Are you considering striking out and becoming an independent contractor? This is how to become your own boss.
What is an independent contractor?
An independent contractor is someone who is self-employed. This means that you get hired by companies who need your skills.
You’re not employed at any company, which gives you the freedom to decide how you do your work, which clients you work with, and where you do your work.
Independent contractor versus employee
A copywriter that’s employed at a company has to be at the office, work set working hours—for example nine-to-five—and provide the copy the company wants.
A copywriter who is an independent contractor can work from wherever they choose, work odd hours, and choose which clients to work with, which also means they get to choose what type of copy they get to write.
Of course, as an independent contractor you have to adhere to the terms in the contract you sign with the client.
Perks of being an independent contractor
There are many perks to being an independent contractor:
- The opportunity to do what you love, and if you want to try something new and expand your skillset, you free to do that
- The flexibility to work where you want, whether that’s from home, in another country, or on the road
- The ability to set your own working hours, so long as you deliver your work on time
- The freedom to work with the clients you want
- The feeling of knowing you’ve accomplished something on your own
Those are just the obvious ones, we’re sure you can think of many more!
See also: 5 benefits of working as an independent contractor
Downsides to being an independent contractor
There are, however, some downsides to being an independent contractor:
- Less stability: As an independent contractor, you’re not always guaranteed a steady income. It depends on your marketing, sales, and networking efforts—as well as on how the market’s doing.
- More administrative work: As an independent contractor, you have to take care of the admin yourself, including accounting, invoicing, and collecting sales tax. Luckily, an accountant and free invoicing software, can help you off to a great start!
- You have to bring in the business yourself: You have to promote your expertise, network with new clients, and build great relationships with customers.
How to become an independent contractor
Once you’ve figured out how you’re going to be earning money by playing to your strengths, these are the next steps to becoming an independent contractor.
Step 1. Decide what type of business to set up
A sole proprietor is the simplest kind of business structure. When you run a sole proprietorship, you and your business are considered the same legal entity. While this type of business is easier and less costly to set up, you’re personally liable for all your business debts.
A limited liability company is a more complicated kind of business to set up, and you usually need a certain amount of money to get set up. However, you and the business are considered separate entities, which is a bonus.
Depending on what country you operate in, there can be other business structures to choose from as well.
Step 2. Register your business
Once you know what type of business you’re going to set up, you should register your business with a fitting and memorable name. There will be requirements for what kind of business name you can choose, for example that there are no other businesses registered under the same name in your area.
Once your business is registered, you’ll usually get some form of organization or tax number to identify your business. This number should be included in your contracts, invoices, and other official business documents.
Step 3. Figure out taxes
You should also figure out if you have to register for consumption tax.
Consumption tax is the term for tax that’s added on your invoices. Depending on what country you’re operating in, this can be called VAT, GST, or simply sales tax.
You usually have to register for consumption tax when you’re earning above a certain threshold. The threshold varies from country to country.
If you’re registered for consumption tax, you should add tax on your invoices.
Read more about consumption tax.
Step 4. Get the required licenses and permits
Depending on what type of business you run, you might need to get one or more licenses and permits. For example, you might require specific licenses to work in the finance industry, or to work in the healthcare industry.
You should check local and national regulations to see what applies to you.
Step 4. Don’t forget insurance
Get the right insurance for your business, such as general liability insurance, professional liability insurance, and insurance for your equipment, such as a company car or a laptop.
Step 5. Sort out your finances
Finally, you should set up a separate bank account for your business. If you run an LLC, this is usually a requirement, but even if it isn’t for your type of business, you should set one up anyway. It makes it a lot easier to handle your finances, figure out how much you’re spending on running your business, and ensure that you’re entering all transactions in your accounting software.
You should also find a good accounting software, or hire an accountant to help you with your bookkeeping and taxes.
Finally, you need to get paid, so an invoicing software is indispensable.
See also: Tips and templates for invoicing as a contractor
There might be additional or different requirements depending on what country you operate in.
Once your business is set up correctly, you’re all set to start working as an independent contractor.
