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Tips for Starting as an Independent Contractor

May 15, 2024 / By Jack Shaw

Tips for Starting as an Independent ContractorPeople often consider two career pathways — becoming an employee or an entrepreneur. However, your ultimate route to success may entail starting as an independent contractor.

According to the Internal Revenue Service (IRS), an independent contractor is synonymous with being self-employed. Still, the reality is usually a hybrid arrangement between a traditional employee role and hanging out a solo shingle. The classification covers diverse professions, from doctors to plumbers to writers.

Many such individuals contract with a specific entity, such as an electrician whose majority of work comes from the same general contractor. However, those classified as independent contractors may accept work from other sources and do not appear on the payroll, receiving a separate fee for their services. Following these tips can set you up for success if you are considering such an arrangement.

1. Set Up Accounting

When the IRS considers you self-employed, you are solely responsible for paying your taxes. This prospect becomes more complicated as an independent contractor because you no longer have automatic withholding. The United States has a pay-as-you-go tax system, which means you become responsible for reporting your quarterly earnings and paying estimated taxes sufficient to avoid penalties. Also, because self-employed workers don’t have withholding for FICA, they have to include not only projected income taxes, but also self-employment tax for Social Security and Medicare taxes (essentially  both the employer and employee share of FICA) in estimated taxes.

Therefore, you need an accounting system to track your income and expenses so you can pay what you owe and accurately complete income tax returns. A simple Excel spreadsheet is sufficient for a writer who only deducts home office expenses, such as internet access, and computer upgrades. However, a plumber with multiple income streams and variable expenses should graduate to a program such as QuickBooks, which imports your data into the tax preparation software of your choice if you self-prepare returns.

2. Cover Yourself

Independent contractors also bear full responsibility for meeting their insurance needs. For many, health insurance coverage is their primary concern. However, those in skilled trades must also carry liability coverage and workers’ compensation for all crew members or face legal action.

Likewise, physicians must cover malpractice while other providers — such as accountants — benefit from umbrella policies protecting against wide-ranging potential suits. Coursework and training to prepare for such professions generally address which coverages you need, although you can also consult an independent agent specializing in your field.

3. Get Organized

Your primary focus is your skill or trade, and shifting your mindset toward a more entrepreneurial one trips up many new independent contractors. You are no longer solely a photographer but also a business owner, meaning you must allot time to handle the crux of your business, including marketing activities, as well as the incidentals accompanying organizational operations.

A planner will allow you to schedule time for tasks like:

  • Keeping your books updated
  • Attending required continuing education coursework
  • Managing your license or certification requirements
  • Organizing your tools
  • Taking inventory

If you want to avoid burnout, schedule such activities as part of your work week — do not leave them for after-hours. It is too tempting to neglect them when you feel fatigued, but these tasks are essential to success as an independent contractor.

4. Hone Your Necessary Soft Skills

Taking care of the legal aspects of independent contracting seems intimidating. However, the most challenging yet necessary part of success could be honing your soft skills. Since you don’t have the same protections as an employee, it is up to you to cultivate the following traits for stronger working relationships.

Reliability

Independent contractors must still meet agreed-upon schedules. Lagging behind casts doubt on your ability and can hinder operations. For example, an electrician who misses deadlines may hold up other aspects of a construction project — and the general contractor won’t likely use their services again.

Communication

Communicating clearly, honestly and positively counts. Hone a reputation for living up to your word and talking well to and of others.

Active Listening

What does your client value most? Every job may be slightly different, requiring you to tune in carefully.

Conflict Management

What happens when you disagree on fees and deadlines? Approaching negotiations from a win-win instead of a winner-versus-loser mindset smooths relationships.

Adaptability

You might typically write about health-related topics, but publishers need articles on the shipping industry. Expand your horizons.

Emotional Intelligence

The same personality traits that create problems in family relationships also wreak havoc in business. To manage emotions in healthier ways, cultivate emotional intelligence skills like self-management and consider therapy or personal development courses.

Getting Started as an Independent Contractor

Working as an independent contractor could be your launching pad to business success. It allows the freedom of entrepreneurship while providing connections that can make self-employment less stressful. Following the above tips helps you avoid common pitfalls as you grow your business.

More blogs related to self-employment are here. 

Tags entrepreneur freelancer independent contractor self-employed startups worker classification

Jack Shaw

Jack Shaw

With a specialized focus on individual success and self-improvement, Jack Shaw's articles provide actionable steps and valuable wisdom to ignite personal growth. Jack is the senior writer of the lifestyle publication Modded and has also been published in Hella Wealth, Skills You Need and more.

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