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What to consider when you are self-employed
Being self-employed has its perks, but let’s be real – it’s not always rainbows and lollipops. As a business owner, you wear multiple hats and have a seemingly endless to-do list. And the financial responsibilities are another story. So as an Accountant, let me delve into some of the things I have learnt that are important to consider when being self-employed.
As your business grows, it’s natural to question whether your current operating structure is the right fit. You may wonder if it’s time to open a company or explore other models. Assessing the situation and making informed decisions accordingly is necessary in growth. Other legal structures include a company, partnership, and limited partnership. Each one has its own advantages that can impact on your business’s growth. Think about your goals and talk to your advisor, and that should help you to take the next best step.
Being responsible for your own tax isn’t exactly one of the perks of being self-employed. But hopefully, this helps…
- Income tax must be filed using your individual IRD number.
- You file an individual income tax return to determine how much tax must be paid (based on net profit).
- A GST registration should be considered if your sales exceed $60,000.
- If you have to pay less than $5,000 of income tax, you’ll just need to make one payment at the terminal tax due date — you don’t need to worry about provisional tax. (note: terminal tax is the leftover income tax to pay that was not paid for during the year via provisional tax payments).
- If you had to pay more than $5,000 tax at the end of the year from your last return, you’ll have to pay provisional tax. (note: provisional tax is tax you pay in instalments if you earn income from self-employment)
- If you paid too much tax, you’ll get a refund. If you pay too little, you may be asked to pay more (sometimes with interest or a penalty charge).
Too often, complications occur, so I highly recommend getting an expert to remove the stress.
Accounting and bookkeeping
A basic understanding of accounting principles isn’t necessarily a must (that’s why you have us to talk to and ask questions), but it does help. It helps you get an idea of the business as a whole and assists in managing financial records – it’s all a part of business success. As a self-employed individual, using accounting software like Xero is the easiest way to keep track of finances.
Different business models have different needs when it comes to insurance. Brick-and-mortar retail stores may require property and liability insurance, while e-commerce businesses benefit from cyber liability coverage. Make sure you discuss with an insurance advisor to explore the best options for protecting your business.
Marketing and customer service
When you’re self-employed, marketing and customer service are essential to focus on when aiming to expand and retain your business. At GS, we have an exceptional marketing team (MasterJack) equipped with the skills to develop effective marketing strategies and help you stand out with content marketing.
Time management and work-life balance
As I mentioned at the beginning, as a self-employed business owner, you wear many hats and handle multiple tasks in the business. As challenging as it can be to achieve work-life balance, it’s crucial. By taking the time to recharge, engage in hobbies, spend quality time with loved ones, and focus on self-care, you improve your overall well-being, productivity, creativity, and decision-making abilities. I know there’s no switch for this, and attaining a work-life balance is an ongoing process that requires conscious effort and boundary setting.
And finally, (the accountant in me says) I hope you can smoothly complete your 2023 financials to enjoy a stress-free and happy 2024. If you need help with operating structure, tax responsibilities, accounting and bookkeeping or marketing, please email me; we would like to help.