You can find success and financial stability as an independent business contractor. During strong economic times there is usually an overflow of work available for independent contractors. In a sluggish economy companies are downsizing, unable to keep up with the financial strain of providing benefits and other financial securities to employees. Businesses begin looking for individuals to secure independent business contracts who can instantly fill that void.
Being an independent business contractor is basically the same as starting your own small business. You are completely responsible for working out your own plans to create financial security. The mistake many independent business contractors make is focusing so hard on survival that they fail to plan for the future. Prepare for life as a small business independent contractor.
1. Separate your personal and independent business contractor expenses.
2. Get all of the tax breaks you are entitled to as a business contractor.
3. Handle insurance issues.
4. Plan for retirement.
Keep your independent contractor information and expenses separate from personal expensesIf you don't keep your business and personal expenses separate, you will create a huge headache come tax time. If you are audited and have been routinely dipping into your business account to cover personal expenses, the IRS may question the legitimacy of your business.
Use your independent contractor status to take advantage of certain tax breaksAs an independent contractor, you may be eligible for several tax deductions. If you work from home and have a dedicated space for your office, you can deduct your home office as a business expense. You can even deduct your monthly phone, Internet and utility services.
IRS Form Schedule C and Schedule SE to take care of self-employment taxes. Even though it's not necessary, you should also consider incorporating your business or setting up an LLC to protect your personal assets from any legal action against you.
Secure adequate insuranceBusiness contractors are not eligible for many of the benefits employees receive like health, liability or disability insurance. You will need to provide those things yourself and the rates for individual policies can be quite high. Many independent contractor agreements, or the independent contractor form you may be asked to sign, clearly states that you will receive no typical employee benefits like insurance coverage while working for them.
Independent business contractors must take action and plan for retirementThis is another thing your independent contractor agreements or independent contractor form will not provide. Just because you won't receive a 401(k) doesn't mean you can't plan for your own retirement. You can investigate setting up a Single Employee Pension (SEP) IRA plan or a 401(k) plan designed for self-employed individuals on your own.
- Enroll in discount card programs like Ameriplan to save more money on health exams, dental procedures, eye glasses and contact lenses as a complement to your health insurance policy.