How to become an independent contractor is a common question for those who want to start working in this type of employment. You will need to complete some tasks before signing the first contract. This includes registering for an independent contractor business entity, obtaining contractor’s licenses, opening a business bank account, and marketing your business.
ERA will let you know how to become an independent contractor and give you some valuable tips for being an independent contractor.
What Is An Independent Contractor?
An independent contractor is someone who works for someone else or a company. Independent contractors are self-employed business owners who work in a trade, business, or profession and provide services to the general public. If the person paying them can only control or direct the outcome of the work, they are an independent contractor.
5 Steps To Become An Independent Contractor
Whether you want to supplement your income or stop working for someone else, here is how to become an independent contractor:
Step 1: Name your business
Naming your business is an essential step in your journey to become an independent contractor. It will be your brand’s identity and how people will recognize and remember your services.
Consider a name that you are unlikely to change in the future. Changing your company’s name can cause confusion, and you will need to restart your branding efforts. So consider a memorable, concise, and appropriate name for your services.
Once you’ve decided on a proper name, you’ll need to register it to protect it and prevent other businesses from using it.
Step 2: Register your business entity
Registering your business entity with your local state government means you register as an independent contractor. The two most common types of legal entities in Vietnam are a Limited liability company (LLC) and Joint-stock company (JSC).
Regardless of your chosen structure, it will determine how you pay taxes and accept liabilities. If you are unfamiliar with different company structures, you can also choose to start as a sole proprietor the first time you decide to become an independent contractor.
Step 3: Obtain a contractor’s license
To become an independent contractor, you will also need to obtain any industry-specific licenses. For example, if you want to work as a mental counselor, you will need some related psychology or clinical counseling licenses.
A contractor’s license has numerous advantages, including the ability to demonstrate your expertise to prospective clients.
Step 4: Open your business bank account
Assume you fail to provide the agreed-upon service, and a client wishes to sue you. When you combine your business and personal funds, you will risk your finances if you need to repay a client.
A business account ensures that all the funds collected by your business are in their own place. Furthermore, it makes things a lot easier when paying taxes.
Most banks that serve individuals also provide business checking accounts. Check with your bank to see what types of accounts are available. It is always preferable to begin with an organized financial system rather than switching to new accounts later.
Step 5: Start marketing
It is time to begin marketing your services. You want your community to be aware of your company. Learning marketing is a must to become an independent contractor. So, invest the time learning how to advertise in your field.
Several independent contractors begin by utilizing their local network. You can notify friends and family members that you have launched your own business. You’d be surprised how many people might require your services.
3 Tips For Becoming Successful Independent Contractors
Working as a business partner, not an employee.
Only some companies are accustomed to working with independent contractors, and some may test the limits of your agreement.
If your customer makes requests that go beyond the scope of your agreement, don’t be afraid to say no. They aren’t your boss, and your time is valuable. Your clients, like you, cannot afford to provide free services.
See more: independent contractor vs employee
Watch out for taxes.
Becoming an independent contractor means you are responsible for making tax payments and ensuring that your business is in compliance. Furthermore, as the business owner, you are responsible for Medicare, payroll tax, workers’ compensation, healthcare costs, and employee benefits. Hiring a qualified tax professional is the simplest way to navigate these tax obligations.
See more: how much taxes does an independent contractor pay?
Prepare ahead.
When becoming an independent contractor, your business income may take several months to reach your bank account. That is why planning and setting aside funds to cover your business and personal expenses is critical when being an independent contractor.
FAQs
What are the five traits of an independent contractor?
Below are five common traits you need to become an independent contractor:
- Confidence. Being in charge of your income necessitates a ”can-do” attitude that allows you to seize every opportunity.
- Personable. By being personable, you can grow your business through networking events to ensure your career growth.
- Flexibility. Clients may request more of your time than usual and request last-minute changes, so flexibility is beneficial.
- Problem-solving. Highlight any issues that you discover could have significant benefits for the client and ensure future work.
- Honesty. You are ultimately in charge of your PR and reputation in independent contractor status. Have an honest approach to clients with your time and skill level.
What is the difference between a contractor and an independent contractor?
A contractor works on a contract basis, which means they are typically hired to work on a specific project or for a set period. Client companies frequently hire on a contract basis because they need work done but do not want to add to their headcount permanently.
An independent contractor is typically hired to perform tasks outside the principal’s usual trade or business following the company’s requirements for an independent contractor. Such tasks are included in independent contracting. Also, independent contractors are generally not considered the business’s employees.
Does an independent contractor count as income?
You can work as a freelancer or business when becoming an independent contractor. In both cases, your earnings are counted toward the total income. You will have to make tax payments following the local government laws for independent contractors.
Conclusion
In conclusion, mastering the steps to becoming an independent contractor empowers you to seize opportunities and unlock the benefits of a flexible and self-directed career. Embrace how to become an independent contractor and pave the way for professional autonomy and success.
See more related articles:
How Much Do Independent Contractors Pay In Taxes?
How to Hire Independent Contractors?
Best Independent Contractor Jobs For A Flexible Work Lifestyle
Independent Contractor Agreement: Definition & Must-have Clauses
Ms. Tracy has worked in human resource consulting for over 15 years. A driven entrepreneur focused on business expansion and people development. She previously worked as Country Manager for an international Australia firm that specializes in global workforce management, as well as several key roles as Business Growth Director and Executive Search Director for both large local firms to effectively drive their business growth. A strong emphasis is placed on aligning organizational priorities/objectives with business needs. She has a large network of local business leaders and a thorough understanding of the local market.
