Looking at going self-employed.

[onearmedbandit]

So anyone got any advice regarding being self-employed. I will be contracted to manage a company. Ie tax ins and outs, acc levies, should I get myself an accountant, or should I just use my fathers!! :msn-wink:

[Wonko]

I went down this road end of last year. Things to know:
If you earn(or plan on earning) more than $40 000 a year you need to charge GST and be GST registered.
You will need an accountant of some kind, or someone who knows what they are doing regarding taxes(yes use your old man's if you like)
Keep a third of all income in another account for tax reasons. It should be less than that, but is good insurance.
Make sure that your contract allows you time to take time off if need be.
Record any/all expenses that you have that are for the business. If you have to tavel, then keep a log book of how much is work and personal. If you use a cellphone during the day for work, claim the useage.

[Drunken Monkey]

It depends a lot on if you're going to work as a sole trader or limited liability company. Sole trading has it's appeal as it is easier, and you can just claim around 50% of anything you do. Limited liability is more complex, but lets you do things like claim all of your phone calls (as long as you transfer ownership of your phone from you to your company (easy)) and all of your vehicle expenses if you a) pay FBT or b) make it 'work only' vehicle (a bit more complicated).
This forum is probably not the best place to get the information you need as even I could write you a small thesis. I'm far form the most experienced self-employed person here, but I made sure the information I got was as accurate as possible - a lot of accountants might know how to balance books, but they don't necessarily know the law - through various contacts.

[sels1]

Keep a third of all income in another account for tax reasons. It should be less than that, but is good insurance.
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This is a really important point. And dont be tempted to dip into this fund as it grows. With provisional tax you may not have to pay much the first year but they will hit you with a big bill in the 2nd and you may have to pay tax in advance as well.

[ktulu]

I am just winding up my fencing business where I was self employed, it can be great and all of what is listed above is very good advice, I guess one thing which I have seen so much in the building industry is business' wanting some one to be self employed so that it is for benifit to the business. what I am trying to say is just watch that you wouldn't be earning more if you were just doing it for a salary or wage.

[gav]

You may want to discuss it with a reputable accountant. I think the IRD clamped down on this sort of activity and at the end of the day, its a bit of a grey area if you are actually deemed self employed, if you are contracted to manage a business. ie Whats the difference from signing a contract to manage a company as a salary earner? There are some strange rules that apply to say real estate agents as whether they are strictly self employed or not. Also, you may find their are no real advantages and may be better to try and gain benefits from an individual contract, say company car, phone, personal expenses etc

[onearmedbandit]

Thanks for the advise guys, looks like I've got a few rocks to turn over.

[Drunken Monkey]

You may want to discuss it with a reputable accountant. I think the IRD clamped down on this sort of activity and at the end of the day, its a bit of a grey area if you are actually deemed self employed, if you are contracted to manage a business. ie Whats the difference from signing a contract to manage a company as a salary earner? There are some strange rules that apply to say real estate agents as whether they are strictly self employed or not. Also, you may find their are no real advantages and may be better to try and gain benefits from an individual contract, say company car, phone, personal expenses etc

This is one area the accountants usually give different advice to what is 'actual law' so to speak. The usual advice from an accountant is the "80%" rule, ie if more than 80% of your income comes form 1 supplier, you may be deemed to be an employee rather than a contractor. The IRD DO NOT use this as their guideline - they have a series of questions about availability, rates, when you take holidays, if you can choose what jobs you want to do or have the ability to turn work down, etc... These are available in one of their guides. Had a quick look through the filing cabinet, but I can't seem to find my copy.

[Wonko]

Ask Gav pointed out, there may not be any advantage if you are going to be managing a business. You wil have to do your own taxes, and pay an accountant( added expenses and time usage) . Also figure out how much you are going to get paid. Is it safer to be paid as an employee for x number of hours a week garuntted, or will the hours be of your making.

[gav]

Yeah, thanks, it was at least 15 years ago I worked in an accountants office, so unsure of current rulings. :niceone:

[750Y]

there are definite advantages to being self-employed(apart from being your own boss).
The biggest bonus I can think of are the tax advantages You can gain($$$ in Your pocket which employees never get). There is a book called "slash your taxes now" by Peter Sibbald of Christchurch(accountant/tax agent) (ISBN 0 7900 0940 4). it sells for around $25 at whitcoulls and outlines all the LEGAL tax breaks available(including COFFEE).
My main advice is that that You MUST manage your tax affairs AND accounts in tandem. get hold of a package like MYOB(or use a spreadsheet). You will save money by doing it yourself(~$1000/year) but You must be thorough in your record keeping. other than that it is plain sailing and really satisfying. go for it!

[TonyB]

This is a really important point. And dont be tempted to dip into this fund as it grows. With provisional tax you may not have to pay much the first year but they will hit you with a big bill in the 2nd and you may have to pay tax in advance as well.
I know several guys who spent all of this money, either out of necessity or stupidity. It can't be nice to be hit with a tax bill in the 10's of thousands when you've got nothing to pay it with.
All of this sounds a bit strange considering what you mentioned last night. What's their reasoning for doing it this way? Surely they must see some benifit in it for themselves, which probably therefore means a potential problem for you. Like for instance after a few months if they decide it's not working out, can they just end your contract? Much easier for them than making you redundant or firing you...

[vifferman]

What's their reasoning for doing it this way? Surely they must see some benifit in it for themselves, which probably therefore means a potential problem for you. Like for instance after a few months if they decide it's not working out, can they just end your contract? Much easier for them than making you redundant or firing you...
Yeah, very good point. You have to wonder....

I enjoyed my stint of self-employment, as it was very lucrative (I charged for everything, includng several hours of playing cards at $60/hour :lol: ), but in the end the uncertainty of an irregular income made me move to D'Auckland for a regular salaried job. However, there are lots of things to be aware of, like the aforementioned tax, and ACC. I was still getting billed for ACC levies nearly two years after firing myself, as the ACC had underestimated their levies and were legally entitled to retrospectively recover them.

One thing which helped me a lot was marrying a tax accountant - I didn't have to worry about the financial side of things, apart from keeping track of costs, hours worked etc. and sending out invoices.

[Motu]

You got to be careful what your accountant is doing for you too.My first accountant was a recomenation from my Bro in Law,so we had the same guy.Seems he thought his main job was to make me not pay tax - fair enough,a small tax bill at the end of the financial year is pretty good...but try getting a bank loan if he's got you earning $3000 a year! We have an accountant now who produces real figures and I pay tax on them.

[onearmedbandit]

Tony, what you said was also what I was thinking. Our last manager was a fuckin idiot who they couldn't get rid of, had a couple of staff members like that. So yeah, they may well be protecting themselves, but hey they approached me. Once bitten, twice shy. I'm going to hit them up tomorrow about it as I'd rather stay as an employee.

[TonyB]

Good idea- it's got to be safer for you. At the end of the day, they know you and they know you do a good job, so it shouldn't really be a problem for them.

[Dodgyiti]

I have never earned more [ or worked harder]than when I was self employed.
But if you see my thread in the Rave On about ACC and self employed- you will get some income insurance or at least something to cover your mortage/debts in case you lose time off work. :o
A good accountant is essential, at least for the first year, then you will probably have the hang of it, and do your own.
Nothing [ besides riding and sex] is more satisfying than recieving a cheque from the :ar15: IRD- I know, they are giving you money ! Amazing :shit:

[cowpoos]

do u have any questions you want answered?