Money-Smart Solopreneur. Laura D. Adams
Чтение книги онлайн.

Читать онлайн книгу Money-Smart Solopreneur - Laura D. Adams страница 5

Название: Money-Smart Solopreneur

Автор: Laura D. Adams

Издательство: Ingram

Жанр: Ценные бумаги, инвестиции

Серия:

isbn: 9781613084335

isbn:

СКАЧАТЬ the same weight. If companies in your industry are used to working with freelancers but you call yourself a founder, that could mistakenly send the message that you’re only focused on innovation or building a large company and are not available to do their work.

      So call yourself whatever your clients are accustomed to, which will ultimately give you a leg up. Use the terminology they’ll understand and value.

      You might also wonder if what you call yourself affects your financial issues, such as taxes. For the most part, it doesn’t.

      The IRS classifies your earned income in two ways:

      1. You work for someone who pays you.

      2. You own a business.

      The first type is known as W-2 income, which you receive from an employer. The second is any trade or activity you do to make a profit. In other words, you can be a W-2 worker, you can run a business, or you can do both at the same time. It doesn’t matter what you call yourself or your business—the income it generates is taxed the same by the IRS.

      We’ll discuss paying taxes on your business income more in Chapter 12. You’ll learn the various taxes that every solopreneur must pay, which tax forms to use, and how to comply with IRS rules so you stay out of trouble.

      The IRS requires employers to report wages paid to employees on Form W-2, Wage and Tax Statement, each year. Employers must send workers a copy of their W-2 by the end of January for income paid during the prior tax year.

      If you’ve had a job, you had to complete Form W-4, Employee’s Withholding Certificate, before getting your first paycheck. The W-4 indicates to your employer how much money to withhold from your paychecks for federal taxes. Depending on where you live, you may also have forms to complete for state and local tax withholding.

      Accurately completing a W-4 is important so you have the right amount of taxes taken out of your paycheck throughout the year. Having too little withheld means you could have a big balance due at tax time. Having too much withheld prevents you from having more money in the bank throughout the year. When you receive a tax refund, that means you overpaid taxes during the prior year, and the IRS is giving back what they owe you.

      When you earn business income, you don’t receive a W-2, because you don’t have an employer automatically withholding tax from paychecks they give you. However, you’re still responsible for paying the same taxes that employees pay.

      Let’s break down some common terms for business owners. Getting familiar with them will help you know how to identify yourself and the solo work you’re doing or plan to do.

      Business Professional

      This is someone whose business activity depends on specialized training or advanced skills, such as a doctor, attorney, accountant, or financial advisor. They may have a local office that’s open to the public and work alone or with hired employees.

      Example: Trudy is a licensed real estate professional who works with residential buyers and sellers. She’s affiliated with a local brokerage, where she works and meets clients. Her broker splits commissions with her 50-50 and offers a variety of services, such as training and an office assistant.

      Consultant

      This is someone who typically was once an employee and has career skills or advanced training that’s valuable to other businesses or individuals. They may work alone or have employees and do consulting full time or on the side in addition to their day job.

      Example: Diane used to work as a COO for a Fortune 500 company. Now she’s a performance coach for corporate executives who want to improve their leadership skills. Diane conducts calls with her clients from home or travels to their offices for meetings. She works alone and bills clients a monthly retainer to consult with them on an ongoing basis.

      Entrepreneur

      This is someone who creates and manages a business. The term is often used to describe someone who takes on risk or has an innovative idea. However, it’s an umbrella term that can be used for anyone who is in business, with or without employees.

      Example: Bill used to live in Ecuador and saw the potential for a hostel and restaurant that would cater to American tourists. He and a family member invested funds to open the Magic Café in downtown Quito. Bill manages a team of workers from home and makes quarterly trips to Quito to meet with his staff.

      Founder

      This is someone who has a business idea and establishes a company. They take on risk and typically recruit a team to help execute their idea. A founder splits the original ownership in some way and may bring in outside investors to build the enterprise.

      Example: Jane used to be a sales representative and buyer for a floor covering distributor. She saw a need in the marketplace for environmentally friendly flooring products and decided to found her own company, America Green Floors. She brought in three partners to invest in her startup and take leadership roles. Each partner has a 25 percent interest in the company’s profit. Jane manages all aspects of the company’s product procurement from her home office.

      Freelancer

      This is someone who often works alone in a creative field, such as writers, designers, software developers, and producers. A freelancer typically provides services to businesses without a long-term commitment to any one client, and usually seeks out assignments and clients that give them maximum work flexibility.

      Example: John is a freelance editor and writer who creates blog posts for a variety of website clients in the automotive space. He refers to himself as a self-employed freelancer, which sends the message that he works on multiple projects simultaneously. John primarily works from home but also uses a local co-working space for networking opportunities. He takes a month off each year to travel and visit family.

      Independent Contractor (IC)

      This is someone who may work alone or with hired employees to provide services for one or more businesses. An IC is similar to a freelancer but tends to have longer-term commitments and fewer clients.

      Example: James is a lighting technician who rigs stage sets for theaters and entertainment venues. He typically contracts to work with a particular company for their entire production season and bills by the hour for his services.

      On-Demand Worker

      This is someone who typically works as an IC for an on-demand company or app, such as Uber, Instacart, or TaskRabbit. They fulfill consumer demand for products and services through networks created by technology.

      These gig-based businesses are electronic middlemen, taking a cut of the price to connect customers with providers. They’re also known as the creators of the “sharing economy,” because they share access to goods and services through online platforms.

      Example: Dorie is a stay-at-home mom in Denver who drives for various ride-sharing services, such as Uber and Lyft. She works for a few hours in the evening after her husband gets home from work. Dorie enjoys getting out of the house, meeting people, СКАЧАТЬ