Medical Malpractice

Are you tired of answering to someone else? You may be thinking it's time to call the shots yourself and be an independent contractor? Just think of what it would be like to own your own business and be in charge. You can finally kick off your shoes, lean back in your chair and decide just when, where and how you want to work Ah...but before you overturn your desk drawer into that box tucked under your desk and make a dash for the free agent express train, you might want to peer into that dark tunnel ahead to be sure you're not headed for a train wreck.

There are serious legal requirements to being an independent contractor, and lack of preparation could quickly turn what may have been a ride of a lifetime into a head on collision. In this article, I will offer ten 'to-do' items to test whether the life of an independent contractor is right for you. If it is, I'll offer advice on how to correctly launch your own business. First a few words to the wise about what being an independent contractor is really all about.

Nobody But YOU!

When 'traditional' workers (that is, the average 9-to-5 employee) think about the terms "independent contractor, freelancer, free agent," they only see one side of the equation. The flexible upside! They don't get to see the real life of an independent contractor for what it really is; a small business owner. What looks so attractive to a full time employee is the flexibility, independence and sense of "being your own boss" that comes along with being an independent contractor. What they don't see are the risks: no steady paycheck, constantly pitching new clients and business, no pay for sick time or vacation, collecting from clients who aren't timely about paying and lastly the lack of benefits. It also takes a certain kind of person to stay on top of all these items, can you self-direct? Can you manage your time and stay on top of billing and client retention? Probably the most significant change in work status that you undergo when changing from employee to an independent contractor is that all the responsibility shifts squarely to you. The steady income you've come to rely on is long gone and unless you are willing to shell out the money to cover the cost for medical coverage, you can forget about those fringe benefits too. But all things considered the hefty fees for your services makes it all worth it, right?

Start Up Costs!

Wait until you see the list of out of pocket expenses required to launch your business, and remember you have to maintain it on an ongoing basis. You will need to make a few purchases beyond the regular home setup you may already have like your own cell phone, fax machine, home office space and a laptop or desktop computer. What supplies and equipment you need is dependent upon what services you plan to offer and what it actually takes to convince the public and the government it's not just a store front. These additional costs must be factored into your pricing because you're the employer and there is no such thing as an expense reimbursement anymore-it's your money that you are spending. You may even need a business name and business license too so don't forget to factor in those costs when planning your new venture. When you stop and think about what it really means to go it alone and launch a business, it can seem a bit overwhelming in the beginning, rapidly moving to downright discouraging, and finally you may, like many, end up chucking your dream as soloist. Transitioning from employee to independent is no simple task. It should only be considered with a clear view about what it really entails.

Look Before You Leap

Let's review the minimum requirements to make the leap to independent contractor. The following is a list of business requirement. As you read them, ask yourself, am I prepared to go it alone as an independent contractor, even if it's into an unknown marketplace? Am I prepared to deal with nosey auditors looking to score big on unpaid payroll tax dollars from my client base?"

The Top Ten "To Dos" To Real Independence!

1. Get Real with a Business License -- Investigate to see if the city in which you plan to do business requires a business license or tax certificate for the services you are offering to the general public. If so, the fees to obtain a license are fairly nominal and do not require you to jump through a lot of hoops. The responsibility for renewing them will be yours, do not let them lapse. Some clients look to a business license as a clue that you're legitimate it may be what takes you off a potential clients' prospects list in the future.
2. Toot Your Own Horn with Advertising or Marketing Materials -- This is critical to your start up costs, make an investment in yourself by spending a few bucks and invest in some really great business cards and/or letter head. If you are a non conformist, go for putting up a really cool website, or create flyers geared specifically to your industry. If you are really adventurous and decide you want to spread the word near and far, how about a billboard or even a banner?
Whatever mode you decide to use to advertise your business, be sure it's readily available for view by the general public and not buried so deep that finding you is just way too much trouble. Keep your marketing/advertising tools looking top notch, designing your cards or flyers on your home computer may work for some, but the more professional they are, the more likely you'll recognized as a legitimate business. Please note: although word of mouth may be an acceptable practice in your industry, it is not viewed as a true form of advertisement by an auditing agency or a company trying to add you to a preferred list of businesses!
3. The Tax Man Cometh Prepare by Acquiring a Tax Identification Number (TIN) -- Your social security number is completely acceptable to use if you operate as a sole proprietor, but the extra effort to get a separate Federal Tax ID number to look like a business goes a long way in an audit of your client base. .
4. Obtain a DBA ('Doing Business As') - This form of identity is if you do not plan to incorporate and decide to simply use your name to do business.
5. Do it -- Incorporate -- Although not a requirement, this is another one of those extra steps toward the "investment in your business" and an extra step that clearly shows you intend to operate as a business owner and not an employee. It can also protect your personal assets, should something go wrong with the business.
6. Separate Your Business Finances - Open a business bank account, with your DBA name, in order to keep business and personal money completely separate. This will help strengthen your position as a business owner. Come tax time, it also makes things a bit easier to prepare your taxes. It's also a great way to track your revenue growth. Besides it's hard to adequately look at your "books" if your grocery bill is interspersed with business expenses!
7. Protect You & Yours with Insurance -- Depending on your service offerings, business type or industry standard, you will need insurance to protect you and your clients. To determine insurance coverage options, contact your current homeowner's insurance provider to see if they provide business insurance policies or check out industry experts on the web who can offer advice and perhaps better rates.
§ General Liability in my opinion is a non-negotiable requirement to convince others you are a business owner. Being the subject of a lawsuit without insurance can be a nail in the coffin for most small business owners. § Professional Liability/Errors & Omissions (E&O) Insurance is not always necessary and quite costly to purchase for the purpose of "just in case" but think of it as Malpractice insurance, If there is the possibility that an error or omission in your work could result in significant financial loss or injury to others, play it smart and make the investment. Consult with your insurance provider to help determine if E&O insurance is advisable or standard in your line of work.
8. Insist on an Ironclad Contract -- A well written, rock-solid contract or consulting agreement is critical to your continued livelihood and your client's piece of mind. Be sure to clearly outline:
9. The intent of the parties, both the contractor and the client; The services that are to be delivered with definitive start and end dates of the project; Fees for all services along with milestones and/or deliverables; Equipment to be used for the project, who will provide it and if it will be on a loaner basis, or any rental fees that apply, including any stipulations that may apply such as work stoppage clauses, kill fees, and termination of contract language. The end result must clearly demonstrate to a third party looking at the relationship that the intent of the two parties is one of client and independent contractor. Make it crystal clear this is a business agreement, not an employment agreement.
10. Brag A Little with Customer Raves - Prepare a list of clients along with any references for projects or services provided. Ideally, these would be a combination of current clients and clients you have worked with in the last six months. Think of it as your professional references list. A recent list of current clients and projects demonstrates your services are available to the general public and you are not financially dependent on a sole source of income as an independent contractor.
11. Document, Document & Document with a Paper Trail - Paperwork maintenance is another one of those critical pieces to running a business. A paper trail of prospect bids/proposals, business expenses, accountant or attorney fees and any and all other business-related costs will come in handy. Don't toss them after you receive payment for the work or plan on using your checkbook ledger as proof of related expenditures. The last thing you want to do is hand over evidence to an auditor that may help them win their case.

So there you have it -- a list that covers some of the basic requirements to prepare you for your life as an independent contractor. But, wait, don't run off just yet! You need to aware of a few potential landmines you may stumble upon along the way to becoming a successful business owner. Don't be surprised if potential clients request copies of your business documents and your track record of credibility. Newspaper and weblog headlines are filled with worker-instigated lawsuits, hefty employer fines and penalties and ginormous plaintiff payouts-leaving a bitter taste in the mouths of many. Would-be clients are no longer willing to take your word for it that you comply as an independent contractor; you must prove you're a business and can defend the claim if need be. Before you receive a ticket to ride at their company, you may be asked to submit "evidence or supporting documents" along with your bid or work proposal. These documents are collected to safeguard the employer in the event of a payroll audit where they must prove you are properly classified as an independent contractor -which excused them from paying employer payroll taxes. Clients are forced to demonstrate their innocence and you've become the target of these audits. Unpaid payroll taxes and worker misclassification cases are rampant across the nation, forcing employers to build a defense in advance. Securing copies of this documentation and keeping them handy in case they are audited is an employer's basic defense against these types of audits. Be respectful, don't push back or kick up a fuss if you are asked for the documentation to prove you own and run your business. It comes with the territory. Make a few copies of all of your business documents and put them in a file for safe keeping in case somewhere along the way you are asked for evidence of your business identity. If asked, you'll be ready! Documents vary from employer to employer and you may be asked for one you simply don't have. Don't panic! Simply ask for an explanation of the additional documents requested; perhaps an alternate document may be substituted in lieu of the original one requested.

Ready, Set, Control!

One final piece of advice to those individuals currently working as an independent contractor or planning to go solo in the future: take complete control of your business. Remember, you left the 9-to-5 in pursuit of independence and the ability to make your own decisions if, when and where you will work. Collect the necessary tools: proper insurance coverage, a business license and a consulting agreement and you're on your way to looking like a business owner. Go further and keep control over your business. If the client is jumping in and taking control, it can spell disaster for you when you or your clients are audited. Owning a business is not a panacea; you actually have to run it like one. Make sure you start your business off right is the first step to independence and a successful business. Luck! Who needs it; you've got your documentation!