The Basics of Self-Employment Financial Obligation

Entrepreneurs everywhere are going into business for themselves. If you are one of them, there are a few things you should know about being self-employed. Many people are confused by the terminology when it comes to filing their taxes and may end up categorizing themselves as something that they’re not. This can cause compliance problems or even cost you more money. Make sure that you are using the right terms for describing yourself so that you are able to better understand your obligations when it comes to taxes.

Sole Proprietor: A sole proprietorship is a type of business owned and run by an individual. The owner runs the business and is personally liable for all debts of the business. A sole proprietor has no partners and is subject to fewer regulations and taxes than a corporation. They simply file their taxes as “self employed”. A sole proprietorship can grow until the liability becomes too much for a single person to handle. This is why many sole proprietorships end up becoming registered as a Limited Liability Company (LLC) or a corporation.

Business Owner: A business owner is not the same as a sole proprietor. A sole proprietor owns and runs a business whereas a business owner simply provides the capital, maybe offers some expertise, but the business itself can run without the business owner’s input. Taxes are generally filed as “self employed” unless there is more than one person involved, which there usually is, and then LLC or corporation tax laws must be used.

Contractual Worker: Being a contract worker is much the same as being self employed. Remember that you are independent and your overhead will be significantly more than an employee. Contract workers are hired by corporations or other businesses because of their specific skills and the money that the employer will save on taxes, such as social security costs. Contract workers will pay the highest taxes, as much as 40%, so charge accordingly when you take a job.

Being self employed can have many freedoms and benefits, but it comes with a greater responsibility for one’s own fate. Being a diligent bookkeeper is important. Finding ways to track your income, expenses and possible tax liabilities will help you to be more successful. Finding ways to save money and claim expenses is essential. You may decide to work from a home office instead of renting office space. You can invest in video conferencing equipment which may replace your need to travel for meetings. You can utilize popular small business solutions, like using mobile concierge services for directory assistance instead of paying a hefty fee every time you need directions, flight information, or a restaurant recommendation.

Finding ways to save money and classify yourself in the most profitable position will help you to make being self employed the dream that you hoped it would be.

About the Author: Joe Smith is a Marketing Associate of OnCall, a leading online source of mobile concierge services that goes above and beyond traditional directory assistance. Get international personalized assistance with phone direcory information, turn by turn directions, movie times, stock quotes, sports scores, and more at http://www.askoncall.com.