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Moving from Employed to Self Employed, What Am I Forgetting?

being self employed

I have owned my business for the past 10+ years, which makes me essentially self employed (and about half crazy )  However, I have been a w-2 employee as far as salary and witholdings. I walked into an established business that had employees who did most of the book work. Deposits went through the corporation, and expenses were paid before I saw a dime.  At the end of the year I will be selling my business that has provided a huge safety net for the last decade. I will be my own corporation without  a book keeper to figure things out for me unless I want to spend the extra money to hire one. I’m hoping my experience is enough to make the right financial decisions to avoid any huge mistakes. This is my list for going from employed to self employed. Am I forgetting anything?


On paper my income should be higher than the salary I have been paying myself. I have three jobs lined up. One with the government, one as employee for the new buyer of my business, and one with another optometry office. At my old office, I will still be a w-2 employee, but the other two jobs are 1099 contract positions. My thought on having three different employers is that if one goes South, I will have others to fall back on. Because I don’t have office overhead, I can work fewer days/hours and make more money


The downside of being a 1099 contract employee is that I will have to fork over more in taxes since no one will be witholding them from my paycheck. I honestly am not sure how much I will have to pay because we now have rental income and expenses that will hopefully offset some of the tax burden.  I plan to save 35% of the contract income for taxes at this point. That may change if tax rates go up next year


If you are going to be self employed there are many reasons to incorporate. I have decided to stay as an S-corp because that was the set up of my old business, and I am familiar with the rules. With this set up I will have to have officers and an annual meeting. (My husband makes a great Vice-President.) I’ll also need to obtain a business credit score to keep personal finance and work separated.


I have not been as good with budgeting as I should have been in the past. With owning a successful business, I have been able to take out dividend income to supplement salaried pay. With this option gone, we have to really make a plan and stick to it.

Cutting Expenses

With trying to pay off credit card debt, we’ve already cut out most of the fat from our spending. You can never do too much, though. One reason I love the personal financial community is for the great ideas and suggestions that I read on other blogs. I called our internet provider this week. We only have one provider that services our area, so I’ve never had much luck with negotiating rates.  The company just got bought out by another one, so I though I’d try again. I was pleasantly surprised to learn that all I had to do was ask if they had any promotions. The phone representative told me they could give me 50% off my rate AND increase my internet speed for the next 12 months. She also said to call back in  year and ask about promotional rates again. Even if they don’t extend it, this still saved me about $240 over the course of the year.  I really encourage everyone to try this if it’s been a while since you called. You might get no fifteen times, but the 16th call could save some serious money.


I’ll have to set up a new retirement plan in the upcoming year. I haven’t studied it enough to make a decision, but it seems that I can either set up my own 401 K or a SEP retirement plan. I also hope to use Roth IRA’s plus save for more rental property. I’d love any ideas from people who have experience with these plans.

I’m sure there are a hundred other things I need to do before the end of the year, but these are the things I can think of so far for my move from employed to self employed.  What am I forgetting?

Have you ever set out on your own for employment purposes? Did you make any mistakes?

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. With the number of moving parts you’re going to have there - several employers, rental income, maybe capital gains on the business sale? - have you considered consulting with a tax accountant?

    We finally did the first year we had rental income on the books since we didn’t want to deduct when we were supposed to depreciate, etc. It was a little pricey (considering we’d always done our taxes ourselves before), but the peace of mind was so worth it in the end.
    Mrs. Pop @ Planting Our Pennies recently posted..What Do You Mean, Average?My Profile

    • Yes, my accountant has been in the loop and we will probably have another brainstorming session next month. Since we’ve made almost no rental money compared to what we’ve spent, I’m hoping it will offset some of the other taxes I will owe.

  2. Good job on the $240 phone call!!
    We have tax incentives in France for self-employed people, it is a bit confusing to go through them all but they can reduce your taxes. For example if your office is in a zone with few businesses, you get a tax discount, some zones are even tax free.
    Pauline recently posted..Festival of Frugality #359: 60 days left EditionMy Profile

  3. I have never been self-employed, and I am okay with that. The benefits of being an employee outweigh the benefits of self-employment for me at this time. It looks like you are doing all the right things in getting prepared for self-employment, so I’d say you are on the right track!
    DC @ Young Adult Money recently posted..Using the Internet to Build your “Personal Brand”My Profile

  4. Awesome! My wife and I took the plunge several months ago (well she had been running her own business for the last three years and we’re now doing it together) and love it. Sure, there are drawbacks like trying to keep work life separate from home life, but it’s been great so far.

    It looks like you’ve got a good start here. We do similar with the taxes and hold back 35%, although that will probably change next year. ? We’re also in the process of becoming an LLC, which seemed to be a better fit for us.

    The two things I would add is insurance and a good CPA. I don’t know what you have in terms of insurance, but if you’ll need to get it on your own then there are a number of paths you can take. I would also recommend a good CPA. I always did our taxes as I am a nerd and like that stuff, but with our business expanding it started to take on too many moving parts. Sure, it’s a cost. But, if you itemize it can be written off plus they’re the experts and can save you a good bit of money in the long run.

    Again, congrats…it’s a scary but VERY exciting time. Plus, you’ve been running a business for ten years already so I am sure you’ll do great!
    John S @ Frugal Rules recently posted..Is a College Degree Worth it?My Profile

    • I do have a really smart accountant that I’ve used for a while. I would never try to do my own taxes. The American Optometric Association has a great insurance program, so I should be good there. Thanks for the advice and congrats on your business success.

  5. Good luck with your new role! It sounds like you have thought most of it out already!!!
    Holly@ClubThrifty recently posted..How to Be More Credit SavvyMy Profile

    • I’m sure I forgot something really important, but it’s not like we’re a Wall Street company. I think we can work out any kinks if something arises.

  6. In college, my roommates and I started a computer business. If we had been successful, we would have eventually formed an LLC or an a-corp. But we started out as a partnership. Filing fees for a 2 person partnership is free, but it costs $50 per person to file schedule k’s for the or more people. Second year, we restructured to a 2 person partnership and made the third person a 1099 contractor!
    Edward Antrobus recently posted..Why We Have Separate Finances (Sort of)My Profile

  7. Mandy @MoneyMasterMom

    Way to go on reducing your telephone expenses - another example of if you don’t ask the answer is GUARANTEED to be No! A 15 minute phonecall saved you $240.00 bucks - that’s like getting paid $1000 an hour. It’s like you’re a celebrity!

    Good luck as you diversify your income, it must be so exciting! Good luck with whatever the future holds ?
    Mandy @MoneyMasterMom recently posted..6 tricks to make you BUY BUY BUY!My Profile

  8. Well you certainly have got your list and plan in place that’s for sure. I’m sure the transition will go as smooth as you want it but everything is a learning process. I’ve never had my own business so I’m afraid I can’t help you. Best of luck to you Kim! Mr.CBB
    Canadianbudgetbinder recently posted..What Products To Stockpile For Maternity LeaveMy Profile

  9. It sounds like you are being quite proactive in terms of how these new changes may affect your income. As well having 3 sources of income is so very smart. I’m sure you will do quite well! Good luck!
    Tackling Our Debt recently posted..Let’s Get Personal, 21 Things You Probably Don’t KnowMy Profile

    • Thanks for the vote of confidence. My neighbor owns a laundromat and will always let me fold clothes if my other ventures don’t work out, LOL!

  10. I agree with the others, go see an Enrolled Agent or CPA to properly sell your business. I just went through a 2-day class for taxes on business entities, and there are a LOT of variables and ways to sell of your business, some more tax-favorable than others.

    Also, I’m pretty stoked to be putting a budget together for you. It’s going to take a bit longer than the others I have done, but will be flippin’ sweet ?
    Jacob @ iheartbudgets recently posted..How We Survived On $14 An HourMy Profile

    • I actually have a good CPA and am working with a lawyer to make sure we do everything correctly. I’ve for sure never had a flippin’ sweet budget, cant’ wait!

  11. Sorry I can’t offer any advice on this one Kim… but if it makes you feel any better I learned a lot ?
    Savvy Scot recently posted..10 Crazy Safety Facts You Never KnewMy Profile

  12. When I started my publishing business a few years ago I went with establishing it as an LLC. I imagine that an S-Corp provides the same liability protections.

    Best of luck with your new corporation.

    That optical illusion had me hypnotized!
    Terry recently posted..5 Steps to take if your house is floodedMy Profile

  13. I’ve known several contractors in the software development industry who incorporated themselves and work as a “company”. Sadly, I have no idea about any of it! Best of luck ?

  14. It sounds like you have a good safety net lined up. When I established my LLC, I had nothing to fall back on. It was do or die. I did. There are plenty of tools to keep your books and keep track of things but no substitute for a great CPA to keep you out of trouble.
    Veronica @ Pelican on Money recently posted..He Got a Job, I Interview Him!My Profile

  15. Taxes are what killed me when I freelanced. Even setting aside money to cover it, come year end there were all these other levies I hadn’t thought about. *facepalm*.
    eemusings recently posted..Link love (Powered by tiramisu and the Muppets)My Profile

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