All About Self-employed individual


Who is defined as a self-employed person?

A self-employed person is an individual who does not work under an employer for a salary or wage.

They may be a sole proprietor, independent contractor or an individual in partnership who earns an income through a trade or business. Self-employment offers many advantages as well as challenges. With no fixed strategy to become a successful entrepreneur, you must be willing to take risks in self-employment.

KEY TAKEAWAYS

  • A self-employed person doesn’t work under an employer.
  • A self-employed individual offers services to clients and businesses.
  • There are no salaries or wages in self-employment but profits.
  • Self-employment may include a sole proprietor, independent contractor, or partnership.
  • A successful self-employed person is hard-working, curious, decisive, a risk-taker, a good leader and adaptable.

Pros of being a Self-employed individual

Self-employment has its pros and cons. The advantages of being self-employed can be:

  • Being your own boss in self-employment, you enjoy the freedom to make decisions instead of being controlled by an employer.
  • Self-employment allows you to follow your passion and work dedicatedly towards achieving your goals.
  • In self-employment, you have the flexibility to decide your work schedule.
  • Self-employment gives you the freedom to choose people you like to work with.
  • Self-employment allows you to contribute to employment creation.
  • In self-employment, you get the result of your hard work in the form of profits.

Cons of being a Self-employed individual

Self-employment has several advantages over a regular job. However, it comes with challenges too that are as follows:

  • Self-employment involves irregular or volatile income. With business ups and downs, your income is not fixed like in a salaried job.
  • There are no paid leaves in self-employment. Also, it is harder to take an off.
  • Self-employed people usually have to pay more taxes than salaried individuals.
  • You have the entire responsibility of success and failure on your shoulders. This leads to more stress.

Types (Business structures) of self-employment

Picking a suitable business structure is essential to running a business seamlessly. The common business structures in India include the following:

Sole proprietorship: A sole proprietorship is a business structure controlled by one person where the entity and the owner are not considered separate. With no formal registration required for a sole proprietorship, it is an easier way to start a business. The owner is the sole beneficiary of the profits earned. However, he/she is also responsible for all the liabilities. Also, the income earned by the owner comes under personal income tax as there is no need for separate filing of tax returns.

Partnership : A partnership firm is a business structure where two or more individuals come together to work and earn profits. A partnership deed lays down the business terms and the partners’ profit-sharing ratios. The partners have unlimited liability implying they are legally responsible for paying the debts and handling the financial obligations of the firm. Registration of a partnership firm is not mandatory, but it is advisable to do so.

Limited Liability Partnership (LLP): Unlike a partnership firm, the partners in an LLP are liable for the business debts or losses up to their investments in the business. Thus, the liability of the partners in an LLP is limited to the business assets. Incorporated by the Limited Liability Partnership Act, 2009, the partners and the LLP are considered separate entities. Also, the partners are independent of each other’s liabilities and misconduct.

Public limited company : According to the Companies Act, 2013, a public limited company is a company that is not a private company. Setting up a public limited company requires at least seven persons and a minimum prescribed paid-up capital. The company can also list on the stock exchange to raise capital. Also, the shareholders of a public limited company are only liable for their stake in the company.

Private limited company :A private limited company is a company having a minimum prescribed paid-up capital under the Companies Act, 2013. The number of members in a private company is restricted to 200 except for one-person companies. There is a prohibition on transferring shares and inviting the public to subscribe to the company’s shares.

One-person company :As the name implies, a one-person company has only one individual to run the business. The individual is the sole decision maker and the owner of all the company shares. However, a nominee is required for the sole owner to register the business.

Section 8 Company : A Section 8 company is a non-profit company which enjoys the status of a limited company without adding the term “Limited” to its name. The company is set up to promote science, art, commerce, religion, charity, research, etc. The profits of the Section 8 company can be used for the promotion of its objectives only. Also, there is a prohibition on dividend payments to its members.

Joint venture company : A joint venture company is an alliance or relationship between two or more companies. The parties’ resources are shared and used to run a business and achieve a common commercial goal. It may be equity-based or a contractual joint venture. Also, it may be a long-term or a short-term arrangement to work on a specific project.

Non-governmental organisationNGOs are organisations formed to benefit society or the underprivileged sections in particular. They can be established as a trust, society or a Section 8 company. The members of an NGO have no self-interest as they work for charitable purposes only.

Qualities to become a successful self-employed person

Self-employment offers you the freedom to work towards your passion. With consistency and dedication, you get the chance to excel in your business field. There is no fixed strategy for business success, but here are a few qualities of successful self-employed individuals which you can follow. They are:

Hard work: Self-employment requires more hard work than a salaried job. You must be willing to put extra hours into your work, especially in the beginning phase. As you are responsible for the success or failure of your business, self-employment demands utmost dedication and hard work.

Curiosity: Successful entrepreneurs have a high level of curiosity and continuously search for new opportunities to expand their business. By discovering and exploring new avenues, you must strive to stay one step ahead of your competitors.

Leadership: Usually, businesses are run by multiple people working together to achieve the company goals. A successful self-employed person surrounds himself/herself with talented teammates and leads the business towards success.

Risk-taking ability: Self-employment is full of risks along with opportunities. However, a successful business person manages the risks and rewards to benefit from every opportunity that comes in the way.

Adaptability: Markets are continuously evolving with many changes happening now and then in technology, rules and regulations, etc. To ensure your business’s continuity in every environment, you must be willing to adapt to the situations accordingly. Being flexible can help you to become a successful entrepreneur.

Decisiveness: A successful business person knows how to tackle difficult situations and make decisions at the right time. The decisions may not be correct every time, but a successful entrepreneur knows how to jump back from losses or failures.

Final words

Self-employment comes with its benefits and challenges. However, the avenue provides endless opportunities to excel in your business field. You should devise your business strategy on innovation, hard work, discipline and excellent leadership qualities. So, seize the endless opportunities and start with your business idea now!

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