Independent contractors may not consistently see themselves as entrepreneurs, but the two accept abounding things in common. What accomplish should absolute contractors booty to authorize their businesses, and why?
There are abounding paths to entrepreneurship. Entrepreneurs are apprenticed to alpha their own businesses abundantly by necessity, opportunity, inspiration, or some aggregate of all three and added factors as well. There are additionally business owners who may not set out to accompany entrepreneurship, and activate on accession aisle instead. This is a accepted alley for absolute contractors.
Creating a Business Opportunity
Independent contractors generally actualize a business befalling out of the knowledge, skill, and acquaintance they already have. They may accommodate their ability to accession business, an individual, or both. For example, accession who advised accounting in academy may accommodate accounting casework to a few bounded baby businesses as an absolute contractor, rather than alive for one alignment full-time. Similarly, accession with abilities in computer clear architecture ability action casework in logo design, website development, or agenda marketing. Sites like Fiverr and Upwork accommodate platforms for absolute contractors to calmly bazaar their casework to a ample audience.
Advantages and Disadvantages of Being an Absolute Contractor
Independent contractors accept several key advantages compared with full-time employment. As an absolute architect you are your own boss. You can set your own amount as able-bodied as accept your clients, the projects you’d like to pursue, and the hours you’d like to work. You can administer the admeasurement and ambit of your business to fit your lifestyle, and you are not angry to one employer.
There are disadvantages as well. As an absolute architect you will not accept allowances from an employer, such as medical benefits, retirement plan contributions, aggregation disinterestedness incentives like banal options, holiday/sick/vacation pay, and others. You will additionally not be covered by the employer’s medical allowance or accept unemployment insurance. In accession you will charge to be amenable for business your business, managing your clients, ciphering and advantageous your own taxes, accepting the adapted licenses and permits, and purchasing able business allowance as appropriate.
Independent Architect or Employee?
It can be ambagious to apperceive back a being is or should be an absolute architect against an employee. In contempo years, states accept been casual laws that advice analyze the aberration amid absolute contractors and employees. Individuals may adopt to be affianced as absolute arrangement workers for greater flexibility, autonomy, and conceivably college pay; and analogously companies may appoint workers as absolute contractors for their own adaptability and amount savings. However, some companies may accept behavior that workers charge be assassin as employees, in ample allotment because of laws advised to assure workers who should be classified as advisers rather than absolute contractors. It’s important to accept the laws in your location.
For example, several years ago California’s law changed, adopting the “ABC test” to ascertain an absolute architect as one who satisfies all three of the altitude below:
The ABC analysis fabricated it decidedly harder to allocate a artisan as an absolute contractor, mostly due to the “B” allotment of the test. However, new legislation was afresh anesthetized in California apropos to exceptions to the ABC test, which in those cases makes it easier to allocate assertive kinds of workers as absolute contractors. Some exceptions especially crave the artisan to accept registered and accountant their business in adjustment for the barring to apply. For added exceptions, an accustomed business is not adapted but is one of abounding factors belief against acceptance the artisan to be advised an absolute contractor. Either way, absolute contractors who formally authorize their businesses are demography a footfall in the adapted administration to abbreviate the accident of mis-classification. This can be important for advancing arrangement opportunities, because it minimizes the accident to the hiring company.
Recommendations to Setting up an Absolute Architect Business
While the guidelines may alter from accompaniment to state, there are a few minimum recommendations to set yourself up as an absolute contractor:
Other recommended activities to authorize yourself as an absolute architect include:
As an absolute architect you may adjudge to accompany baby jobs actuality and there, assignment primarily with a few beyond organizations, or article in between. Since you may charge to verify your cachet and accommodation as an absolute architect to accompany contracts, the activities aloft will accord to establishing your business as an absolute entity. In addition, you may want to pay your estimated taxes quarterly. It can be difficult for baby businesses to plan advanced and account for ample tax payments at the end of the year. Advantageous a annual appraisal will acquiesce you to administer your banknote added analogously with attention to tax payments. Because absolute contractors are amenable for advantageous their own assets taxes (the assets taxes are not deducted from their paycheck), it is important to plan advanced and account for tax payments, which could be annual or yearly.
Timesheets, Pricing, Invoicing, and Contracts
Before you accompany business opportunities, it may be a acceptable abstraction to accede your appraisement archetypal and how you will bill for your services. It can be accessible to use a anthology or an online spreadsheet affairs to clue your hours or jobs as you go rather than aggravating to bethink all your activities at the end of the month. You can use an online chat processing apparatus or clear architecture affairs such as Canva to actualize an balance template. Accounting software programs such as QuickBooks or acquittal platforms such as Square additionally accommodate invoicing accoutrement that accommodate with their software. As an absolute contractor, you will acceptable assurance a arrangement provided by the alignment for which you are accouterment articles or services. However, it ability be a acceptable abstraction to do some analysis online, argue with a business advocate or a chargeless business dispensary like Santa Clara Law’s Entrepreneurs’ Law Clinic, and accept your own arrangement arrangement accessible in the accident you assignment for an alignment or alone who does not accept a accepted contract.
In Summary
While absolute contractors may not consistently accede themselves entrepreneurs, both are creating business opportunities for themselves. Both additionally account from establishing their business endeavors through activities such as creating and registering a business name, chief on a business organization, accepting a tax ID number, and more. Accede how you will clue your time and projects, in accession to your pricing, invoicing, and affairs afore advancing business opportunities. By afterward these guidelines, you can bigger assure yourself and your business, and additionally accompany opportunities that crave analysis of your absolute business status. In today’s gig economy, there are abounding means to accompany your abilities to the bazaar and actualize a new business opportunity!
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About the authors:
Laura Norris, J.D., is Santa Clara University Academy of Law’s Associate Clinical Professor; Co-Director, High Tech Law Institute; Director, Entrepreneurs’ Law Clinic; Director, Tech Edge J.D. Program, and Faculty Advisor, ChIPs Women in Tech Law as able-bodied as a MOBI Advisory Board Member.
Mary Fuller, J.D., is a Senior Clinical Fellow at Santa Clara University’s Academy of Law’s Entrepreneurs’ Law Dispensary and Entrepreneurs’ Acknowledged Advising Dispensary and the architect and arch at Fuller Tech Law in Silicon Valley.
About The Entrepreneurs’ Law Dispensary at Santa Clara Law:
The Entrepreneurs’ Law Dispensary at Santa Clara Law casework the alive bounded startup association by carrying affection acknowledged casework to entrepreneurs through the use of second- and third-year law students. Entrepreneurs accept two opportunities to accept services: 1) The Entrepreneurs’ Law Dispensary (ELC) is a transactional dispensary acceptable with affairs acute to startup companies, such as business article formation, financing, operational contracts, aggregation policy, website agreement of service, and bookish acreage licensing; and 2) The Entrepreneurs’ Acknowledged Advising Dispensary (ELAC), a by-appointment abrupt advising sessions in which business owners and entrepreneurs accommodated with an accomplished accountant pro bono business advocate and apprentice volunteers to altercate business acknowledged issues of apropos they may have. ELAC accessories amid 30 and 60 account are about offered over three Saturdays during the bounce and abatement terms.
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