Saved by the inbox, again! As I noted a few posts back, I really didn't have a lot of stuff "in the hopper" for this week, but was contacted by somebody at BrainTrack.com about having one of their writers do a guest post ... which (especially for "industry Wednesdays") I always welcome. This week we have Ellen Berry, who writes on a range of subjects for their site, discussing the option for self-employment (which, with every new "not a job" freelance assignment I get, looks to be the direction I'm heading, if by default!).
by Ellen Berry
Strategic Self-employment for Career Stability
If you listen to the hype, you might think there are two kinds of people out there: entrepreneurs and career employees. Entrepreneurs are seen as risk takers while employees are thought to prefer stability. But don't be fooled into thinking in these black-and-white terms when it comes to your career. With some creative strategizing, the right combination of employment types can serve you well.
Consider Yourself Self-employed First, Employed by Others Second
You may have built up being your own boss as "the big plunge" or a "someday" dream, imagining a drastic change in lifestyle with long-sought freedom and unlimited income potential. Perhaps you are waiting for a big idea or the right partner to come along.
In actuality, anyone who gets themselves to work each day and does their best to make sure their bills are paid is acting as their own boss. There isn't much difference between working for an employer or a client. It's mostly about mindset.
Just knowing that you have your own side business (even if it's simply doing a few hours of consulting for friends over lunch each month) can give you a sense of security. Although you might be between jobs, you are still employed. If you have to take a job that doesn't really further your career in obvious ways, being your own boss in your own mind can help give you the perspective you need to not feel trapped or sidelined.
Of course, you may want more than that. You may want to feel more in control of how much money you make, how your success is measured, and what you do with your time. But even natural born entrepreneurs are bound to keeping their clients or investors happy. So if you keep your options open for taking on clients or employment as the opportunity arises, you get the best of both worlds.
One key advantage to approaching your work from a self-employment perspective is being able to show a steady timeline of employment rather than gaps of unemployment on your resume. The first day after a job ends, you can simply restart your consulting work or other business until you find more full-time employment.
Many people are self-employed while they're going to work for an employer every day. So what's stopping you from acting in your own self interest by thinking more like an entrepreneur?
Consider the major differences between being self-employed and employed by someone else:
Business Entity: Owning your own business is surprisingly easy - just take a look at your state's small business website. Sole proprietor is the simplest business entity to set up (your Social Security Number becomes your Tax ID). You may not need to do anything to become a sole proprietor except decide that you are, pick a name for your business, and choose a start date. Or you may need to fill out a simple form and pay a small fee.
Setting: By law, employers can dictate the hours and location that you work (whether it's on site, telecommuting or in the field), but when you're working as a consultant, clients cannot legally tell you what specific hours to work or insist that you work on site. (Note: Be sure to review the laws in your state regarding the legality of any work or business situation.)
Tax Status: Food for thought - if you were to establish yourself as a career adviser, and start a blog that evaluates job hunting sites or follows your job search, you'd still working even when you're job hunting. Therefore, you'd most likely be able to write off some of your job hunting expenses.
Sole proprietorship can bring with it other significant tax savings on costs from:
- Meals related to developing business relationships
- Gas for work-related tasks
- Software, office supplies, and clothing purchased for work
- Tuition, training, and books
- Computers and prepaid cell phones used only for work
- Utilities and other costs related to work space
- Creating and maintaining a website or blog
- Medical expenses from doctor appointments, hospitalizations, and prescriptions
(Note: Always verify potential tax deductions with a reputable Certified Public Accountant.)
Benefits: Personal benefits are similar to employer benefits and typically include health insurance, flexible spending, and 401k. They can be obtained through organizations like Freelancer's Union and MavenLink (websites like the Small Business Health Insurance Network can help you choose a provider) or through membership in some professional associations.
In some states, you need only be a company of one to be able to directly purchase a group insurance benefit plan. In other states, a group is considered a company of two. (You'll need to maintain a simple payroll in order to manage group benefits.) Professional Employer Organizations (PEO) that specialize in small businesses will handle your benefits for you, along with payroll and other basic HR responsibilities.
More and more states are offering insurance to those who qualify, in addition to the Federal health care plan for the uninsured. Private insurance companies offer different tiers of coverage based on how often you seek medical care, and Health Savings Accounts use pre-tax dollars to help pay medical costs.
Simple Starting Steps
Taking these steps may be just enough to begin weaning you off of a subtle dependence on employers, or the beginning of a whole new career path in entrepreneurship - either way, your future rests more with you.
- Pick a simple company concept (something that you're familiar with and interested in), a business name, and a start date (even if it's only for tax savings or a change in mindset).
- Write up a short description of your business plan - just a couple paragraphs to capture your initial thoughts and document the start of being your own boss.
- Review your state's small business guidelines and, if required, register your new sole-proprietorship.
- Start thinking of employers as clients, and yourself as a consultant (although it's best to keep your thoughts to yourself while at work). You may discover that it inspires you to be more invested in your work.
- Look for other people who approach their professional life in a similar way, and support each other.
Certainly, there are a lot of folks out there who, like me, have a ton of experience but still can't seem to land that full-time assignment and might well consider "formalizing" their consulting/freelance gigs into a company concept. I know that it would be easier on my resume to be listing some corporate name under which I'd done a number of varied projects, rather than just spinning out a long list of the specifics! Anyway, thanks to Ellen and BrainTrack for providing this interesting look at these options!