Providing Financial Advice to the Newly Self-Employed

Financial planners can themselves be a valuable asset to the self-employed. This means you can help your clients from the ground up. One of the first things to determine is whether the new business should become a sole proprietor or incorporate. While setting up as a sole proprietor is easier, incorporating offers your clients protection if they may face any sort of liability issues.

If your clients expect to receive 1099-MISC forms, encourage them to obtain an Employer ID (EIN) number, so they do not have to continually give out their Social Security Number. This helps protect against identity theft and provides strong evidence that they are indeed a business.

Financial Planning Strategies for the Self-employed

You can also help your clients navigate the challenge of having an uneven income. Bringing in a lot of money one month and not so much the next is a common challenge for the self-employed. One of the key tasks of a financial planner for the self-employed is helping them set up a budget to better manage income fluctuations.

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Key advice that you can provide is to recommend the best time to take large business deductions. While this might seem like an obvious way to reduce tax liabilities, taking a large deduction could severely hamper your client’s ability to take out or refinance a mortgage. If he or she has taken a large write-off, it will seem like their income is very low, and the business owner may not qualify for a mortgage loan.

You can be particularly valuable to your client by helping them save for retirement. With 401(k)s being too complicated and expensive for the self-employed, your clients will benefit from your advice about other options like traditional or simple IRAs.

Financial planners for the self-employed can help bring peace of mind to those navigating the complex waters of independence and help to ensure the success of the newly self-employed.