The first thing to consider when you are getting started in your new career is how you want to be classified: as an employee or an independent contractor. There are important tax and legal differences between the two types of workers, and you should consult an attorney or a CPA for a detailed explanation of all the nuances and for an explanation of how tax cuts will affect you. However, there are some general differences between the two forms that you would want to investigate on your own or with the CPA.
Step 1: Choose a Business Structure: If you have decided that you prefer to be an IC, you must determine how your business will be structured. You can find forms for structuring your business on the internet (LegalZoom.com, forms.findlaw.com, etc.), but be sure the forms are valid in your state. Information from online entities does not substitute for the advice of a lawyer or CPA, particularly regarding how the new tax bill applies.
There are many forms of business organizations. There is no one form that is perfect for everyone. Here are the four common structures; Sole proprietorship, Limited Liability Company (LLC), Subchapter S Corporation (S Corp) or Subchapter C Corporation (C Corp).
Step 2: Plan for Your Taxes: As an IC, income taxes, Medicare and Social Security are not withheld from commissions. You’ll receive a 1099 form and must pay taxes. Ask a CPA about paying quarterly taxes and about the possibility of claiming a home-office deduction on your income tax return. Also ask how the tax bills will affect your ability to deduct your car as a business expense (if you used it in your business) or to deduct other expenses (health and other insurance premiums, office equipment and supplies).
Step 3: Select a Business Name: Once you have decided on your business’s structure, it’s time to name it! Search your local court clerk’s office or records office and select a name that defines you. It’s also advisable to search Google, the Better Business Bureau, and Yelp to see if the name is being used already. Also, check to be sure the domain is available to register a URL for a website. Remember, this name is part of your brand, so choose it wisely.
If your company engages in several different businesses, ask an attorney or CPA whether you should file in your local court clerk’s office or records office an assumed or fictitious name (d/b/a or doing business as). If you want to trademark your name, consult an attorney.
Step 4: Design a Brand, Logo, Tagline or Image: These constitute your face to the world. They promote your image and, together, they should match your company’s mission and values; be consistent on your business cards, stationery, email signature, website, etc.
Step 5: Find a Host: A host agency acts as an umbrella organization to which many ICs belong. Being a member does not make you an employee, and you remain the owner of your independent business. This arrangement is memorialized in a written agreement. Hosts offer many administrative services and provide tools needed to start and maintain your home-based business. Before you go too far, research a host and understand what they offer. Joanie Ogg, CTC, founder of findahosttravelagency.com, recommends that you ask potential hosts these questions:
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How long have you been hosting independent agents, and how many agents do you host?
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What are the ideal characteristics of an agent you are looking for?
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What is the average sales volume per independent agent in your network?
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Who are your preferred suppliers?
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What consortia do you belong to?
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What technologies do you use?
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What training do you offer?
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Do you offer a mentoring program?
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Do you offer leads?
Go to findahosttravelagency.com for information, comparisons, and reviews of host agencies.
