Self employment advice

gsganzer · Jan 28, 2016

I need some information/feedback on self employment. I'm just starting to research this and it's time to consult the TBN brain trust once again. I'm just looking for some basic info first, I'll start digging deeper as I go.

I'm contemplating starting a business and working for myself as a technical field rep and start-up/commissioning expert. I have extensive experience with process equipment used in the oil/gas and power generation industries and I have a number of business contacts saying they're interested in using me as needed. The big benefit for them is that they're buying the service "by the cup" and avoiding the cost of overhead in between service calls. Right now, I would be employing only myself. This could possibly turn into something bigger at some point (multiple reps working under me), but I'll broach that when/if I get there.

A little background first. This business venture is meant as supplementary income. Our primary income and health insurance is through my wife's employer, so I don't need to go down the health insurance rabbit hole yet.

Some of my basic questions to start:
Did you use an attorney to set up your business? How did you structure your business?
Do you use a CPA or are you using a software program to manage your books? Tax filings?
Liability insurance?
What payment terms with customers, Net 30 etc?

Thanks folks! I'm sure there will be more questions to come.

fishheadbob · Jan 28, 2016

You can go broke with professional advice setting you up as if you're Exxon-Mobil before you earn your first nickel. My suggestion would be to start as a self employed individual and see how things develop. Over the years I've been a LLP , a LLC, , a Delaware corporation, a LP, and gods know what else. Lawyers and CPAs don't work for nothing and they make their share of mistakes, just like the rest of us. None of those guys came cheap either.

Right now I'm back to being a self employed individual, which is by far the easiest; I have enough experience to handle my own tax stuff without help, and my current business of farming is a lot easier to report than some of the stuff I used to be in. If business takes off you may have to take on becoming a more complex entity.

Talk to your regular tax guy after you get a feel for how things go to ask if there is any specific reporting requirements for what you're doing.
Save all your receipts for everything in a big envelope, keep your ledger as simple as possible in the beginning. Like a notebook.
Good luck. Hope you become a conglomerate.

EagleTDL · Jan 28, 2016

You've got some things to think through... First piece of advice I'd give you is spent an hour with a CPA and an hour with an Attorney, it will be worth the $200-300 bucks you spend. You can even write it off if you decide to pull the trigger! The bean-counter can give you the pros/cons of S-Corp, LLC, Self-employed, etc based on your current financial situation. The Attorney can start you down the right path based on the Accountant's advice, each state has different rules about business types and how to incorporate.

Once you've gotten the advice for your state requirements, then you can decide to use those agencies to help you or do it yourself. That's your call, what's your time worth at the end of the day? When I did this in AL back in '07, I got everything going for less than a grand. But, again, that's a personal choice, none of the requirements are so hard that you can't do them yourself...

I use both a CPA and QuickBooks. I do all the Payroll and Quarterly filing for a two-person company. It's pretty time consuming to figure out just exactly what has to be done (see CPA advice above), but once you get it down it only takes a hour or so a week to do the Company paperwork. I let the CPA do the End of Year stuff, that way he can correct anything I've dorked up earlier in the year!

And his fees are deductible on the next year's returns.

Liability Insurance is a good idea, but part of the player in that is how you are getting paid?? If you are getting money as a 1099 employee (consultant), your liability values may be different than if you have a contract with the Payer and they have Subcontractor requirements. Might want to feel your contacts out on that subject?

Net 30 really ain't "30" days, just so you know! You need to get that exactly in place before you go forward... I've seen "Net 30" start the clock when the Invoice is received, or when it is "processed". I've seen it be 30 days + processing + 1 week to cut the check. Each company handles that differently, again, feel out your prospective customers on that topic.

That'll get you started, and good luck!! :thumbsup:

Garandman · Jan 28, 2016

Most states have Small Business Development Centers that will advise you. For free or little cost.

Texas SBDC Network

lennyzx11 · Jan 28, 2016

I opened an automotive shop after leaving the Army. One man show then hired on a helper then a mechanic then two three four up to five at one time. I was making the same every year clear. The headaches at the height of it was horrible. A divorce caused me to shut it down as "she wanted half" but that was the best thing I did in my career path. I worked a few years on my own as a secondary job. I enjoyed that much more than you'll ever know.

So to your request.

Work it as a second job with options to back out if too much.

Don't hire a permanent helper until you absolutely have to.

Think about trying to hire on one of those companies and using their corporate umbrella with a salary to be close to what you will make without the overhead and heartaches.

This is the best piece of information I can say from experience.
Sir, you start a business and you are going to marry it, be it's momma, poppa, and everything else. When you figure the time versus money equation on the way to the "Good Life", you'll find out you worked your *** off for every penny. No business ever has succeeded with only a token commitment to it. Ever.

kevin37b · Jan 28, 2016

If you have to ask those questions with an education such as you have , get a job .

Tomtint · Jan 28, 2016

I have been self employed for 30 years. Before you go balls deep with legal etc. Start off with plenty of insurance and a talk with your CPA. Your CPA will advise you how to structure your new company. Either a DBA, INC, Partnership, sole proprietor etc. there are pros and cons to all. Our terms with regular clients are net 30 that inevitably turn into net 60-90. You need to make sure you have the reserves to wait for payment sometimes.

gsganzer · Jan 28, 2016

kevin37b said:
If you have to ask those questions with an education such as you have , get a job .

Kevin, are you just an internet prick or are you also a prick in real life? I'm guessing the latter.

I don't see where my questions to get some basic input from some others that have gone down this path, should illicit a crappy post like that.

PILOON · Jan 28, 2016

Going into business is a gamble in itself.
My thought is if you go for all professional advice and consultants etc you start yourself off with a costly overhead.
I'd be tempted to gamble a bit and start off small and add pro's as needed.
If you are member of a professional organization (engineering?) your assn probably has some sort of liability program, start small and add as needed or when the DIY gets too much to handle.
It is all kinda simple, pay taxes on your earnings and nobody will bother you.
As you go on you learn what you can write off, depreciate etc etc.
\Being in Canada I am not familiar with US and state taxes and loopholes etc but for sure as long as you file returns honestly nobody shoud bother you.
Later on you can look at professional advice.
\Go for it!

JFoy · Jan 28, 2016

I've been employed, unemployed, self-employed, and employer. I've run service businesses and brick n mortar retail. I've had DBAs, C corps, and S corps. Being your own boss is great for the ego but it also means you have to be absolutely firm with the finances. It means riding the roller coaster in terms of income - some months you're up by thousands and others, you're credit card balance scares you. Until you get your bank account padded with above and beyond tie-over monies for the slow times, you can forget the 'I want that so I'm going to buy that' mentality. Financial stress will cause so much stress in your marriage, it ain't funny. I agree with some of the others to check with your accountant and attorney in the beginning for advice on whether it is even a good idea and if so, how to go about it. Then check with your insurance agent about liability insurance - people love to sue these days. If all checks out, try it as a side job.

Every guy wants to own his own business. It's an independence thing. Biggest lesson I learned was I always grossly overestimated my own knowledge of what it takes to make a business last. In other words, I didn't know what I didn't know. Still, once you get one going, it does feel nice.

Hope that helps.

STx · Jan 28, 2016

I'm of the opinion that an entity of some sort is of benefit for both the legal protection and, more importantly, avoiding SE taxes. It does cost you some money on additional state Franchise Tax filings but you'll more than make up for it avoiding the SE tax. I have an LLC that has elected to be taxed as an S-Corp, it gives me all the benefits of the corp without the administrative overhead.

I've always heard people say use a good CPA and attorney but over the years, I've been through a lot and none of them really gained me anything over what I was doing on my own. I use an attorney from time to time when I have specific questions and have a CPA prepare my corporate return but that's about the extent of that. The primary reason I use the CPA for my taxes is because corporate returns are exponentially less likely to be audited when prepared by a CPA (not that I'm worried about an audit but, who needs the hassle?).

As to insurance, only you know what the risks are in your field and for the services you'll be providing. Maybe you can't mess up anything significant and don't need any liability insurance. Maybe a bad decision by you could cost your client a hundred million dollars and you need to be protected from that, both in a consulting agreement and liability insurance. A good, independent insurance agent is the one professional I have found useful. If they're honest and not just trying to sell you something, they can really help to make sure your coverage is appropriate.

Good luck, now is a pretty risky time to be going into O&G consulting. I hope it works out better than you could ever expect.

Budweiser John · Jan 29, 2016

I have been self employed my entire working life.
In the last fifty years I've learned several things:
1. You work like ****
2. The work week is not necessarily 40 hours
3. Your spouse and family must be on board with your goals.
4. Hire a CPA
5. Some years are better than others.
B. John

Budweiser John · Jan 29, 2016

I have been self employed my entire working life.
In the last fifty years I've learned several things:
1. You work like ****
2. The work week is not necessarily 40 hours
3. Your spouse and family must be on board with your goals.
4. Hire a CPA
5. Some years are better than others.
B. John

kevin37b · Jan 29, 2016

gsganzer said:
Kevin, are you just an internet prick or are you also a prick in real life? I'm guessing the latter.

I don't see where my questions to get some basic input from some others that have gone down this path, should illicit a crappy post like that.

I owe you an apology . I am sorry .

EddieWalker · Jan 29, 2016

I was wondering if you would do this after talking to you a couple weeks ago. Glad to see you're exploring your options and considering the big move. For me, it was very scary going out on my own. I spent a year and a half doing all the research I could, including talking to several lawyers, CPA's and friends that owned business's. Advice was all over the place and it was very hard if not impossible to know what was usable advice and what was just self serving. Lots of people seem to want tell you what to do that is all about them. The so called professionals, CPA and Lawyers, where very vague and in my case, a total waste of time. In my opinion, they are best after you have done something and then fixing it.

The SBDC is where I got the best advice. They had all sorts of pamphlet that I felt where excellent at explaining what to do and examples of how to do it. If you ever have to write a Bussiness Plan, their examples where better then any of the dozen books I bought.

My advice it to give it a try. Better to fail then to never know if you could do it or not.

My experience has been very good. But I have had several periods where I was down to having to use my credit card to buy gas and not sure when I would get paid again. Worse case for me was when I had less then $300 in the bank, bills due at the end of the month and not one single phone call for work. There is a panic, fear that grows every day when that happens. If you work for yourself, you have to realize that sooner or later, that is a very real possibility. There is also the fear that the phone will stop ringing. Right now with the collapse of oil, I've had clients cancel jobs and postpone them. I'm still working, but who knows for how long?

roadhunter · Jan 29, 2016

Good advice so far. Owning your own business can be the everything from the most rewarding to the most difficult part of your life depending on the situation from my experience. Some people are just not happy working for others and love the independence and freedom that being self employed offers. Other people like the stability and steady paycheck that working for others provides them. You just have to decide what type of person you are. At 5 on Friday do you want to go do your own thing and forget about work? Or are you willing to work wherever work needs to be done be it after hours of weekends?

Having a supporting wife is key to making it work as well. Getting her on board is mandatory.

I have been both successful and failed miserably starting businesses but it is what I enjoy doing and I would not have it any other way.

forgeblast · Jan 29, 2016

I carve (spoons and bowls) as a supplemental income. I had to get a dba (doing business as) liability insurance, register with the state, register with the state to pay sale/use tax. I also keep the supplemental income in a separate account to help with record keeping.
We just had southwestern lay off a lot of oil and gas workers in our area, cabot is holding but not hiring. Going to take a bit to get the pipe lines done.

forgeblast · Jan 29, 2016

I carve (spoons and bowls) as a supplemental income. I had to get a dba (doing business as) liability insurance, register with the state, register with the state to pay sale/use tax. I also keep the supplemental income in a separate account to help with record keeping.
We just had southwestern lay off a lot of oil and gas workers in our area, cabot is holding but not hiring. Going to take a bit to get the pipe lines done.

gsganzer · Jan 29, 2016

Thanks folks, I appreciate the great advice so far.

The great thing is that I don't need this to turn into a high paying income or turn into anything larger than me doing occasional contract work. However, I'm feeling around in case I decide to turn it into something larger in the future. The simple thing is for me to just contract through a payroll agency whenever a customer wants me to go consult for them. I've had a number of contractors that I've used over the years that have done it that way and it works fine. The issue with that scenario is that if I ever went on my own, I wouldn't be able to contract directly with that customer, due to protection clauses I had with the payroll agency.

Eddie,
Thanks. You're advice is solid with the SBDC as others have also recommended. I'll check into that next week. As you can guess, this decision has been a long time coming. I've actually started to get the spring back in my step knowing that it's time to move on. Good things will come.