You have made the decision that working for someone else is not for you. Why allow someone else to become wealthy thanks to your hard work and diligence, right? In making the decision to become a private contractor, you have chosen your field of interest. You have a list of the services you wish to offer, and you have located the right area for your business. All you have to do now is to advertise, right? Wrong. Becoming a private contractor is the same as starting your own business. There are laws, rules, and regulations you must follow. Here are the steps you need to take to get started in the right way.
How to become a Private Contractor
Write a business plan to get a loan. You know your intentions for this business, but your financial institution does not. If you construct a well-researched business plan to include start-up costs, chosen location, and potential services offered with a price list, the bank will take you more seriously. They will know that you intend to work hard and become a success, meaning they have a better chance of seeing on-time payments. They will be more likely to approve your loan. You can find everything you need to write this business plan at the U.S. Small Business Administration (See Resources 1 for link to their website).
Get financed. There are programs all over the internet to help you select the best financial institution for your needs. Some offer small grants as well (which do not require that you ever pay them back). A list of both grants and loans are available at Business.gov (See Resources 2 for link).
Choose your business structure. As a private contractor, your business structure would be "sole proprietor." However, please keep in mind that you also have the option of selecting the following: partnership, LLC, non-profit or cooperative. Your choice will decide how much paperwork you will need to file to satisfy federal regulations. It will determine your liability to anyone who invests in your company, and it will also determine just how much you will pay in taxes each year. A good resource to help you in this decision can be found at the U.S. Small Business Administration website.
Name your company. As a private contractor, your business name will be your full legal name. This is also called "DBA filing." Each state has its own rules, laws and regulations for accomplishing this. You can find this information for each state online (See Resources 3 for link).
Get an Employer Identification Number (See References 3 for link to an EIN application).
Get a Tax Permit. You are required by laws based in each state to apply for this permit. You can find this information on Business.gov (See Resources 2 for link).
Get your business license. For each state, it varies where you would go to apply for a business license (See Resources 3 for link).
Once you have completed these steps, you are ready to start your career as a private contractor.