What Issues Should I Consider As A Business Owner Or 1099 Worker?

As an individual who runs their own business or engages in 1099 work, there are a variety of unique financial considerations to keep in mind. These considerations can have a significant impact on personal financial planning goals and require careful thought and planning.

One of the most important areas to consider when running a business is the effect it may have on personal financial goals. For example, if the business is not generating sufficient revenue, this may negatively impact personal savings goals or the ability to pay down debt. Conversely, if the business is highly successful, there may be opportunities to accelerate retirement savings or invest in other areas.

In addition to the impact on personal financial goals, it is important to consider the tax implications of running a business. This includes understanding how different business entities (such as sole proprietorships, LLCs, and S-corporations) are taxed, as well as taking advantage of any deductions or credits that may be available.

Coordinating different tax planning factors can also be critical to achieving one's financial goals. For example, contributing to a retirement plan can help reduce taxable income while also building up savings for retirement. Hiring a spouse or other family member can also be a tax-efficient way to help run the business while also potentially qualifying for certain deductions.

Other areas to consider when running a business include risk tolerance and insurance needs. This may include protecting the business with liability insurance or disability insurance to help offset potential risks. Financing issues may also be a concern, especially when starting a business or expanding operations.

By considering these key issues and working with a financial advisor, individuals who run their own businesses or engage in 1099 work can develop a comprehensive financial plan that takes into account the unique challenges and opportunities of their situation.

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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.