Welcome, and congrats on your decision to become an independent business subcontractor! More and more companies are looking to outsource their jobs to independent contractors, and as the freelance market continues to boom, customers will be increasingly expecting on-demand appointments and instant service. Becoming an independent, self-employed contractor is ideal for experts skilled in a profession, such as plumbing, electrical work, drywall, roofing, and auto detail. Subcontractors can take advantage of the flexibility of owning a business to meet these and other growing demands of both larger companies and customers. Here, we’ll dive into the main emotional, financial, and legal ideas to consider as you start your own subcontractor-based small business.
Emotional Considerations
Before even considering the financial and legal sides of starting a business, you need to make sure that you have the emotional strength to work through the challenges of being an entrepreneur. Handling 100% of the failures, in addition to the successes, can cause severe stress and anxiety. Therefore, for those who are prone to severe anxiousness or stress about their career, going the entrepreneurial route is not advised. However, if you determine that you have the mental fortitude to become an independent subcontractor, here is the best advice you’ll ever get for starting a business.
Financial Considerations
After considering your emotional capacity to handle the demands of entrepreneurship, the next step is to determine the initial funding for your business. Will you need family and friends to invest? Will you have outside investors? Do you have a savings stockpile to fund the enterprise yourself? It can be awkward and relationship-damaging asking family and friends for funding, especially if the business fails. Therefore, asking friends and family should be the last resort. If you are an expert with a long track record in a trade that is in demand, you likely have spent years building a reputation with clients. As a result of this hard work, you should feel comfortable that your business will succeed if you continue this excellence and are able to book business through your network of past and current clients. In this case, a business loan with a low-interest rate is an attractive option without having to rely on investors or large savings.
Once the business is up and running, you can take advantage of setting your own hours and taking in all the profits, two of the major attractions of owning a small business. In addition to these benefits, you can take advantage of tax deductions for small businesses on home expenses, driving expenses, and depreciation expenses on property and equipment that you cannot deduct from your personal taxes.
Legal Considerations
Once the emotional and financial considerations are taken care of, you can start handling the legal aspects of starting a business. For starting a subcontractor business, sole proprietorships are most common due to their cost-effective and streamlined application process. However, as a sole proprietorship, your personal assets will be intertwined with the business. In the case that the business goes bankrupt, you can be held liable to pay off the business’ debts. On the other hand, if you’re willing to cover the greater financial cost and longer application process of creating a limited-liability corporation (LLC), you will NOT be held personally liable for the business’ finances since you and the business are separate legal entities. For further advice on whether to form a sole proprietorship or an LLC, as well as have access to an entire team of small business lawyers for the fraction of the usual hourly rate for legal assistance, check out JUSTLAW’s legal plans for small businesses.
