Let me begin this section by saying that I am not a legal expert, a financial planner, or a tax professional of any kind. However, I have made my way through a number of business startups without having hired any of these experts to date—all while remaining on good terms with the federal government. I learned the old-fashioned way: by reading, researching, working with successful business owners, and asking tons of questions. I tell you this because if your business is starting out small, you may want to consider doing the legwork yourself and saving a few thousand dollars.
One of the best tips I can give you is to visit your local library and search for books dedicated to the legalities of starting a small business. Alternatively, you can search online for reputable treasure troves of information such as the U.S. Small Business Administration (www.sba.gov) or the Internal Revenue Service (www.irs.gov). There are endless printed directives, video instruction, materials you can have shipped to your door—the works! Let me hit some of the highlights to get you started, but please keep in mind that this list is not exhaustive.
This is an important section of the book, walking you through each of the mandatory steps for establishing your business as an official entity. From choosing a location for your office to setting up your records, the following steps will get you up and running:
Congratulations! You are officially in business. Now it’s time to protect yourself and your business by taking a look at the various forms of insurance.
Insurance is a necessary expense for any small business owner. The purpose is simply to transfer risks that you can afford (the premiums) to cover risks that you cannot afford (such as a client breaking his leg when slipping on the ice on your front steps). The necessity for any of these forms of insurance will be driven in part by the type of work in which you engage. As a Patchworker, you may want to consider a few different types of insurance:
Insurance is essential to your long-term success. You should contact a certified insurance agent for more information about these products and what is best for your business needs. Among the many forms of insurance that you must consider purchasing, health insurance is the most critical.
Millions of Americans get up and go to their 9-to-5 jobs each day for the sole purpose of maintaining their health insurance eligibility. I used to be that person, so I understand where you are coming from. The turning point for me, in all honesty, was when I one day discovered that the inflated health insurance premium that I was paying at my 9-to-5 job for basic coverage was only $20 per month less than it would have cost if I opted to leap out on my own and purchase coverage independently. It was a revelation.
Alternatively, you can investigate your eligibility for COBRA group health continuation coverage through your most recent 9-to-5 employer. Under certain circumstances, you may be eligible to purchase coverage through the group plan for up to thirty-six months. Prepare yourself for the fact that COBRA coverage may be pricey, but it can prove to be a viable and guaranteed form of coverage for individuals with certain preexisting health conditions.
When was the last time that you shopped around for health insurance? Have you ever done that before? Do you know what the actual costs are to purchase coverage outright for yourself and your family? Shop around! You might be pleasantly surprised.
To begin your quest for insurance, you can request insurance quotes online through a portal, such as www.healthinsurance.org, or enlist the help of a local certified, professional insurance agent who can evaluate your needs, educate you, and shop around on your behalf.
Opening a Health Savings Account (HSA) is a smart option for managing health-related expenses when you choose a high-deductible insurance plan. The HSA is a tax-advantaged repository established by the U.S. Department of Treasury to encourage saving for health-related expenses. You can withdraw money from the account to pay for health-related expenses such as medical bills, medication, or your deductible. According to the official Treasury directives:
Purchasing a health insurance policy with a high deductible and then building up an amount in the HSA equivalent to that deductible can give you peace of mind, knowing that in case of a catastrophic accident or serious illness your deductible can readily be met and a large portion of the costs will be covered. Contact a health insurance expert or the U.S. Department of Treasury (www.ustreas.gov) for more information.
It is unorthodox in our society to haggle with someone about the costs of a retail good or service being provided in a store, much less a medical setting. However, most medical professionals do have a separate pricing category for someone who has a high deductible and is essentially paying cash, minus the in-network discount. For routine procedures this can provide a moderate discount that can add up to a great deal of savings over the course of a year. For major procedures, such as newborn delivery, the discount can be as much as 50 percent off of the inflated retail sticker price. That can really add up to a lot of savings. Ask the question of the billing specialist at the medical office—you may like the answer!
Saving for retirement is critical, period. Just because you’re no longer contributing to a company-sponsored 401(k) doesn’t mean you can forget about saving for retirement. After all, retirement is a metaphor for the biggest journey of your life. The journey will be to places you have always dreamed of living or visiting and in the manner you have always envisioned. It is a trip that will last for many years, and the path you travel as well as the level of luxury you enjoy will be determined by your careful and disciplined preparation. Effectively saving for retirement will empower you. Failing to save for retirement sufficiently will result in a long, difficult journey.
To plan for and ensure a safe, pleasant journey into your golden years, you should first check out an online retirement calculator to determine the approximate amount you need to save in order to enjoy the lifestyle you have in mind. Most brokerage companies, such as Vanguard, offer excellent, free, and easy-to-use online tools for the general public. Use this information as a starting point for a conversation with a certified financial planner in your area.
Attending to these necessities is critical in order to ensure your health and the health of your business. Take your time and build a strong foundation that will safeguard your future success.