Being self-employed grants you the freedom to do things at your own pace.
That being said, self-employment isn’t always rosy. It comes with a lot of responsibility.
For instance, you will be required to fill out multiple IRS forms like the W-9 form for contractors and freelancers who need to send their information to their clients to prepare a 1099-NEC form accurately.
Nonetheless, there is no need to be discouraged. Here are some tips to help you on your self-employment journey.
Always Be Ready for Tax Season
Tax season tends to be more intense for small business owners than regular individuals because they have to prepare taxes for themselves and their businesses, each of which has its own set of regulations.
For instance, the taxes for self-employed individuals are higher than those employed, who pay half of their 15.3%, and employer corporations pay the other half. In contrast, you pay the complete 15.3% tax as a self-employed person.
It’s also worth noting that as a self-employed person, you pay taxes quarterly rather than annually.
If you’re self-employed for the first time, you’ll need to estimate your earnings and base your payments on that. Then, during tax season, you send a finalised tax statement of your profits and, depending on the scenario, either have to pay more or receive a refund.
To be on the safer side, you could also consult a tax specialist or accountant for a better understanding.
Proper Time Management
Managing your time very well and separating work time from rest time is essential. It would help if you did not make yourself available 24 hours a day, seven days a week, to clients because your business is not on your phone.
Just like you would in a regular job, give yourself and your clients a timetable, and keep to it. Better still, get a work phone and number to be able to disconnect entirely after your work hours.
Never Use Your Personal Money or Credit
When starting a business, you’ll need to put some of your own money into it as seed money or initial investment. However, it is essential to ensure a difference between you and your business in terms of money. Never put corporate funds in your personal account and vice versa.
Creating a corporate savings account, checking account, and credit card is an excellent method to ensure there is never a need to mix up the monies. That way, you will be able to tell your money and company apart.
The need for the separation becomes more critical as the business gets bigger and large amounts of money start rolling in.
The first part of money management for self-employment is to set a salary for yourself. This is important to avoid overspending. More money is saved when there is a fixed percentage of the total income set as salary.
Big problems ensue for the business when you overspend. For instance, when you begin to overspend, you might be unable to pay the quarterly tax payments, and you don’t want to piss the IRS off.
If you have problems with money management, you could set aside a specific amount to get professional assistance from an accountant. Getting assistance will be considerably less expensive than making a mistake on your own.
Never Stop Marketing Yourself and Your Business
Always advertise your business. This is very key at the beginning of any business. To maintain a constant flow of new money, you always need to pitch your business to potential clients.
It may feel natural to take a break from your marketing efforts, especially if you are currently experiencing success. That is a terrible idea because you never know what is out there until you keep checking.