Starting your own business comes with countless benefits. However, there are certain financial matters you simply can’t overlook. Here are 5 self-employment business tips that you’ll thank yourself for following.
At Market Street Partners we serve a diverse range of clients: Individuals and families, small and large businesses, newer and older companies. You name the type, and we work with them. This includes a healthy roster of self-employed clients.
And whenever I’m meeting with a new self-employed partner, or I’m just offering advice to a friend, I always encourage them to follow these 5 self-employment business tips.
Understand how self-employment taxes work
This is often one of the bigger shocks to the new-to-being-self-employed system. Back when you were a W-2 employee, you paid only your portion of payroll taxes, but now you have to pay those taxes as yourself and as the employer. It’s a double whammy.
You will need to make quarterly estimated payments based on your income, and — this is very important here — you'll want to make sure you submit those payments in a timely manner so you don't get hit with underpayment penalties at the end of the year.
Register in all the necessary places
Don’t think that just because you registered your business at either the federal or state level, that you’re up to speed. You’ll need to register it at the federal and state levels, as well as — more than likely — the local level.
Keep good records and clean accounts
This is the bane of many self-employed folks’ existence, but it is absolutely crucial that you keep good — no, great — records. This includes expense receipts, invoices, client payments...everything.
Again, everything.
Additionally, open a separate bank account. Use a credit card that offers cash back to earn rewards and help manage cash flow. But, don't be stupid and not pay the balance. If you've had trouble with credit card debt personally, I would encourage you to refrain from using them for your business.
Use tech to make business life easier
We live in an age of really helpful technology. So why not use it for your business? These three tools are a great start:
Get an accounting system that syncs to your bank account, like Xero or QuickBooks Online. This, of course, if you’re not in the market to hire an actual accountant.
Receipt Bank — Keeps good records of all your receipts.
MileIQ — If you drive a lot for work, track your business mileage so you can write it off later.
Take care of your future self
Make sure you are thinking about health insurance and retirement savings. It's easy to forget about those perks when your employer is taking care of them for you. Now, as a self-employed professional, you need to give extra consideration to those matters.
I hope these 5 self-employment business tips help. And, as usual, if you or someone you know would benefit from talking with a CPA, we’d be happy to hear from you, or them, at Market Street Partners.
Kyle Bryant, CPA, is a founding partner at Market Street Partners, PLLC, an accounting firm headquartered in Chattanooga, Tennessee. He can be reached at kyle.bryant@marketstreet.partners