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How LLCs are Structured and Taxed

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By Greg Lindberg, 1800Accountant.com Writer

Before you receive the hard-earned title of being a newly crowned business owner, you must weigh the different types of business entities available to you. Each entity is designed uniquely when it comes to how the IRS treats it. Considering the tax obligations that apply to each entity is a must to make a wise business decision. 1800Accountant.com, one of MyCorporation’s partners, offers a few pointers to consider on how LLCs are structured and taxed.

A Limited Liability Company (LLC) is a business structure that is ideal for many small business owners. Individuals who own LLCs are known as “members.” A member may be an individual, a corporation, a separate LLC, or a foreign business entity. The advantage of an LLC is that there is no limit on how many members can be involved in it. Single-member LLCs, which only have one owner, can also exist.

When it comes to business taxes, an LLC is categorized as a “pass-through entity.” This classification means that all of the taxes, profits, losses, and deductions that result from the actions of the company pass directly through to the owners of the LLC. An exception to this rule is that the IRS can treat certain LLCs a little differently. An LLC can elect to be treated as a corporation. This assertion has to be made during the entity classification election by filing Form 8832: Entity Classification Election. The two options for the corporation route are choosing to be taxed as an S corporation or a C corporation. S corporations are considered pass-through entities in which business activities are passed to the personal taxes of their owners, which prevents double taxation. C corporations are taxed as separate business entities.

If an LLC does not elect to be treated as a corporation, the IRS will automatically treat a single-member LLC as a sole proprietorship and a multi-member LLC as a partnership. In these cases, the activities within the business are reflected on the personal tax returns of an LLC’s members. The LLC is considered a disregarded entity in these situations. Regardless of how an LLC chooses to be structured, owners who are actively engaged in these business entities are generally on the hook for paying self-employment taxes.

In terms of protection, there are some other benefits to running an LLC versus other business entities. As an LLC owner, you are only partially responsible for any unpaid debts or court judgments made against the business. In addition, the losses your company incurs are limited to your overall investment in the business as well. An LLC can also give your business more credibility as a formal venture compared to operating a traditional sole proprietorship or partnership. Plus, if you go with the corporation structure for your LLC, your personal assets will be protected from your business assets.

Overall, LLCs offer lots of flexibility for those who prefer having several options on how to run their businesses. This is why opting for an LLC may be a fantastic decision for you to make if you like having more control.

About 1800Accountant.com
1800Accountant.com is a national full-service accounting firm that assists startup companies, established small businesses, and individuals with tax planning and preparation, bookkeeping, payroll, and business development.

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Is Your Team of Employees Helping or Hurting You?

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Ohhh I loved my pillow. I used to travel with it all of the time when I was a kid. This week, while I was at the Los Angeles airport on my way to see clients in San Francisco, I saw this guy with the worst comb-over ever traveling with his own pillow. I was expecting him to whip out a juice box and maybe even his special blanky. He had made up his mind to travel in comfort.

So, how comfy are you in your business? I mean really comfy? I’m not sayin’ that you should convert your office into a day spa. I’m talking a little less chaos and less flying by the seat of your pants. On a scale of 1 to 10, how stressed are you when you come into the office? Believe me, I still have some of those days.

In the past year, I have worked with tons of entrepreneurs. Many of them aren’t comfy in one particular area – their team of employees, independent contractors, and even their vendors! They have the wrong people with the wrong skill sets in the wrong positions.

Take it from me. I have had many of the wrong pillows on my team. My revenue stalled, my client experiences weren’t as great as they are now, and I was spending tons of time fixing mistakes that my people made. Ugh!

Here’s the deal. We all want a team of employees who are dependable, smart and take initiative. But that’s not enough. Try filling your positions based on how your people are wired.

On one end of the extreme is the person who loves to do research, gather data and pays a lot of attention to detail. On the other end of the extreme is the person who is highly creative, can make quick decisions, and can function with 5 projects going at the same time.

A common mistake that entrepreneurs make is hiring creative people to do highly detailed tasks. Things fall through the cracks. The systems don’t get followed, or even implemented – and then you, the business owner, have to do it yourself. Time is money.

If you don’t have the right team to support you, it is going to be challenging to seriously grow your business. It’s that hard. Things could be so much easier if you had a team of employees using their strengths and doing what they are innately good at. Why try to fit a square peg in a round hole? Get comfy.

Make an investment and hire the right people (or vendors) for the right job. Other than marketing, this is THE investment that you must consider if you want to have a kick ass 2nd half of the year, and really a HUGE 2014.

How do I do this? I use the Kolbe Index A test. I even use it with clients. It helps me connect with them because I understand how they are wired. It’s that good. The cost? $50. I get no kickback if you use them.

Take your biz to the next level. Get comfy. Get support. Get the right team of employees to help you so they can hold down the fort while you are on vacation with your cozy pillow.

Justin Krane, is a Certified Financial PlannerTM professional and the President of Krane Financial Solutions.  His savvy, holistic approach to financial planning allows clients to unite their money with their lives and businesses with sound financial decisions. Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to create a bigger vision for their business with education and financial modeling. Follow Justin on Twitter @justinkrane.

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Hot Marketing Tips for Summer

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Summer is rolling in and it’s time to think about what you’re going to do to get your business heating up! As with holidays, summer is full of opportunities to entice your customers. From Fourth of July sales to summer-friendly promos, you won’t want to miss out on all the fun. Here are some tips so you can jump right in:

Let the thermometer drive your sales up

So you’re smack in the middle of a heat wave. Even though your seatbelt is giving you third degree burns every time you get in your car, it doesn’t mean that you have to be a downer about everything. Use the heat to your advantage! Give your customers a special deal for every consecutive day that the heat exceeds a certain number on the thermometer – it depends on where you live! It can be as simple as posting up a coupon code on your business’s Facebook and Twitter pages and sending out an email offering a free summer gift to those who visit your business during that time. Get creative with it!

Get outside

People spend a lot of time outdoors in the summer months. Find out what local events are going on and become a part of it – become sponsors or provide fun activities or products such as food or balloons that are branded with your logo. Be seen spreading summer fun and you will be remembered. Or, if you have the space and capability, throw your own bash for your loyal and prospective customers. If you go for that idea, then be sure to use social media to help spread the word. Fill your customers in on hashtags they can use or offer gifts or discounts for those who “Like” you or talk about the event.

Show some seasonal appreciation

Maybe your business works with a few key clients who really keep the roof over your head. Let them know how much you appreciate their business by taking them out to a baseball game, or a round of golf, or other activities. It will remind them why they like working with you so much, and it will be a nice way to spend a summer day or evening.

Embrace what the summer has to offer, understand what your customers enjoy doing and how you can become a part of those experiences for them. Everyone will benefit from a little bit of creativity and generosity on your part, so have fun!

Danielle Pacelli is the Marketing Coordinator at MycroBurst/Logo Design Guru. MycroBurst is based in Langhorne, Pa. and is an online marketplace for graphic design. MycroBurst provides custom designs through crowdsourcing. Follow Danielle and MycroBurst on Twitter @MycroBurst.

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Time is Money: How to Set Up a Small Business Network

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For small business owners, a business network can make life much easier. The network allows for seamless sharing of files among all of your employees and is much easier to set up than most people realize. It also speeds up the productivity of your office due to the faster transfer of information and isn’t too expensive to install a small business network in either. You can do it yourself with minimal instruction and background experience. The next few steps will lay the basic blueprint for setting up a network in nearly any small business environment.

The Basics

First and foremost, you are going to need a router. Routers transfer information between computers on the same network. It is the central hub for your network. Preferably, you are going to want a business grade router, so you can use all of the advanced security features.

The wireless against wired route is a bad example, since you are never forced to use one over the other. However, a wired network provides more security. On the other hand, a wireless network allows for laptops and Wi-Fi capable desktops to connect without the hassle of wires. You can have both networks on one router, so you will never be lacking in connectivity.

Types of Networks

You can do either a peer-to-peer network or a client-server network. The only difference is in the way the files are transferred.

Peer-to-peer networks allow the transfer of data directly from one PC to another PC. However, it also has the potential to be less secure and has fewer features than a server-client setup.

A server-client setup allows you to transfer data between computers too, but all of the information goes through a server that is located on the premises before it arrives on another PC. It effectively adds another layer of security on top of your existing system and oftentimes large businesses prefer this setup.

Security

Security is the next important measure in a business network. A good security system prevents users from accessing your network without your permission.

Typically a secure network is successfully set up by following these instructions. First, you install a WEP password onto your router. This can be done through the router’s firmware, which is accessed by typing in the router’s IP address. Next, you choose a password. It translates into four strings of hex code that protects the password from outside sources. Finally, you must input the password on every wireless device that connects to the network. In some cases, you will also have to do it for computers that have a wired connection to the router.

Additional Useful Features

You may want to use VPN, or virtual private network, software for accessing your network from places around the world, assuming you have an internet connection.

On a VPN, your computer is treated as a computer that is in the network. There is one key difference: speed. The speed of a VPN network depends on the speed of the internet service you are using.

However, a VPN provides a business with a means of accessing their network from around the world. This is obviously extremely efficient and helpful because it allows business professionals to access their network without physically being at the office.

As a small business owner, you can install all of these systems yourself. In turn, this helps to save you money and provides you with a secure network. It is simpler than it seems for small networks, but it gets tricky when inputted on a larger scale. It is pretty convenient to obtain more extensive knowledge about these topics with a Management Information Systems Degree, as well.

Blake Pappas has a bachelor’s degree from Arizona State University and is currently pursuing an MBA. 

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How Taking Minutes Can Bring Small Businesses to Success

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With technology ever evolving and online collaborations on the rise, minute taking can seem like an old-fashioned approach to recording a business meeting. However, it does still have its place and can benefit a business in numerous ways, especially those who are new to running a company and start-ups.

As a quick refresher, minutes are notes recorded by an allocated individual, often a PA or secretary, in order to summarize what has been discussed at a meeting. Done correctly, they will highlight the meeting chronologically and succinctly, including important information such as event dates, deadlines, who said what, budget concerns and suggestions.

Why are minutes important?

Minutes are important for a number of reasons. To begin with, it’s important to have a record of meetings that have taken place in order to act on information. Often, once out of the meeting, important information may be forgotten, so having that record gives everyone involved a reference point when it comes to carrying out what has been discussed.

For those employees who don’t attend the meeting, but will be working on some of the things discussed, it’s a valuable record to use as a starting point for carrying out their job. Further to this, it means that workers can effectively stay on track, with clear deadlines and definitions, without the need to ask others in the office or type up their own notes.

Minutes are also important for absent members of staff and as a tool to avoid arguments over who decided what and when.

How they can help avoid failure

Record keeping is an important aspect to every business and keeping minutes is just another instance of this. By looking back at previous meetings, managers can track the success of certain projects by seeing instantly what was discussed and imagined for each one.

Budgets can be examined to see where they can be improved, or when funds can be added to improve various aspects of the business and information from minutes can be included in the company’s annual report, giving an effective yearly overview, which has all of the necessary information included.

The performance of suppliers can be tracked too, using information such as when they were first used, how much budget was allocated and how they have performed any work for the company. This kind of information is invaluable for keeping tabs on suppliers and service providers to ensure the company is getting the best deal.

Communication

In business, another important factor is communication and this is where minutes really come into their own. Without minutes, everybody would be required to remember what happened during a meeting and non-attendant staff would receive a watered down version, often which will have changed from what actually happened.

Taking minutes and having a clear and concise overview of everything discussed in a meeting will make for a happier team, who are more productive. It also promotes effective collaboration as everyone is on the same page from the start.

Collaboration is a bit of a buzzword at the moment and this is because it’s very effective and has been proven to increase productivity. For a company that is just finding its feet, this is priceless, as a productive and happy team will always be an asset to any business.

This has recently been further confirmed by the introduction of social intranet where an office network has its own kind of social network, something on which minutes can easily be distributed and collaborated on with little fuss.

Minute taking has been an invaluable business tool for many years and should never be discounted because of advances in technology. By capturing an organization’s most important decisions, communicating them clearly and keeping a concise record, businesses can safeguard against any problems they may experience in the future.

Effective record-keeping, communication and productivity increase, budget tracking and the well-being of employees are all key take-out points that every new or small up and coming business should bear in mind and apply when it comes to a building a successful company.

Written by Ellie Boyd- Video and writing journalist for Payday Angels- A small company who are taking it upon themselves to tackle the financial crisis within the payday loan industry.  We review other payday lenders- for example read our Payday UK review here. As we are new to building our company up, we have relied heavily on tracking our every move, in order to develop business more efficiently and learn from previous mistakes made. 

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5 Tips for Launching a Successful Online Store

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When you decide to start a business, optimism and excitement abound. You work tirelessly to ensure your business has solid fundamentals across legal, product and more but as launch day for your online store approaches, a myriad of new details and competing priorities can leave you feeling anxious. Here are 5 areas of focus that should top your list to help you successfully launch your store.

Put your best foot forward

One often sees online stores fail in one crucial area: properly and beautifully showcasing their products. Despite a strong product line, customers can misconstrue poor picture quality for poor product quality. Don’t fall into this trap! Follow these simple guidelines and display your most important site assets, your products, in the best possible light.

  • Consistent background: pick one consistent color or backdrop and stick with it for all product photos.
  • Crop to the same size: choose one set of dimensions for all photos so a shopper sees a product listing page of equally sized images, focusing on what is important versus oddly shaped images.
  • Zoom in: include at least one picture that shows your product up close, perhaps the fabric pattern, texture or other intricate detail.
  • Provide context: show your product in use. The more guessing you can take out of the equation for a customer, the more likely you are to make the sale. That means showing a food product on a table, an earring on an ear or soap in a nice bathroom setting.

Make sharing easy

Word of mouth about your store cannot spread easily without the proper mechanisms in place. Many shopping cart platforms give you the technical tools to include social share buttons, star ratings and product reviews on your store. The social cues that are sent when a shopper sees favorable stars, reviews and shares are invaluable. Be sure to enable these features immediately and ask friends and family to seed some positive responses to help you get going in the right direction.

The little touches matter

Stores with excellent products are nice. But stores with great products and topnotch customer service are memorable. Start with custom order receipts. This is one of the rare chances when a customer is expecting an email from you. Include a discount to encourage a follow up purchase and thank them for their order. Additionally, consider unique packaging or including a surprise sample or note along with a customer’s shipment. In short, even little touches can help you stand apart from the competition and boost sales.

Create a “test & try it” calendar

If you try to tackle every sales and marketing tool in the handbook at launch, you’ll likely end up overwhelmed and unable to fully give each the attention it deserves. Instead, create a calendar with a weekly goal. Each week, try a new strategy or tactic. In the beginning that could be week 1 creating your Facebook business page and week 2 starting your Twitter account. After you’ve gotten into the routine of posting to each, create a Pinterest account in the weeks that follow.

Get in front of customers

Selling your products offline can help you tailor your messaging and pricing online. Local farmers markets, mall pop-up booths and trade shows are all great places to get in front of a large volume of shoppers and hear their on the spot reaction to your products and how you’ve positioned them. In person feedback is invaluable and can help you refine your store quickly after launch, showcasing the best possible version to your online customers.

Happy selling!

Anjali Cameron leads marketing for Cashie Commerce, which makes it easy for small businesses to create and mange social, mobile and online stores. Cashie Commerce helps customers sell anything on any website and provides the sales and marketing tools to help customers grow their business. Working daily with small businesses, she’s learned a lot about ecommerce best practices. Check out her tips and ideas for selling online.

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X is for Xenodochial… or (e)Xcellent Customer Service!

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Obviously, we struggled a little bit with the letter X. There aren’t a lot of topics that lend themselves well to this particular letter, so unless we wanted to discuss the ins and outs of running a xylophone business, we had to expand beyond our normal vocabulary. Enter xenodochial, a long word that essentially means being nice to strangers – a quality that businesses must exhibit if they ever hope to attract new customers! But for simplicity’s sake, you can also think of X as standing for (e)Xcellent customer service.

Truly the most confusing letter.

There are a lot of theories on how to best serve your customers, but in reality there is no one answer on how to provide good customer service. Instead, there are multiple factors that have to built into how a business interacts with its customers.

First, though, it us up to the business owner to determine what their customers expect from them in terms of interaction. After all, what works in a restaurant may not necessarily work for a tire shop. Part of finding your niche is learning what your customers expect, and then working to meet those expectations. After you figure that out, you can begin training your employees on how best to interact with the customers. Do they want to be greeted at the door? Updated on new products? Treated like close friends? Part of running a business is organically zeroing in on answers to those types of questions. While a business book can give a laundry list of recommendations, customer service expectations and policies should be built on your experience with your customers.

Of course, good customer service goes beyond your interactions with your customers. You also need to make sure your employees are happy and treated well by the management – yes, they should always work in the interest of the company and people that pay them, but you can always tell when someone hates working somewhere. A disheartened, unmotivated employee may not treat customers poorly, but they certainly won’t work to make sure they have an excellent experience.

Finally, there are three parts of customer service that advisors and analysts constantly harp about – knowledge, body language, and anticipating needs. Though these three things border on cliché, they can be useful as long as they aren’t the only three parts of customer service focused on. Everyone who works for the business should be knowledgable about what the business sells, should be able to make eye contact and smile, and should be able to anticipate common customer needs so that customers feel that the business went “above and beyond” (if you will pardon another cliché) while helping them.

Xenodochial may be a complicated word, but customer service doesn’t have to be. Honestly, a lot of what creates a good customer experience is common sense. Treat your customers well and know what you are talking about. When you hire people to work for you, make sure they know and do the same. Small businesses have an advantage over giant corporations because they can still inject a bit of that personal touch into how they interact with their customers. And, as long as your employees feel as though they are an important part of your business’s success, they will be willing to work hard to maintain that level of customer service you worked so hard to build.

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How to Actually Save Money When Buying in Bulk

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If you’ve ever shopped at Costco, Sam’s Club or any other warehouse-type store for home goods, you know how easy it is to get carried away with the tantalizing prices of bulk items. “Twelve dollars for 20 bars of Dove soap? What a steal!” Then you get home and remember you don’t even use Dove soap, and it just sits in the back of your bathroom storage cabinet.

As tempting as some of the prices might be, buying in bulk isn’t exactly as cut-and-dry as it seems. When it comes to bulk-buying for business, things can get even more complicated. Read on for some tips on how to really get the most bang for your bulk buck.

Stick with Non-Perishables

Unless you work in a restaurant, buying perishable items in bulk can be a disaster. However, even non-perishable bulk-buying can be a bad idea if you’re spending money on items you don’t regularly use. For example, printer ink might be classified as a non-perishable item, and it’s something that seems justifiable to buy in bulk for your business. However, if you deal largely with electronic communication, this seemingly non-perishable item can eventually dry out and go to waste. Plus, even when buying in bulk, ink isn’t cheap!

Consider Your Space

Small businesses could save a lot of money by purchasing huge packages of office supplies, toilet paper, and other essential everyday items in bulk. But when working in a small setting, you also have to consider how much room you have to work with. If your storage room—or, worse yet, your entire house—starts to look like an episode of “Hoarders,” it might be time to take a break from bulk buying. Remember that you only have so much space to work with, so use it carefully and avoid getting too carried away.

Measure Consumption

Sure, you might technically find a use for 50 rolls of tape, but how often do you really use this item when you don’t have loads of it hanging out in the storage room? Perhaps a worse offense than letting items go to waste is needlessly consuming them. You think you’re saving money because everything’s being used, but be wary of careless consumption of a product just because you’ve got a huge reserve.

For example, it’s good to have a stash of battery-operated flashlights and batteries around the workplace, but employees shouldn’t be using them to play shadow puppet games or on their weekend camping trips. Before you start buying items in bulk for your business, be sure to keep a long, detailed record of the typical consumption levels in the workplace. Continue to monitor these levels after you start collecting a reserve to keep track of your consumption habits.

Too often, financial experts will advertise the benefits of buying in bulk without emphasizing the importance of not going overboard. Believe it or not, the practice isn’t as intuitive as it might seem. In fact, it’s more natural to get greedy with high volumes of supplies than it is to use sparingly. However, with a little practice and an application of these fundamental rules, the benefits of buying in bulk can far outweigh the risks.

Felicia Baratz is a freelance writer, graphic designer and social media addict living in Indianapolis, IN. As a contributor to ProfessionalIntern.com, Felicia discusses new, innovative technology and it’s relation to the business world and social media marketing.

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How to Reinvent a Dead Brand

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Rescuing a dead brand and nurturing it back to life is a special kind of business art that requires enterprise, vision and a bit of psychological savvy. Building a brand from scratch is easier, but it lacks the historic richness and recognition of a long established brand. Brands with history are already embedded in the public consciousness; whether memories are bad or good, the presence of any memory can be a marketing boon.

The burden of a brand revivalist is to rewrite the memories and reputation, erasing negative connotations and associations by reinforcing good brand qualities and rolling out new, impressive features. Following are typical strategies to reviving any brand.

Get a Second Opinion on Your Brandable Skills

Brands often fail due to the mismatch of skills of between brand and entrepreneur. Whether you are the original brand owner or the adoptive owner of a purchased and lagging brand, begin the reinvention by refocusing your identity. Get feedback from peers, former bosses, clients, professors and other evaluators about what your strengths are as well as your weaknesses. This can be done in individual interviews, emailed surveys or, preferably, in an all-day brand development conference. Be honest about how other professionals perceive your personality highlights and deficits.

Rather than forcing yourself to live up to a brand and, by extension, an impossible identity, tailor the new brand to fit who you are and your valuable traits. Let it be a distinct, custom brand that only you can present because it conforms to your experience, talents and skills.  In this way, the new brand identity is unique, memorable and in harmony with your identity.

There are situations, of course, when you need to completely change fields and markets; in those cases, you might need to undergo training for new skills but these should not be so beyond your natural aptitude that you feel ill-prepared as the executive behind the brand.

Create a Legend

Once you have your identity, immortalize it. Every reinvention needs a good narrative. This story must be truthful and it should narrate the crash and fall of your previous life, career or business in such a way that it emphasizes character and the values of your new brand. The general public loves a back story and can relate to underdog entrepreneurs who struggle to get back on top.

Once polished, this story can be disseminated through brand literature, advertisements, word-of-mouth and social media. Have a short-hand, pithy version of the story that can be used to influence your brand elements; the image in the logo, the colors, the slogan should all pay homage to the themes and motifs in the legend. Do not make the narrative too personal; the goal is tell the tale of how a brand, not your ego, got reborn.

Modify and Expand the Brand

Dead brands typically have a dearth of public interest, profit and innovation, generally because they failed to grow. They stayed unchanged while competitors in their midst evolved with the times.  Upon revival, zero in on nostalgic aspects and the few remaining selling points of the brand.

These features can attract brand loyalists and be used as a foundation that keeps the brand recognizable so that the public gets a sense of the business as the same but vastly improved. The improvements come from modifications, such as an expanded product or service line, a new building or atmosphere, a new style of marketing or a new community and social media presence.  All alterations should present the brand as fresh, in-style and contemporary.

Stage a Major Reintroduction

Once you’ve designed your elements, retooled your identity, salvaged the remaining positive brand features and expanded the offerings, now is the time to capture the interest of the public. The reintroduction campaign should be designed to impact offline and online audiences, local and remote audiences.  Activities can include the unveiling of a new website, blog and social profiles, special promotions and marketing campaigns, viral videos or memes, contests and old-fashioned live events in multiple locations.

Launching by partnering with related businesses to roll out bundled services or products has also been an effective reintroduction practice. Furthermore, if a formerly dead brand still has a warehouse of stock, interest in the brand can be revived months before the re-launch by selling these items as limited, commemorative pieces and collectibles.

Willie Pena is a freelance writer, video producer, visual artist, and music producer. Willie writes about marketing, branding, innovation among other topics. In addition to writing for firms such as IBM, Colgate, Transunion, Webroot and a multitude of private clients and websites including Cloverleaf Innovation’s website. Connect with him on LinkedIn.

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4 Risks and Payoffs to Running Your Own Small Business

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For most of the risks that you face in running a small business, there tends to be a corresponding payoff that goes hand in hand with it. Business insurance will deal with some risks that can damage your company and work on ways to mitigate them, but there are more general risks that a business faces that are far from insurable. Luckily, these less insurable risks do normally come with a silver lining to balance things out.

Risk: No financial security

If you run your own business, you are the one that pays the wages. This means that your financial security is far from guaranteed. You have a responsibility to keep your staff in employment and to nurture their development, all the while being careful not to overwork them and drive them into the ground. Not only that, but you will answer to a higher power if you have share holders who should be breathing down your neck to make sure you are doing the best you can in maximizing their investments.

The lack of financial security will really hit you when you realize that holidays and sick days are less of an option. When you work or yourself, it can be difficult to schedule that kind of time off and keep the business afloat at the same time.

Payoff: No fear of losing your job

Of course, you could argue that while financial security might be in short supply for you, job security is in fact much better. Working for yourself does ensure that you won’t be made redundant.  That might sound like an issue of semantics and psychology (a journalism tutor once described to me the fine line between “freelance” and “out of work” in that there is so very little practical difference between the two but one is a more positive state of mind than the other) but running your own company makes you the master of your own destiny when it comes to continued employment. You might have to work harder and for longer periods of time, but at the same time this should be easier because you’re doing something that you’re passionate about and you’re able to better act on your own ideas. That has significant advantages over working for someone else in an area that maybe you have less interest in.

Risk: Burnout

What started as a passionate effort that you find yourself pouring all your time into can quickly turn into a soul destroying struggle to stay committed if you start to burn out from it. The burnout can have the added impact that comes from knowing you’ve destroyed a genuine passion through all work and no play in an effort to get your start-up off the ground. Burnout can strike at the most inopportune times and cripple a business with significant potential. It is most likely to hit you if you have bitten off more than you can chew and find yourself facing a seemingly insurmountable workload. A company that burns out can survive, but it risks a demoralized staff and could sack its reputation if it fails to deliver on promises. Additionally, once things plateau in terms of progress, it can be difficult to get that ball rolling again.

Payoff: Relative freedom

Running your own business does give you a remarkable amount of freedom. Although declarations of being able to do whatever you want might be overstretching it a bit as they ignore the commercial realities of your situation, you really can run the show the way that you think is best. Your potential to adapt and change the way you do things is an ideal counter to stave off burning out or address it if it hits you.

Risk: Not enough clients or business

Struggling to drum up enough business or clients can be a significant problem for small businesses and the self-employed. Larger businesses might have larger contracts and longer running agreements whereas your business might take a lot more short term work which can quickly dry up depending on your trade or profession.

Payoff: Choosing your clients

Which clients you take on is entirely up to you when given the option to pick between those interested in working with you. It is your responsibility to maintaining new and recurring business and keeping your schedule full, but if there are contracts that you would rather pass up on, that’s entirely up to you. Small businesses still in their early start-up stages might be a little more under pressure to take on anything that comes their way, but ultimately once you find yourself more established and in more of a selective position, the direction you take your business and who you want to work with is your decision.

Risk: Failing in your responsibilities

Being employed within a company can limit the responsibilities that you have in place. Depending on your role, you might manage a whole division or particular function of a company, but unless you are particularly high up the corporate ladder, the buck does not stop with you. With your own company, it’s all on you. You are responsible for pretty much everything that goes on as part of your business activity, regardless of the division and often regardless of delegation. There is a lot to stay on top of and be held accountable for and the risk is that you ignore a critical area which ends up landing you in significant trouble.

Payoff:  Direct rewards

There is a direct link between how much work you do and how much money you earn when you’re running your own small business. Other factors can sometimes work their way in such as favorable market conditions might mean you are on the right side of a boom in industry and simple good luck could also mean you inadvertently strike a virtual gold mine with your products or services, but when it all boils down to it, your rewards for hard work are much more direct than the vague commission structures and rumored promises of potential promotions that you get in full time positions.

Written by David Hing for YOUR Insurance a broker that understands insurable risks for small businesses and knows a little about non-insurable risks too.

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