So You Want to be an Independent Contractor?

Confused about what it means to be an Independent Contractor?

Maybe you are working for a business but you want to start your own business.

Maybe your employer has suggested that you could work at home, and they will change your status to that of an Independent Contractor.

Before you make this change, you should know about some of the pros and cons of working independently.


  1. Independence.  You may be able to work your own hours from whatever location you choose depending on the type of job.  You should be able to negotiate pay rates and a payment schedule.  You will have to keep records required by your host business such as timesheets etc.
  2. No Tax Withholding.  Some people consider it a benefit that the payments you receive as an independent contractor don’t have income tax withheld.  This can be a curse if you don’t put away funds to cover this debt. It will come home to roost every year.
  3. Deducting Business Expenses.  Expenses you pay to run your independent contractor business are tax deductible. Check what is and is not an “approved expense”, never assume.


  1. No Guarantee of Income.  Being independent also means you don’t get a regular paycheck. If you are lucky enough to work for one or more clients who pay you regularly, that’s great.  Manage your cash flow and have a slush fund to cover you through lean times.
  2. No Benefits. One of the main reasons people stay employed is to have employer-paid benefits such as healthcare. If you need health insurance, you can get it but you will need to pay for it.
  3. You Still Pay Taxes. As an Independent Contractor, you still have to declare all the income from your work and you still must pay taxes and any other levies required on that income.

TIP:  An Independent Contractor can have a contract.  Get a written contract from each person or business you work for.  Having a contract spells out “what happens when.”  Having a contract can settle many disputes before they start, and you can take a contract to court to get paid, if necessary.

If you need further guidance on the benefits and drawbacks of being an Independent Contractor, consider a consultation with your Accountant.  This is a critical decision which can affect your future wealth creation and your current living standards.

Getting Business Infrastructure Right


Working as a freelance Personal Training and Group Fitness Instructor sounds like it could be liberating, interesting and a good-paying job. But the truth is, like any independent contractor, there are business issues that have to be considered, before you take your first class or train a client.

Dean Turner was a full-time chef and fitness enthusiast before he decided to take a chance and work for himself in an industry he loved.


Dean knew he needed to learn how to run a small business and decided to start by talking to his Accountant.  It was a given that numbers would be involved and Dean was also confident his Accountant would reliably advise him what to do and who to see.


The Accountant sat Dean down and gave him some home truths.  Dean, as an independent contractor, would need to keep the administrative, accountancy, marketing and legal aspects of his businesses as up to date as possible.  He would typically spend about 40 percent of his time on administration, marketing and client liaison.  It was time Dean had to factor in now.

The Accountant recommended that Dean invest in a cloud-based business system suitable for a startup business.  With their help, this system would manage his business and provide useful reporting to allow them to make decisions about profit, growth etc. and ensure the numbers stacked up.  It would also drive routine invoicing and tracking of expenses.

Benefits for the Client

In the 20 or so years that Dean has worked for himself, he has been a busy and highly regarded as a Personal Training and Group Fitness Instructor.  Dean confirmed that in his opinion, spending time on getting his small business infrastructure right was just as important as initial client engagement.

Top Tips

Stay current with trends, technology and market issues.
Be realistic about start-up costs, obligations and registrations.
Network by joining a professional group.