How to Become an Independent Contractor: A Step-by-Step Guide

independent contractor overseeing work done at a jobsite

Are you thinking about becoming an independent contractor but don’t know where to start? If so, you’ve come to the right place. Becoming an independent contractor can quickly become an extremely satisfying and lucrative career.

Being an Independent Contractor: Main Points

  • Independent contractors are not employees but business owners
  • You need to obtain a federal business tax ID number and register the name of your business with your state
  • Register your business with your state as an LLC or S-Corporation
  • Set up a business checking account

An independent contractor is someone who doesn’t work for or own a corporation. Essentially, you are considered self-employed and can create the professional and personal life you desire. It gives you the freedom to take on jobs that inspire you and the ability to control your income.

If you want an action-oriented career path, continue reading to learn how to become an independent contractor, or book a Contractor Licensing Start-Up Consultation with a licensing expert to learn more about the process of obtaining your contractor's license!

Get Started on your contractor licensing journey today!

How to Be an Independent Contractor

Independent contracting can come with a vast array of benefits, but how do you get there? There are numerous ways you can approach becoming self-employed.

Whether you’re looking for additional income or want to stop working to earn someone else money, here’s how to become an independent contractor:

Step 1) Name Your Business

Naming your business is extremely exciting, but it’s also a critical step towards your journey of becoming independent. It will be your brand identity and how people recognize and remember the services you offer.

Try to think of a name that you likely won’t change in the future. Switching your business name can create confusion, and you’ll have to restart your branding efforts. Think of a name that’s catchy, concise, and suits the services you offer.

If you’re starting a plumbing business, you can incorporate the word “plumbing” somewhere into the name. If you’re struggling to think of a name, you can always use your name plus the service you provide. For example, “Sam’s Plumbing.”

Once you’ve chosen a suitable name, you’ll need to register your business name to protect it and prevent other companies from using the same one.

Step 2) Register Your Business Entity

After determining your company name, you’ll need to decide how you want to structure your business. This step includes registering your business entity with your local state government. Most people register a small business as an LLC, but you can also choose a partnership or file as an S-corporation.

Whichever structure you choose will determine how you pay taxes and accept liabilities. You can also choose to remain a sole proprietor in the beginning if you aren’t familiar with different company structures.

Step 3) Obtain a Contractor’s License

You’ll also need to obtain any required licenses for your industry. For example, let’s say you live in Florida and you want to become a general contractor. You’ll need to pass the Florida exam for a contractor’s license to perform your duties.

A contractor’s license has many benefits, including demonstrating your expertise to prospective clients. However, the exam can be pretty challenging. Contact the Contractor Training Center for resources on passing the exam with flying colors.

Step 4) Open Your Business Bank Account

Here’s where things get exciting since you’re setting yourself up to earn income from your clients. While it may be tempting to use your personal bank account to collect payments, it’s always better to have a separate account for business transactions and expenses.

The reason why you want to keep your funds separate is because of liabilities. Let’s say that you don’t perform your agreed service and a client wants to file a lawsuit. Sharing your business and personal funds puts your personal finances at risk if you need to pay back a client.

A business account ensures that all the funds collected by your business are in their own place. Your personal bank account isn’t related. Furthermore, it makes things a lot easier when it comes to paying taxes.

Most banks that work with individuals also offer checking accounts for businesses. Check out your bank to see what kind of account you can open. It always helps to start with an organized financial system rather than transition to new accounts later on.

Step 5) Start Marketing

After you have all the administrative tasks out of the way, it’s time to start advertising your services. You want everyone in your local area that needs your services to know about your business. Learning marketing is an essential skill if you’re going to be a successful business owner. So, take the time to learn how to advertise in your industry.

While you can always outsource your marketing, that can be expensive for a beginner. What’s more, having a solid background in popular marketing channels will ensure that you know how to work with the right people.

Several independent contractors start with their local network. You can reach out to friends and family members to let them know you’ve just started your own business. You’d be surprised at how many people may need your services.

You can also spend time learning:

  • How to create a website
  • Blogging
  • Social Media marketing
  • Email marketing

The Benefits of Becoming an Independent Contractor

Becoming an independent contractor could be one of the best decisions you make. It’s perfect if you want to make a career with more freedom to focus on doing what you love.

Here are the top benefits of becoming an independent contractor:

More Freedom and Flexibility

Since you’re essentially working for yourself, you can expect to have a lot more freedom and flexibility. You can create a schedule that is most comfortable for your lifestyle. However, you’re still going to need to work hard if you want to earn a good living. You’ll likely be doing most of the groundwork initially if you don’t have the cash to hire employees.

That said, anyone can be a successful contractor if they have the ambition and the discipline to prioritize their duties. You’ll be working for your clients and not a manager, so you can negotiate terms that are favorable for both parties.

More Clients and Projects

One of the best parts about being an independent contractor is that you can work with a wide variety of clients and companies. When you’re an employee, you’re limited to one company and work environment. Contractors can work with clients and decide to switch when the time is right.

However, you often don’t get the same financial stability as you would working for a company. You’ll need to offer outstanding services to attract and retain clients.

If you have the motivation and productivity level, finding and keeping clients shouldn’t be too tricky. Eventually, you should have a large book of clients that provide you with a pretty decent living.

More Time for Your Personal Life

When you work for a company and earn a salary, you often have a fixed amount of holidays and paid time off. Independent contractors can take as many days off as they want. As long as you have the income, you’re free to take a quick vacation if you wish.

You often have contracts with your clients that will determine how much work you need to produce. Furthermore, you can start to hire employees to keep the ball rolling, so you can have even more personal freedom.

Final Thoughts on How to Get an Independent Contractor License

There are numerous reasons why becoming an independent contractor can be a liberating choice. From more freedom to satisfying work, the benefits of working for yourself often outweigh working for a company. However, becoming a full-time independent contractor isn’t easy.

If you want to learn how you can obtain a contractor’s license so you can start working for yourself, check out Contractor Training Center’s courses in your state.

We can also help you navigate the complex licensing process. Book a Start-Up Consultation and let one of our licensing specialists answer any questions you may have. If you choose any additional services as you move forward in the licensing process, this consultation fee will be credited towards your next class purchase! We look forward to helping you take the next step in your career as an independent contractor.

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