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Working for yourself can be one of the most exciting and challenging career moves that you can make. It’s not for everyone, but we’re here to give you some insight into what exactly self employment is, the pros and cons, and how you can make this type of job work for you.
What Is Self Employment?
For freelancers, entrepreneurs, and business owners, the definition of self employment might vary. But they all agree on one major component: Being self employed means that you don’t work for an employer who’s paying you a consistent wage or annual salary. You work solely for yourself and earn your income by working directly with other businesses or people.
Self employed individuals may also be referred to as sole proprietors (which we’ll get into in a minute) or independent contractors.
Laws and Legal Responsibilities
The definition of self employment is even more important when it comes down to your legal responsibilities. Mostly, this is to do with how you’re taxed by the Internal Revenue Service (IRS).
When you work for a traditional employer, the company is responsible for withholding a certain amount of money from each of your paychecks to go toward your taxes. There’s nothing for you to think about until it comes to your annual filing each year and your company provides you with all the information that you need.
But when you’re self employed, you have to be responsible for saving money to pay your taxes. Regardless of if you’re working full time or dabbling in part time self employment, you’ll still have to pay taxes on any money that you earn. It’s important to understand what is considered self employment by the IRS because how, when, and how much tax you pay will all depend on the type of business structure you have.
Self employment laws when it comes to taxes can get complicated, so we’d always recommend working with an accountant to better understand what you’re responsible for and when. For example, you may be required to pay quarterly estimated taxes if you’re making over a certain amount each year, which is then accounted for in your annual filing.
What Is 1099 Self Employment?
Self employment with a 1099 means that you’re legally seen as an independent contractor, rather than an employee. If you’ve had a traditional employer in the past, it’s likely that you’ve received a W2 come tax time. That W2 lays out all of the earnings you made that year and taxes that were withheld.
A 1099 is the self employed version of that, listing all of the income you received from a particular business in that year. Don’t forget, no taxes are withheld because that’s your job to sort out. You should receive a 1099-MISC or 1099-NEC form from any client that you worked with that paid you more than $600 during that year. They can face fines if they don’t send you one. Even if they don’t, you’ll still need to report any income that you made on your own taxes.
Is Going Freelance Self Employment?
The short answer is yes! Freelancing is one of the most popular types of self employment and, even if you’re still holding down a full-time or part-time job with an employer, you’re earning additional income that isn’t being accounted for anywhere else. You’ll need to pay taxes on that income, in addition to the income from your job (but those withholdings should already be made by your employer).
Examples of Self Employment
There are hundreds of self employment jobs out there, but here are a few examples of the most popular professions include:
- Freelance writers and journalists
- Actors, musicians, entertainers, and DJs
- Event and wedding planners
- Independent distributors
- Business consultants
- Food truck operators
- Building contractors
- Accountants and financial advisors
- Makeup artists and stylists
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Benefits of Self Employment
You Can Choose Your Own Work
When you work for yourself, you’re completely in control of the type of work you do. Want to write? Look for clients who are hiring a copywriter. Eager to get your name out there as an artist? Work with businesses that are opening galleries in your town or sell your pieces online.
You have complete freedom to take on any projects that align with your interests, skills, and qualifications. You don’t even have to stick to one specific field (although that can be helpful for becoming known in the industry).
You’ll also get to pick who you work with. Say there’s a business that doesn’t fit your values or you think they might be a difficult client. There’s no one stopping you when it comes to saying “no thank you.” You can just move on to the next self employment opportunity.
You Have More Flexibility
For most people, one of the biggest self employment advantages is having the freedom to control their own schedules. Aside from meeting deadlines that you set with your clients, when and where you do your work is entirely up to you. If your dream is to have no commute and work all day in your pj’s, self employment could be the answer!
Flexibility means that you have the chance to enjoy a work/life balance that may not be possible in a traditional job. You’ll have the ability to work around appointments, go to your kid’s soccer game in the middle of the afternoon, or even enjoy a leisurely lunch break at a local cafe without having to get back to your desk with a boss breathing down your neck.
Self Employment Disadvantages
You’re Taking a Risk
While traditional employed positions are no longer as risk-free as they once might have been, keep in mind that self employment doesn’t come with a guaranteed monthly paycheck. If business is slow or if you need to take time off, you won’t be making any money.
There are ways around this, though. Building a network of retainer clients that will give you a set scope of work each month, creating a financial buffer for emergencies, and taking out income insurance to cover against illnesses or injuries can all help to make this a less risky career path.
You’ll Need to Get Your Own Benefits
Unlike an employed position where you’ll likely be offered healthcare coverage, retirement contributions, and other benefits, you’ll be responsible for all of that yourself.
Don’t let this stop you. There are options out there for self employed people. You can apply for health insurance directly with many providers, as well as through the government marketplace. You’re also able to take out your own private insurance policies for disability or start your own retirement accounts.
Self Employment Opportunities
With so many self employment careers to choose from, the world really is your oyster. Take a look at some of the types of self employment jobs that you could be working on from the comfort of your own home.
Online self employment jobs are often the most sought-after for both beginners and long-time freelancers. After all, when you only need a computer and the internet, you really can work from anywhere at any time. The digital nomad lifestyle has become incredibly popular in recent years, with people traveling all over the world and working from one picturesque destination before moving onto another.
If your skills are in a technical or professional services type role (think project management, writing, marketing, accounting, legal services, etc.), it’s very possible for you to find this kind of work online. In many cases, you may even earn more than in an in-house position for the same type of work. Sites like Upwork and Fiverr are good starting points, but you can also build a very successful career by finding your own clients directly through your network.
When you’re looking for self employment work from home positions, looking for some of the online-only or remote opportunities is often a good place to start.
But that’s not the only self employment work that you could do. Services like dog walking, becoming an Airbnb host, driving for Uber or Lyft, or delivering food with DoorDash or GrubHub are all occupations in the gig economy that make you a self employed worker. In-home carers, babysitters or nannies, or starting an Etsy shop are all examples of work you can do from home too.
Anything you can do full time, you can also do part time. Whether you’re fitting freelancing around an existing job or trying to live your artistic dreams on the side of caring for a family, self employment gives you the opportunity to put in as much time and effort as you want. Being part time doesn’t mean that you’re any less successful as a self employed person.
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Yes, self employment can be a risky move. It can also be incredibly rewarding and give you the freedom to live the life that you’ve always wanted. We can’t wait to see what you do next!
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