Working from home is a dream of many, and running your own business is a great way to do just that. Chances are that, unless you’re selling a product, you’re doing a lot of freelance work. And when you freelance, businesses treat you as an independent contractor, or a 1099 contractor, which alludes to the 1099-MISC form businesses send to contractors they paid.
Being a 1099 contractor is a great way to make money while working from home, but you have to understand what your responsibilities are when you do 1099-eligible work. The Department of Labor is cracking down on businesses who misuse independent contractors, so the burden is on you to prove you do qualify as an independent contractor. That means handling your finances in a particular way.
1. Bill as Your Company
There is a slightly complicated test courts apply when judging worker classification, but the short of it is an independent contractor is a business, and the hiring company is a client. It is a business-to-business relationship, rather than an employer-to-employee one. So, to protect yourself and your clients, bill as your company.
This means you’ll need a DBA (doing-business-as) name and, for some banks, an EIN (Employer Identification Number). But after you get those in order, you can open a business bank account and accept checks payable to the company. (more…)
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