Starting a self-employed business can be daunting. This guide covers everything from conducting market research to setting up accounting and other systems – so you can start your journey with confidence.
Legal Structure and Registration
When starting a self-employed business, you need to choose how you will legally structure and register your company. Here are the main options:
- Sole Proprietorship: A sole proprietorship is the simplest business structure. You automatically become a sole proprietor if you start working for yourself and don’t formally register a business entity. While simple, being a sole proprietor means you are personally liable for all debts and legal liabilities related to the business.
Steps to Get Started
To start a self-employed business, you can follow these steps:
- Invest in systems that will work for you, such as how you will price your products and services and how you will bill your clients and customers.
- Hire self-employed workers if you have a network of contacts and partners.
- Invest in quality equipment and start-up supplies (i.e., office supplies like paper, pens, markers, etc.).
- Register the business to make it legal and set up the finances properly.
- Market your business to get clients and customers.
- Develop a complete business plan with the essential steps to build an effective one, including determining your business idea and documenting photos and videos of your workplace.
- Register with tax authorities and get any required insurance plans for your type of business.
Choosing a Business Idea
When selecting a business idea, choose one that requires low initial expenditure so financial risks are minimized. Some examples are:
- Online selling
- Web design services
- Content writing
- Bookkeeping
- Photography
Financial and Tax Considerations
When starting out, it’s important to understand tax requirements. Anything earned above $400 is considered taxable income. If you are a sole proprietor:
- You must file a personal tax return and a separate form reporting your business profit or loss.
- Review financial statements to accurately track income and expenses.
If you have employees:
- You must pay various federal, state, and local taxes.
- As an employer, you are personally liable if you fail to pay taxes withheld from employees’ paychecks.
- Consider getting help from a tax professional to ensure you fully comply with tax requirements.
Be prepared that self-employed income may be irregular, so it’s wise to have backup funds. With the right mindset, starting a self-employed business can be fulfilling and financially rewarding over time.