Money-Smart Solopreneur. Laura D. Adams

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      If you’re like me and mostly work from home, you rarely have to set an alarm clock to get up early and fight traffic. You don’t have to commute or work in a cubicle or a noisy, open-plan office. Best of all, you can opt out of time-sucking office politics, gossip, and mandatory celebrations.

      Unless you see clients frequently, you can also save a bundle on office attire. Most of my days are spent in activewear or casual clothing unless I’m doing video work at home or in a studio. In general, being self-employed gives you much more freedom than working for someone else.

      8. You Can Claim Money-Saving Tax Deductions

      You can claim a variety of business tax deductions, whether you’re a solopreneur, a part-time freelancer, or the owner of a large corporation. These deductions help entrepreneurs manage the costs of running a business.

      The IRS says that to be deductible, an expense must be both ordinary and necessary for your trade or business. Some common deductions for small businesses and solopreneurs include office supplies, marketing, equipment, and professional fees.

      In general, you can’t deduct your personal or living expenses from business income. However, if you have costs that are both personal and business, such as a vacation combined with an industry conference in Hawaii, you can deduct the portion related to business.

      Additionally, if you use part of your home for your business, you may be allowed to deduct a variety of expenses by claiming the home office tax deduction. If you qualify, this is a valuable tax break that you should be sure to take advantage of. You’ll learn more about typical business write-offs in Chapter 13 and the tax benefits of having a home office in Chapter 14.

The Cons of Being a Solopreneur

      Working for yourself clearly comes with many advantages, but you shouldn’t discount the disadvantages. Only you can decide if the pros of being a solopreneur outweigh these eight main cons.

      1. You Don’t Have a Regular Paycheck

      Being your own boss means that you have to put in some hard work without the guarantee of a steady paycheck. As an employee, you get paid regardless of the state of the economy or your company’s monthly profitability.

      While you could make more with your own company than with a W-2 job, it could take time to build revenue. Even then, your income could vary significantly each month or each year. Most solopreneurs have up and down periods based on multiple factors, such as the economy, seasonal changes, and your efforts and skill level.

      Independent workers have to pay closer attention to their finances than most salaried workers. If you can start a solo venture on the side while keeping your day job, that’s a great way to keep your income stream flowing. It also gives you room to experiment with your business idea and test the market for potential customers.

      2. You Aren’t Legally Protected

      There are a variety of federal and state laws that protect employees, such as receiving a minimum wage, getting overtime pay, and not being subjected to harassment or discrimination. Employers over a certain size must offer leave to care for a new child, aging parents, or family emergencies, as well as for military service and jury duty. As a solopreneur, you don’t qualify for any of these worker protection laws.

      3. You Have Tax Requirements

      Many entrepreneurs are caught off-guard by their tax requirements when starting a new business. When you work for someone else, your employer withholds your federal, state (where applicable), Social Security, and Medicare taxes from your paycheck. But when you’re self-employed, you generally must estimate these taxes and pay them yourself every quarter.

      After you’ve been self-employed for a while, you’ll know a lot more about taxes than your friends who only have to fill out a W-4 when they start a new job. While dealing with taxes can be a hassle, especially when you’re getting started, you can always use tax software or hire a professional. And after you’ve read this book, you’ll know exactly how to pay your taxes and stay out of trouble. In Chapter 10, I’ll recommend some of my favorite tools that will help you stay on top of your taxes.

      4. You Must Purchase Your Own Insurance

      In addition to taxes, one of the most significant expenses you’ll probably have to pay as a solopreneur is insurance. While workplace benefits typically aren’t free for employees, many companies offer a variety of products—such as health, dental, vision, life, disability, accident, and hospital insurance—at competitive, and often subsidized, group rates. Unless you have a spouse or partner who can add you to their health insurance, getting individual coverage will likely cost much more.

      When you leave an employer with 20 or more employees, you typically can maintain existing health, dental, and vision coverages for up to 18 months through a federal law called the Consolidated Omnibus Budget Reconciliation Act (COBRA). However, your employer won’t be subsidizing you anymore, so the premiums could be significantly higher.

      But COBRA doesn’t apply to other types of insurance, such as life or disability, so you generally lose those coverages by the end of the month you leave an employer. Maintaining a day job while you build your business on the side can allow you to hold on to valuable benefits indefinitely or give you a smoother transition until you can afford to purchase benefits on your own. We’ll cover much more about creating your own benefits package as a solopreneur in Part V.

      5. You Must Plan for Your Own Retirement

      Being your own boss means you’ll have to plan for your retirement. You won’t have a workplace retirement account—such as a 401(k), 403(b), or 457 plan—or enjoy the additional free matching funds many employers offer. There won’t be an automatic payroll deduction that seamlessly moves money into your investments.

      Fortunately, there are great retirement accounts designed for the self-employed, such as a solo 401(k) and a SEP-IRA. They give you the same tax advantages you’d get from an employer’s plan. But you have to take the initiative to open an account, choose investments, and make regular contributions to fund your future retirement. In Chapter 18, we’ll cover the best ways to create a self-employed retirement plan.

      6. You Have Administrative Requirements

      Whether it’s dealing with a retirement account, business regulations, records retention, invoicing, or collections, being a solopreneur means having many administrative requirements. You must be organized enough to complete time-sensitive tasks or delegate them effectively.

      If you don’t maintain a sound record-keeping system for receipts, payments, and employee data, your tax returns probably won’t be correct. If you fail to maintain accurate records and you’re audited by federal or state authorities, you could end up owing significant back taxes and penalties. We’ll cover how to keep records like a pro in Chapter 15.

      7. You Must Make Complex Decisions

      Being self-employed is incredibly rewarding, but it can be much less glamorous than you think. You must make difficult and often complex decisions, such as whether to offer a new service, ask for a retainer payment, or join forces with a new partner, and you may not always have as much data as you’d like before you do. СКАЧАТЬ