Starting a business is more than quitting your day job and putting together a website for your new project. It involves the law, your money, and your daily energy. When it comes to being your own boss, knowledge is power. The more you know, the more you can both protect and grow your business.
I’m not talking about the more you know about marketing or the more you know about your competition. I’m talking about the more you know about business itself. Here are three common business terms all self-employed people need to understand.
People who work for themselves don’t pay taxes in exactly the same way as people who are W2 employees for a company. In the W2 situation, a company helps pay taxes on your behalf and sends you tax information once a year.
When you work for yourself you have to pay taxes once a quarter. These are called, very helpfully, quarterly taxes. You can pay them by phone, online or mail in a check. They’re designed to ease the total burden of taxes due in April. Many freelancers though, don’t save enough for their quarterly taxes or fail to pay them throughout the year. It’s important to pay them on time and to regularly save for them, to avoid any fees or getting into trouble with the IRS.
Bookkeeping is one of those business terms that you’ll hear a lot when you start a business. ‘Do you have someone doing your bookkeeping?” or “What do you use for bookkeeping?” are common questions. But what even is bookkeeping?
Broadly put, it’s keeping track of all your financial records. That means your income and expenses, and narrowed down, it means things like all your invoices, receipts, taxes and contracts. You can do this yourself by hand, or you can hire a bookkeeper, or you can use a platform like Due to manage it. What works for you will depend on your business and your needs.
A work agreement is a basic statement that lays out the type and scope of work that you’ll complete for a client. It’s not as rigid or binding as a contract, but it functions to lay the groundwork of a partnership in a similar way.
A work agreement is essential for freelancers, especially new ones. It can provide some protection for clients that want to take advantage of you. It can provide guidance if you get confused about what you’re trying to create.
These business terms are common in the self-employed world, and understanding them will make your workday smoother. Learn all you can about the functions of being self-employed and you’ll find that the profit comes a little easier.