How to Start a Contract Business

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An Independant Contractor (IC) is defined by law principles set forth by the IRS. Generally, an IC is considered someone who owns his or her own business and earns a living from that business as opposed to relying on an employer. This can be an attractive option for many professionals. Estimates for ICs reach up to 10 percent of the overall workforce in the United States. Starting a contract business is a relatively easy and straightforward process, compared to starting other types of companies. That said, care must be taken to fully understand the state and federal laws that apply to each case.

Things You'll Need

  • Legal counsel
  • Business plan
  • Target customers

Write a business plan. The act of writing out all of the details of the business, from costs to operations and prospective clients, will encapsulate the core ideas of the business. The more time and thought spent on details here, the better guide you will have for down the road when questions arise.

Seek counsel from a tax professional. Determine what legal structure the business will take. Ensure that all proper state and federal forms are filed, and understand how records must be kept for tax purposes.

Develop a product/service. What value will this company provide in the marketplace? Be able to fully explain this value to potential clients.

Market the product/service to potential clients. Sales skills definitely come into play as an IC, as success or failure relies on the ability of the owner to find and develop new business.

Create written agreements. Written agreements will describe the services to be performed, when they will be performed and compensation for the services. This will also help preserve IC status in the eyes of the IRS and other agencies.

Produce for clients based on the work outlined in the written agreement. Do a great job and earn repeat business, a good reputation and steady income.

Tips & Warnings

  • Focus on what you know, and be great at it. Pick a service that you know you can perform that will provide value to others, and do it to the best of your ability.
  • Cash flow is king. One of the most important items to keep track of at all times is the amount of immediately available cash on hand.
  • Ask for referrals. Doing great work will be the best tool in your sales arsenal, and referral business is consistently the easiest to find. Practice asking your best clients for a referral.

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