The “New Normal” = New Opportunities
When COVID-19 first appeared, businesses struggled, lockdowns occurred, and many people were unfortunately laid off. Even as the world begins to rebound, many workers are deciding to take the reins when it comes to their careers and futures.
Between an abundance of new opportunities such as freelance jobs, ridesharing companies, influencing, delivery programs, and more, side hustles are becoming permanent. Others are realizing within the turbulence of today’s business environment, there’s never been a better chance to take a shot at starting their own business.
These opportunities are changing the workforce as the “Great Resignation” is actually creating a wave of new entrepreneurs.
Setting Out on Your Own
If you’re part of this mass exodus from the traditional workforce, managing your finances should be a top priority. In addition to new financial risks, you must also prepare for taxes, business regulations, and growing your business.
- Get Organized
Whether you’re just starting out or your new endeavor is well underway, organization is the key to success – especially when it comes to your finances. Come tax time, you need to make sure all your incomes and expenses are readily available.
A simple yet effective approach is to create four folders.
- Unpaid Incomes · Unpaid Expenses
- Paid Incomes · Paid Expenses
When incomes are received, move them to the Paid Incomes folder. Do the same for your expenses. This strategy helps keep all your revenues and expenses organized and allows you to easily identify any bills or incomes not yet paid.
- Prepare for Taxes
If you’re self-employed and just starting out, taxes will likely not be withdrawn automatically from your paycheck. Instead, you will need to account for owed taxes yourself. This can be a little tricky because you don’t know exactly how much to save. To add to the difficulty, you will also likely have to pay self-employment taxes.
A wise move is to speak with a local Certified Public Accountant (CPA). They will be able to help you estimate how much you should save until your tax bill is due. Also, if your income is consistent, you may be required to pay estimated taxes on a quarterly basis. Your CPA can also help you determine this figure and payment schedule.
- Register Your Business
If your business or freelancing is taking off, it will be in your best interest to register your company with the IRS, your state, and locally. Obtaining a Federal Tax ID, commonly called an Employer Identification Number (EIN) from the IRS, will help you file your taxes, open business financial accounts, and apply for loans.
If you’re worried your business is too small to create officially, don’t be. Many states have options such as creating a Single-Member LLC to provide a formal business structure, along with liability and tax protections. You’ll want to research the opportunities available in your state.
- Obtain Proper Licenses
As your business grows, you’ll want to check with your local municipalities to obtain any licenses or certifications necessary to operate in your area. Depending on the type of service you provide, these can be relatively inexpensive. Having the proper licenses will help protect and legitimize your business and work.
- Open a Business Account
Once you obtain your EIN from the IRS, consider opening a business account at the credit union. As mentioned in Step #1, staying organized financially is crucial to the success of your business. With a business account, you’ll be able to keep your business incomes and expenses separate from your personal financial matters. This is extremely important when it comes to filing your business and personal taxes.
You may also want to open a business credit card to provide your company with more flexible purchasing options. Again, this will also help keep credit purchases for your business separate from your personal finances.
We’re Here to Help!
It’s an exciting period right now as the “new normal” consequently created so many opportunities for self-employment. Yes, starting your own business requires a lot of work and dedication, but the payoffs can be substantial.
If you’re part of this great wave of entrepreneurs and you’re ready to take your business to the next level, we’re here to help. From business-friendly checking and savings accounts to credit cards and business loans, our small business team is ready to help grow your company.
Please stop by any of our convenient branch locations or call (949) 588-9400 to get started today.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.
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