What to Know Before Becoming your Own Boss

Thinking about becoming your own boss? One of the advantages to going out on your own is that there are no one-size-fits-all requirements to self-employment. You can open a private practice. You can work as an independent contractor (also called a 1099). You can create a constellation of “gig” opportunities, such as teaching, writing or coaching.

In short, you have greater independence to focus your talents on work that brings you joy. You may even discover that you can increase your income.

But asking if you should go out on your own is only half the question. You also need to determine if you can—that is, if you are financially ready. When you are an employee, you meet with clients and receive a check. When you open your own practice or become an independent contractor, your income is less stable. You need to have enough cash on hand for start-up costs. It takes time to ramp up a client base. And you still need to cover your day-to-day requirements, like housing, food and transportation.

By taking the time to get your finances in order before you make the leap, you’ll be more likely to land on both feet. Get started with these four tips:


When you work for someone else as a W-2 employee, you can take things like a furnished office, technology infrastructure and health benefits for granted. When you open your own practice or become an independent contractor, the burden is on you to source and pay for these essentials. To avoid financial surprises, spend time identifying and putting numbers to your start-up expenses, which could include:

  • Health benefits
  • Office space
  • Furnishings and office supplies
  • Technology and software (including for charting and accounting)
  • Credentialing
  • Marketing/networking

As you build your financial plan, keep in mind that many of these expenses are not one-time costs. As you build out your plan, make sure to include other costs that crop up throughout the year, such as continuing education.


When you work for yourself, you can set your own schedule. But before you commit to short workdays and long weekends, make sure your business plan can support your lifestyle.

If you haven’t already, establish your personal budget. You’ll need to factor in your requirements—such as housing, food and utilities—as well as your wants—such as eating out or taking a vacation. Remember that you’ll also need to set aside cash for unexpected expenses as well as for long-term goals, like college funds and retirement.

Then, combine this data with your projected business expenses and compare against your desired rate and schedule. If the two don’t align, you’ll need to start making adjustments.


When you are a salaried employee, you get paid the same whether you’re in the middle of a busy season or stuck in a slow stretch. You also receive paid time off to cover vacations or sick days. You may even get paid for holidays.

When you go out on your own—whether as an independent contractor or by opening your own practice—you can earn a higher billable rate. But if business is slow, your income shows it. In addition, if you decide to open your own practice, “therapist” is just one of many hats you’ll wear. You’ll also need to set aside time for marketing, scheduling, billing and collections, bookkeeping and credentialing. All of this will eat into your billable hours.

In short, you’ll need to be ready for unplanned downtime. That requires setting aside enough cash during upswings to have a cushion for temporary downturns or time away from the office.


Taxes are one of the most common stumbling blocks for the newly self-employed. While this topic alone could generate volumes, one of the most common points of confusion is quarterly estimated taxes. You will be responsible for paying estimated taxes four times a year. In addition, you will also be required to report and pay 15.3 percent in Social Security and Medicare taxes, as opposed to the 7.65 percent you pay as a W-2 employee.

The good news? Independent contractors and small businesses are not required to pay taxes to the state of Ohio on income less than $250,000. In addition, you may qualify for an array of deductions, including for a home office, mileage and health insurance.

Your best bet is to retain an accountant you trust before you go out on your own to ensure you understand your tax liability. An accountant can also help you prepare quarterly payments and annual returns and ensure you are in compliance with all applicable tax laws.


If you’re ready to be your own boss but the business side gives you pause, consider becoming an independent contractor. As a contractor, you can partner with a company that will take care of the backend services so you can focus on your clients.

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