5 Tips for Self Employed Individuals

Each year more and more people are taking the leap of faith and starting their own business. Over the last 10 years, Stats Canada reported over a 12% increase in the amount of men and women becoming self employed.

Here are some tips and information you may want to consider when taking that leap of faith:

1. Retirement Plan

You will need to select and manage your own retirement plan as a self employed individual. Choosing the right investment vehicles and strategies will help ensure that when it comes time to leave the workforce you are prepared and ready to take on this next step in your life.

2. Protecting yourself

Self-employed individuals have to purchase personal insurance. Without coverage, if you become sick or disabled you run the risk of losing customers and the ability for your business to function. You should also create a contingency and succession plan as this will act as your guideline should disaster strike.

3. Investment Choice

Your company is generally your main asset. You should choose investments that are less volatile and liquid to compliment it.

4. Incorporation

Choosing when to incorporate is a crucial decision. You gain flexibility in your financial plan, as well the ability for self employed individuals to defer taxes. However, this move should only be made if you earn sufficient income to absorb the costs of incorporation.

5. Canada Pension Plan

In 2012, the required annual CPP employee contribution limit for high income earners is $2,306 – double that for self employed individuals. When you become self employed you are required to pay both the employee and employee contributions to CPP.