There are various definitions of “self-employed” that differ slightly.
1. What Is Self-Employment
A self-employed person is an individual who earns a living by working for themselves.
During the pandemic, self-employed individuals were offered benefits such as the Paycheck Protection Program for businesses that agree to keep or re-hire employees along with Paid Sick Leave and Family Leave Tax Credits.
Being self-employed means running your own business, but that business can be set up in a variety of ways such as sole proprietorship, partners and limited liability companies.
2. Pros and Cons of Self Employment
Being your own boss comes with all sorts of perks such as setting your work hours, choosing the people you work with and the best part: you get to do something you love. But, getting a business on its feet will require long hours along with having to do many things yourself and some of them you won’t exactly relish. You will gain flexibility and freedom, but you need to consider what you are giving away in return.
Although you don’t have to work 9 to 5, you will often work much more than 40 hours a week and it’ll be difficult to log off even when you go to bed. Also, there may not be anyone to cover for you if you are sick or need to take a few days off. Your income won’t be stable for a while as there will be period of low activity, not to mention it takes time to get customers and establish a loyal client base. Conversely, unless you are extremely self-disciplined and family members very cooperative, your work hours may be subject to frequent interruptions or distractions. If you are working from home, you also need to be ready for an increase in your utility bills.
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3. Self-Employment Tips
Save money wherever you can
Lower your utility bills by comparing Connecticut electric suppliers to find the cheapest rate.
Budget
You need to know what your expenses are. Expense trackers like Hurdlr show you exactly how much you’re spending and where.
Manage cash flow
With a smaller number of clients, you can track invoices in Excel without investing in software. PayPal is just one of the payment processors are the easiest way to streamline payments from multiple sources.
Plan
If your business is predictable, you will know when the slow seasons and the busy seasons will be ahead of time so you can prepare yourself.
Taxes
You should budget for and pay taxes all year. As long as you earned $400 or more, you need to file a return. This applies both if you’re solely self-employed or you add a side business to your full-time job. Working on your taxes also involves finding out which deductions you qualify for. For example, you can deduct for your home office expense if you use it as the headquarters of your business along with partial deductions on your internet and phone bills. If you have employees, you can also deduct their paychecks. The general rule of thumb is that a business expense must be ordinary and necessary for your work.
Takeaway
Vague thoughts of making lots of money quickly, choosing your own hours or dissatisfaction with your bosses are not a firm basis for building a successful business. On the other hand, if you are willing to work long hours, have a strong foundation of knowledge and experience in the field you’re considering, and are self-disciplined and committed, self-employment can be the job of your dreams. Being your own boss can be great but you need to be ready to be your own seller, marketer, human resources manager, office manager, and accountant at the same time. The more time and effort you invest in building your business, the quicker the hard stuff like tax will become easier, allowing you to concentrate on value-adding activities such as building your brand.
