It is getting easier to start your own business given rapid technological advances, increased ability to buy your health insurance, ability to outsource your needs, growth in the sharing economy, and innovative financing choices.
There are significant advantages to starting your own business: being your own boss and having control, flexibility, working as hard as you want, and owning your successes.
The disadvantages are risks associated with potentially high upfront costs, a poor business plan, lack of provided benefits, taking care of taxes, raising money, need for support, and the difficulties of handling the business.
What Does Self-Employment Mean These Days?
Generally, it means working for oneself as a freelancer, independent contractor, or business owner rather than getting wages (and taxes withheld) from an employer.
Having the ability to set your own goals, make your own decisions, and carry them out can be exhilarating. You can work remotely from home in sweatpants, making the hours you want and be your own boss.
Many companies offer flex-time as a perk, and that is increasing due to the pandemic. Having your own business allows you to have maximum flexibility over your schedule and how you work. As long you have access to the internet, you can work from anywhere.
3. Higher Earnings Potential
Self-employed people need to make sure to do their proper accounting of revenues and costs. There are software packages for accounting, budgeting, expense tracker, billing, invoicing system and tax preparation.
You must file taxes annually and pay estimated taxes quarterly and pay the self-employment tax.
As a self-employed owner, you can deduct certain expenses. However, the recent 2017 Tax Cuts and Jobs Act eliminated some of those deductions.
Retirement Planning
As you are accountable for doing your taxes, you are also responsible for your retirement planning. You won’t be entitled to an employer match as you are now self-employed. On the positive side, you may have the ability to contribute higher tax-deferred dollars to your plan.
Drawbacks of Being Self-Employed
1. Sole Proprietor (SP)
2. You Are On Your Own
3. Unpredictable Income
4. Raising Money For Your Business
5. No More Company Benefits
Essential Characteristics For A Self-Employed Person:
– Self-starter
– Not A 9-5 person
– Lifelong learner
– Determined and have been obsessively planning
– Have many skills, including communicating with others and problem-solving
– Need good financial habits, financially prepared and disciplined
– Strong work ethic and ethical
– Can be patient