Party of One
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At some point, everyone thinks about going it alone as a freelancer or consultant. Some take the leap buoyed by their own self-confidence, while others are forced to due to layoff or downsizing. No matter what drives the decision, there’s much to consider. Here are five things to keep in mind if you’re contemplating this route.
It’s all you
When you freelance, the buck starts and stops with you. So get comfortable in the big – and only – chair of CEO, COO, CFO and so on. As a one-person business, you’ll find yourself making decisions about things far removed from your core skill set, so either bone up on things like local tax laws and marketing or connect with others who can advise you. The Internet is a valuable ally in the hunt for information and resources.
There are several ways to start
Should you freelance as a Doing Business As (DBA)? Form a Limited Liability Corporation (LLC)? How you set up your business is important, but it doesn’t have to be overwhelming or an impediment to making the leap. Startup Nation is a good source of information, and if you’re savvy enough you can even set up your business online. If not, a qualified accountant or specialist can help. The Small Business Administration (SBA) also provides a wealth of information that can help you set up and register your business.
Create a financial cushion
Few freelancers start with the assurance of steady work and pay. Create a financial cushion that will allow you to fund necessities like rent, food, medical insurance and transportation until you’re self-sufficient. If you have a significant other who can assist financially while you get up to speed, set a mutually acceptable time frame to fiscal independence. If you’ve been downsized, severance can help fill the gaps while you get up to speed. State laws vary, but some will allow you to start a business while collecting unemployment.
Don’t forget taxes
When you work for a company, federal and state taxes are automatically deducted from your paycheck, along with other deductions. When you work for yourself, you are responsible for paying these taxes on a quarterly basis. It takes discipline to send up to a third of your income to the government every three months, but getting into the habit early can minimize issues down the road.
Running your own show is exhilarating when the work is coming in and you’re invoicing regularly but exasperating when projects dry up or a client cuts back on business. These highs and lows are part of the ebb and flow of freelance work that generally even out over the long term. As long as you’re doing good work, don’t lose faith in yourself and your talents.
Going it alone is a fact of life for many in this post-Great Recession era. The more you know about the challenges you’ll face, the more prepared you will be.