You’re fed-up with your existing job, and you’re ready to do your own thing.
You can’t find an “employment position” – with all the guaranteed health and vacation benefits – but you’d still like to do a day’s work, and earn a day’s pay.
Frustrations like these motivate people to work independently, taking-on individual projects and completing them on a case-by-case basis.
But as noble as the ambition is, you’d better have your business straight with city, county, state and federal government agencies before you try to do business with anybody else.
“If you get it wrong, you’re probably going to be hit with some surprise taxes” says Alex Kincaid, a former prosecutor who now practices business law. “And the company you are doing work for might get hit with some surprises as well.”
Kincaid joined me on “Austin Hill’s BigWorld of SmallBusiness” and noted that, as for the federal government, the Internal Revenue Service will scrutinize your independent contractor dealings by examining you and the company you’re working for are behaving with one another.
“The IRS will want to know who controls the relationship” she says. “Is it you, the freelance contract worker, or is it the company you’re working for? Make sure the IRS will agree that you are truly working as an independent contractor before you jump in.”
Kincaid also recommends the following:
- Make sure you have a written contract with your client, and make sure it covers everything applicable to your line of work – intellectual property rights, expenses, making sure you’ll get paid, how you will handle conflicts of interest, and so forth.
- Make sure you are fully licensed, permitted, bonded, and insured to do your type of work
- If necessary, set up a business entity – an LLC, a “DBA,” etc…
- Perhaps most importantly – have a team of experts available to you; an accountant, an attorney, a financial advisor, a banker, and an insurance agent.