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If you were recently laid off, are you “trying out” self-employment?
If you’re testing the entrepreneurial waters for a few months, it’s usually okay to keep your business infrastructure light.
Some things to do:
- Be super clear and intentional about separating your personal and business expenses
- Set up a new email address that’s exclusively for business communications (it’s okay if it’s your business at gmail or similar, you don’t need a dedicated URL).
- Set up a separate bank account for your business. It can be in your name, or you can file a dba (doing business as) and use that name. Deposit all earnings and pay all bills from this account. If you’re loaning the business money to start, clearly transfer from your personal to this account.
- Designate one personal credit card exclusively for business expenses or set up a new one.
- Consider getting an EIN (employer identification number) so you’re not sending out your SSN. You don’t need employees, it’s just the name. EINs are free from the IRS.
- Register with your city / local business office if required.
- Talk to your tax accountant proactively so they know you’ll be self-employed; they may have tips specific to your situation.
Two more if you have assets to protect:
- If your client / customer doesn’t provide one, get a robust independent contractor agreement.
- Consider whether you need general or professional liability insurance to specifically cover your business activities.
But if it turns out to be one project or a few side hustle sales and then you go back to a W-2 job, you’re not stuck unwinding a formal business for 18-24 months.
When in doubt, consult your trusted attorney or accountant.