• Eric Anderson, CEO/Owner

Understanding the Differences Between Being a Business Owner and an Employee


While there is the excitement of being your own boss and doing things under your own terms, certain things might be taken for granted that you are now personally responsible for.

Three important areas that you should understand when starting your own business are:

  • Insurance and personal benefits

  • Retirement planning

  • Accounting, taxes, and admin work

Insurance

Insurances that are covered when working for a company:

  • group life insurance

  • group health insurance

  • group disability insurance

  • any type of liability insurance for the work done at the company

When self employed

  • personal life insurance (whole life or term)

  • personal health insurance (your own or under your spouse)

  • personal disability insurance (very important in case too sick to work)

  • liability insurance for your company (property and casualty, errors and omissions)

Retirement Planning

When working for a company the different types of retirement vehicles:

  • 401(K) and different types savings and thrift plans (many times with company match up to certain percentage)

  • Pension (federal, state, and military, and very few other jobs still offer)

When self employed:

  • Solo 401(K)

  • Traditional and Roth IRA (can also contribute if employee of a company)

  • Whole Life Insurance ( can also contribute as an employee)

Taxes

As an employee:

  • W2 (taxes are taken out your paycheck every pay period and company pays a portion of your social security taxes)

Self Employed:

  • Responsible for your own taxes and social security taxes

  • 1099 from contractors that your business does service for

  • Quarterly estimates to IRS and comptroller to pay taxes throughout the year

  • Taxes at the end of the year ( Schedule C or other form depending on type of company)

Accounting and Admin

As an employee:

  • Accounting department that takes care of keeping numbers in order

  • Admin department that takes care of other paperwork ( customer service, collections, paying bills, HR work)

Self Employed:

  • When first starting out as a business owner, your budget can be very tight. You will believe that you can’t afford an assistant or a professional such as an accountant to help your business. So that leaves all admin and accounting work to YOU!

  • Much of your time is spent doing “backroom work” for your business that has nothing to do with what you are skilled to do and what makes you money. You should hire an assistant or contract out this work as soon as possible to save yourself the time and headache of doing this work on your own.

  • In many cases when it comes to accounting and taxes it is well worth the money to hire a professional. There are many laws and tax breaks that you do not know about that a professional can show you that will save you much more time and money than the cost of hiring them.


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CONTACT US

 Eric T. Anderson, Owner/CEO​

Tel: 512-626-7545

Eric.Anderson@andersontaxes.com

Anderson Financial Consulting LLC
17017 John Michael Drive
Manor, TX 78653

United States
 

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