If you are interested in becoming self-employed, then becoming an independent contractor is a great option. Being hired as a freelancer, or independent contractor, means that you won’t be an employee anymore, which is a huge bonus for some people. However, before you start working as an independent contractor in North Carolina, there are a few things you need to take care of.
Self-employment means they you will need to create an official business entity for yourself. This is helpful when tax time comes, because as a business entity you can take note and keep records of business expenses that are deductible on your tax return; if you don’t complete this step, you will end up having to pay income tax on the entirety of your income!
There are three easy steps to take when beginning an independent contractor business:
1. Pick a name for your business.
The name of your business should shed a little light on what it is you do and who your target clients may be. The name for your business is very important for future marketing ventures. After you choose a name, check to see if anyone else is also using that name before you jump the gun and immediately purchase business cards. After you have chosen a business name, you need to decide on the location for your business so you can work on your first marketing items like business cards, brochures, and a web site.
You might need to file a fictitious business name (which is simple and inexpensive) if the name of your company is different than the name of your business.
2. Get yourself a contracting license.
It is common for a city or county to only allow independent contractors to work if they have a contracting license. You should do this even if you work from your house, because there can be a penalty fee if you skip it; fortunately, it is a pretty inexpensive and simple process. You need to visit the city’s website to acquire the correct forms and, depending on your business services, you may need to get an additional specialty license. You can find out more on your state’s website.
Another helpful step is to get yourself a business checking account. This helps to create the business entity and make it crystal-clear when tax times comes that your personal taxes are separate from your business taxes. If there are contractor courses that you need to pass, there are services out there that help you study and pass these courses. Check out this article for tips on how to finish your contractor courses on time.
3. Make sure you figure out your recordkeeping and taxes.
Recording the necessary information that you need to make correct business deductions is important. As your business year goes on, make sure you are saving important receipts and proof of purchase and tracking all of your expenses because these are helpful at informing you on how your independent business is doing as well as allowing you to safely deduct certain expenses from your overall income. Speaking to a professional accountant is highly recommended when initially setting up your business plan because you want to make sure you do it the right way the first time around.
Taxes are an integral part of working as an independent contractor – you have the ability to deduct expenses that employees (who are not self-employed) would never be able to.
These steps will help you jump-start your career as an independent contractor. If you have any questions regarding your contractor exam or need help preparing for it, check out our Contractors Institute website today for the best exam preparation you could ask for.