For Self Employed
Many if not most people believe that being self-employed or a sole proprietor means that no extra administrative work or planning is required except for preparing a tax return at the end of the year and reporting income. In reality, being self-employed is a micro version of managing your own business, and you must be particularly careful in managing your own accounting and bookkeeping practices, paying special attention to the following:
- Check with the state to see if registration of a trade name is required.
- Consider registering as an LLC for liability protection, which may or may not add extra filings but should not change the way you file your taxes.
- Consider buying general liability insurance. By neglecting to insure yourself, you are risking your livelihood, your ability to earn money, and your personal assets. Click here if you need a quote.
- Employ a cloud-based bookkeeping solution to track your expenses. This will eventually help you organize your records and save a lot of time and money on taxes. Your accountant would likely charge you less for tax preparation as well. ExploreXero and click here for discounted prices on this product.
- Review your expenses carefully to make sure all strategies are employed, including deducting a home office, accounting for travel expenses, hiring your children, making retirement plan contributions, and more.
- Stay in touch with a CPA to know when is the right time for converting to an S Corporation. Typically, once your annual net income exceeds $30,000, savings from operating as an S corporation as opposed to a sole proprietor is substantial. Click here if you would like to run it by a CPA.
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