The following is a guest blog post by Eve Epstein, CEO and Co-Founder of SoleVenture.
Congratulations! You are about to embark on the adventure of owning your own business. This will likely be the most exciting and stressful time of your career. One of the many reasons freelance life can be stressful is the high failure rate of new businesses. To beat the odds, you need more than just a great idea and product-market fit. While successful freelancers and small business owners enjoy the flexibility of freelance life, they must still plan for the unknown. Before you make the leap, it’s important to know how to set yourself and your business up for success. Here are my 3 steps to help you learn how to be a successful business owner.
Reid Hoffman, co-founder of LinkedIn and partner at Greylock, often says,
“Starting a company is like throwing yourself off the cliff and assembling an airplane on the way down.”
From inception, you need to be prepared with a plan that will enable your business to endure frequent pivots and turbulence. Freelancers are the most agile small business owners, as they have to adapt to unpredictable pay cycles, learn remote working technology, broaden their client base, and change how they work to meet their customers’ needs.
It’s undeniably crucial for freelancers and small business owners to be ready for even the most unpredictable developments. An excellent example during the pandemic is how freelancers and small business owners have adapted in-person industries to continue thriving despite the world seemingly being put on hold. New business models include personal training via YouTube and Zoom, virtual photo shoots, and online music lessons and livestream concerts. These stories are only made possible because successful freelancers are always prepared for change, even when it’s least expected.
Businesses of all sizes need to prepare for economic uncertainty. The smaller your business, the more you need to prepare for that inevitability. And you’re ready! As we watch large corporations and governments struggle to adjust, we’re reminded that small business owners aren’t mired in the red tape of bureaucracy. Scarcity breeds creativity so embrace the pivot!
There is almost nothing better than making money while doing something you love. Don’t let your vocation keep you from running your business properly. Whether you’re in need of a loan, facing a lawsuit, or just trying to get through tax season, not having a formal business can be a headache that’s easily avoidable. Formalizing your business can save your business a lot of time, money, and stress in the long run. There are several corporate structures suitable for freelancers to choose from. Typically, and depending on the state of incorporation, a Limited Liability Company (LLC) or S Corporation (S-Corp) is the most appropriate.
There are multiple reasons to formalize your business, but the most significant is to limit your legal and tax risks. A legal entity will generally shield your personal assets if you get sued. The most common lawsuits faced by freelancers range from negligence and defamation to confidentiality and data breaches. Establishing a corporate structure can protect your business from crumbling underneath them.
The second most important reason to formalize your business that often catches new freelancers by surprise is your tax liability. As a freelancer, you’re responsible for self-employment taxes to pay for Social Security and Medicare payroll taxes. You should set aside roughly 30% of your net income to cover your yearly tax obligations. Having a business entity can limit your personal liability and enable you to gain the tax benefits that an LLC or S-Corp can provide.
Entity filings only take a few minutes. Services like SoleVenture make incorporations and tax savings simple and inexpensive.
Have you ever heard of “job lock”? That’s when you feel stuck at a job out of fear of losing your health insurance and benefits. For over a decade, economists have discussed how this phenomenon has stifled entrepreneurship. The idea that one has to choose between staying at a job they hate and affordable, quality health insurance is false.
Individual insurance can be cost prohibitive – even on the ACA. Luckily, though the options for individuals have expanded beyond traditional insurance. Depending on your income and health needs, there are alternatives that can offer greater coverage at a lower cost. If traditional health insurance is the right solution for you, there are subsidies and different plan options if you are open to changing your network.
Finding the right solutions can feel intimidating, but it doesn’t have to be. That’s why SoleVenture is committed to helping our members access a suite of high-quality benefits that fit their budgets and their needs.
You are part of the future of work. Soon, more than half the US workforce will be freelancing full or part-time. Being your own boss is empowering, not scary, if you have the right tools to support you. If you prepare to adapt, set up your business properly, and keep a safety net, you will be able to succeed.