’t go right, or at the end of it all, your business fails; there’s nobody else you can blame or point a finger.
Another advantage, albeit minor (at least related to office politics and Human Resources needs), is that you don’t need proof of legal work status or identification to begin your job as your own boss.
That means if you lose your personal identity, you don’t need to go through the hassle of getting your I.D. and social security card replacement organized before you get paid.
That said, having your EIN or SSI number is critical for quarterly and end-of-the-year tax purposes, and getting that together and organized with your local, state, and federal tax boards is essential, to say the least.
To start out on your own, either as a freelancer or entrepreneur, there are a few key steps to consider before making your first sale. These steps will help you avoid any headaches, missteps, and errors that may detract from your goal of being independent in your business.
To get started, first create a plan of the type of business you want and outline the steps to achieve that goal.
Legal Entity
Before you start your business, decide the type of legal entity you will be organizing. For example, if you plan on providing professional services and only work alone, then a sole proprietorship makes the most sense.
In essence, there are four different types of legal entities in business, and each has its own tax benefits and limitations:
Sole Proprietorship:
A sole proprietorship is owned by a single entity or person. This is a typical form for most freelancers, especially starting. Another option is a DBA or doing business, a legal entity that allows you multiple companies under one name.
Partnership:
The benefit to a partnership is that you each bring different strengths to the table, but when conflict arises, without proper organization ahead of time, resolving those differences may be difficult.
Limited Liability Company:
A limited liability company, or LLC, protects the individual assets of the ownership group while providing sole proprietorship control and taxation benefits.
Corporation:
A corporation is a legal entity that shields individuals and is recognized by the taxation board as a legal “person.” The benefit to this structure is that you can limit liabilities while adding some security to the principals involved.
Business Name
Once you decide the legal entity you’re going to operate, picking a business name and registering it as a recognized entity is the next step. A legally recognized, licensed business offers some legal protections and tax benefits in addition to giving you a recognizable brand.
Keep branding, domain names, and SEO in mind when deciding on your business name.
Delegate Tasks
It doesn’t matter if you’re a Fortune 500 corporation or operate a boutique freelance service; delegating tasks to an outside expert is an extraordinary suggestion. You can choose between various outsourced expertise, from finding a digital marketing agency to help market your products and services.
Or delegate all of your bookkeeping needs (this is critically important as the IRS is changing some of the third-party payment apps like PayPal and Venmo’s reporting requirements).
Another possibility is to utilize the advantages of a fulfillment center to handle your logistics, shipping, warehousing, and labor needs.
Conclusion
There are numerous benefits of working independently and on your own. Still, if you don’t spend time organizing your business ahead of time, you may be creating some unforced errors that are hard to overcome.
