Many business owners start out organically, providing a service or creating a product. This is often a part-time endeavor in addition to their primary employment. But at what point do you transition from self-employed to Atlanta business owner?

What It Means To Be Self-Employed

To be self-employed you must be an independent contractor or sole proprietor. In other words, you do not have any employees. While you may utilize other freelancers or the occasional contractor most who are self-employed do it all themselves. Obtaining a business license is not always required. For many Stone Mountain freelancers, consultants, and contractors, this flexible and independent business model is the one they wish to maintain. Whether you have a full-time job, or self-employment is your full-time means of income—you will need to pay quarterly taxes on your income, as well as monthly payments for Social Security Insurance.

What It Means To Be A Small Business Owner

The primary difference between self-employed individuals and business owners, is that business owners often have employees. This means that a business license and an Employer Identification Number (EIN) must be obtained. While some freelancers begin independently, as their business, products, and services expand—they often transition into a small business. However, if you plan on opening a brick and mortar location and hiring staff from the get go you will be a business owner from the start.

Why Is It Important To Know The Difference?

There are a variety of reasons it is important to know the difference between the two. Tax rules and regulations vary greatly for home-based freelancers versus business owners—so you must understand what eligible deductions you should be tracking. While a freelancer can outsource work, for example hiring a graphic designer to design their logo or website, they cannot hire a part-time or full-time employee without an EIN. On the flip side, business owners can hire contractors to perform work, but must follow the current laws that differentiate contractors from employees. In other words, no trying to get around officially hiring an employee.

If you have started picking up a few freelance or consulting jobs on the side, or you are ready to officially launch your small business—then it is time to identify a business consultant and accountant to help you create a sound business plan, file for the proper license and paperwork, track the appropriate expenses, set aside money for payroll, payroll taxes, taxes, and more. If you live in Stone Mountain or the Atlanta area—please reach out to NTRC Tax & Finance to get started!

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