By Kevin Theissen
While many of us have thought about starting our own businesses, not all of us actually do. Why not make 2017 the year you take the dream out of your head and put it into practice? Yes, you will hear many reasons not to go into your own business like it is too risky, you will fail and go into debt, and a thousand other reasons. However, you also can’t reap the benefits unless you actually start your business.
The benefits are numerous. You could gain independence, flexibility and personal fulfillment in providing a useful product or service to your community. You could create jobs for others and significantly increase your financial situation. Although not all self-employed people become wealthy, it is one of the best ways to enhance your financial position and overall lifestyle.
Small businesses in the United States employed 56.8 million people or 48 percent of the private workforce in 2013 (the latest numbers available), according to the U.S. Small Business Administration. That’s pretty remarkable when you realize that 34 percent of small businesses employ fewer than 100 people.
If you’re thinking of starting a business, the AARP suggests you carefully consider legal and tax issues, including:
Business structure. Will you be a sole proprietor? Or will you establish a corporation, limited liability company, or partnership? The structure of your business will affect taxes, liability, and other matters.
Licensing. Many cities and states require a new business to register, apply for a business license, and pay an annual fee to do business.
Tax payments. Talk with a tax professional to determine whether you need to make quarterly tax payments. Also, be aware that people who work for themselves pay both the employer and employee portions of Social Security and Medicare taxes. You’ll want to factor that in when deciding pricing for products or services.
Recordkeeping. In many cases, your business will need its own bank account and credit cards. You’ll also need a system for tracking business receipts and expenditures. Investing in business accounting software can make recordkeeping a lot easier.
Contracts. Contracts specify deadlines, terms of payment, and other particulars, ensuring everyone shares the same understanding and expectations. If your client asks you to sign a contract or asks you to provide a contract, consult with your attorney.
Liability insurance. Professional liability insurance protects you if you’re ever sued, and some clients may require you to have coverage. Talk with your financial or insurance professional to determine what type of coverage you may need.
Of course, when you work for yourself, it’s critical to set money aside for retirement. Contact an independent Registered Investment Advisor to discuss options that might work for you.
Kevin Theissen is principal and financial advisor at Skygate Financial Group, LLC., located on Main Street in Ludlow, Vt. He can be reached at [email protected]