Self-Employed? 4 Important Rules Not To Overlook #Startups - The Entrepreneurial Way with A.I.

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Monday, September 7, 2020

Self-Employed? 4 Important Rules Not To Overlook #Startups

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The freedom of being self-employed is unbeatable. You can set your own hours, work wherever you want, and choose the clients you do business with. You don’t have a boss breathing down your neck, getting impatient with impossible deadlines, or demanding you work with difficult and disrespectful clients.

While freedom is wonderful, being self-employed comes with a host of serious responsibilities that would normally be managed by an employer. Responsibilities like taxes, meeting labor law requirements, and safety regulations fall with complete responsibility on the self-employed.

If you’re self-employed, make sure you don’t overlook the following rules to keep yourself in business.

1. Pay estimated taxes quarterly.

Self-employed individuals are required to pay income taxes on a quarterly basis by estimating how much tax will be owed each quarter. It’s easy to estimate owed taxes when your income doesn’t vary much, but when your income is sporadic it’s more difficult.

You’ll pay higher taxes as a self-employed individual, so be prepared to set aside between 15-20% of your income (or more if you are in a higher tax bracket). If you’re newly self-employed or still getting the hang of self-employment taxes, download this handy self-employed tax guide from Hurdlr to learn how and when to pay.

2. Follow U.S. copyright laws.

Before taking any advice on copyright law found on the internet, consult a lawyer. U.S. copyright laws are extremely protective in favor of the individual who created the piece of work. 

One of the most important things to understand about copyright law is that innocent misunderstandings can get you in serious trouble. Perhaps the biggest misunderstood aspect of copyright law is that you can use someone else’s work as long as you aren’t making money off of that use and give proper credit. This is false.

There is something known as the “fair use doctrine” that allows using a portion of another person’s work under strict and specific circumstances. However, the use must be legitimate. For example, you can’t take inspirational quotes from a book written by Wayne Dyer (without permission) and use them in your marketing material, even for a non-profit organization.

Courts have a strong history of denying claims of “fair use” and ruling in favor of the copyright holder. It’s not worth the risk. Never use anyone else’s work for any reason, whether it’s an image you found on Google, an audio file, or a quote. If you think your use would qualify as fair use, consult a lawyer before using that piece of material.

3. Adhere to state and federal labor laws.

When you’re self-employed, it’s harder to know for certain when you’re following state and federal labor laws. Without an HR department to handle everything for you, you’ve got to know the laws (or at least consult with an attorney).

There will be times when you’ll need to hire independent contractors, and at some point you may want to hire a small in-house team. The rules apply differently to independent contractors vs. employees, but are stricter when it comes to employees. For instance, when you have employees, you need to stay on top of critical labor issues including:

  • Managing new coronavirus regulations for paid leave and unemployment
  • Handling labor unions
  • Managing required sick pay
  • Maintaining the right insurance policies
  • Meeting minimum wage and overtime pay requirements
  • Mailing out 1099s to contractors you’ve paid $600 or more to during the tax year
  • Meeting rest and meal break requirements
  • Terminating employees correctly 
  • Managing the Family and Medical Leave Act (FMLA)
  • Carrying workers’ compensation insurance and handling claims
  • Managing minors according to youth labor laws

If you’re just working for yourself and by yourself and you never need to hire an employee or contractor, you probably don’t have anything to worry about. However, if you work with others, you’ll need to adhere to all federal and state labor laws.

4. Don’t misclassify employees as independent contractors.

Just because you have a contract stating someone is an independent contractor doesn’t make it so. Be careful not to misclassify your employees as independent contractors. Although they can share some similarities, there are major differences. 

For example, both can work from home, but employees who work from home aren’t necessarily contractors. If you completely control and direct someone’s work, including how, when, and where the work is performed, they’re probably an employee. On the other hand, if you hire someone to get work done and they are self-directed, they’re probably an independent contractor. 

Keep up with your responsibilities.

If you love freedom, stay on top of these four critical responsibilities. This isn’t an exhaustive list, but following these rules will help keep your business running.

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