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The risks of being self-employed (and how to mitigate them)

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For many, being independent is job security. Not having to rely on someone else for a salary means that it is sometimes a bustle, but freedom is priceless. However, being independent involves a unique set of risks.

For example, it is tempting to be laid back about where you put your equipment and the one you let in at home. In addition, there are laws that every independent worker must follow to the letter. Ignoring these laws, or being casual about them, is perhaps the biggest risk of all.

Some independent people opt for business insurance, but this only covers you after a loss. You need simple strategies to reduce your potential risk before something happens.

As an independent, here are some of the unique risks you could face, and what you can do to mitigate them:

1. Theft of your property

You probably use the same laptop for your business activities as for your personal activities. However, if your laptop is stolen, your risk of loss is doubled. If you work in a cybercafe and need to shop, consider putting down your laptop at home first. It will be tedious to carry around with you, and you might be tempted to leave it in the car. Leaving your laptop in the car makes it more vulnerable to theft.

Also, when you invite new people to your home for your personal time, avoid showing them your desk, especially when you have expensive equipment in sight. Do not give anyone any reason to be tempted to steal your property.

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2. Damage to your home

When you're self-employed, the way you look after your home can have a direct impact on your business. This is especially true when you work at home and you need electricity, appliances, plumbing and telephone to spend the day.

It is easy to mitigate the risk of property damage through basic preparation. Plan for regular maintenance, take care of your pipes and, if you live in a weather-exposed area, make any necessary modifications.

For example, preparing for storms, especially during the storm season, mitigates the risk of loss. The most important way to prepare for a storm is to protect surges. Small surge protectors are important, but you need a complete surge protector. You have to divert the excess currents to the root, or you could end up with fried appliances that will cost you thousands of dollars to replace.

According to J & W Heating and Air, the average insurance claim for surge damage is $ 4,329. This seems to be a lot of money for a surge, but it is a serious situation. Major appliances like refrigerators and HVAC systems are likely to be damaged during a surge, and they are not cheap to replace.

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3. Working with entrepreneurs

Whenever you work with contractors, make sure what you ask them to do falls under the legal definition of an entrepreneur and not an employee. Before allowing them to work, get a W-9 so that you can properly report your payments to the IRS under their social security or taxpayer identification.

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The hiring of entrepreneurs involves some risks. For example, if you hired them online, they could disappear without completing the project. You can easily mitigate this risk by paying them only at the end of the project. Some industry professionals require a 50% deposit in advance, so be sure to get an iron contract before making this deposit.

4. Be an intermediary for the expenses of your customers

Filing and paying taxes is not difficult, but if you do not detail expenses, you should never take money for your customers' bills. In some cases, this can be considered an income transfer and can complicate your tax situation.

Your client should have his own accounts linked to his own credit cards to pay his recurring bills for services that you do not provide him. Services such as domain name registration, hosting and other monthly service charges must always be billed directly to your customer, even if you have created the account for it.

It's hard to say no when a customer wants to open an account immediately, and offers to send you a refund check. Everything seems innocent enough, until you get a 1099-MISC in the mail and you realize you have to claim their payments as income, even if it was not an income. And then you realize that you can not detail your expenses, and that you are now obliged to pay additional taxes.

Mitigate – do not run the risk

Risks are an integral part of life. There is no way to avoid the risk. The only question is what rewards are worth the risk?

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