1. IRunning your own business can be very rewarding, but it’s also very difficult, especially regarding legal concerns. For example, if you’re not careful, you might accidentally miss important tax requirements or could even be unknowingly breaking the law by not having insurance.

The law defines a self-employed person as one who does business as an independent contractor. In other words, while you might work with companies, you are the “owner” of your services or product. But because you’re a business owner, you need to follow specific guidelines, some of which can be confusing.

This post will explore the frequent legal problems self-employed workers face and a few ways you can protect yourself from them.

Common Self-Employment Legal Issues

You need to be careful of multiple legal aspects when running your own business. These include:

• Property damage
• Client disputes
• Injuries
• Incorrect tax information

6 Tips to Protect Yourself

1. Get Insured

One of the best ways to provide protection for your business is to invest in insurance. This gives you financial support should there be a job injury, property damages, or disputes. In addition, many states will actually require you to get insurance if you plan to hire or work with others.

You’ll find that there are a handful of different insurance types self-employed businesses can invest in. These include:

• General liability
• Errors and omissions
• Workers’ compensation
• Property
• Auto

If you’re not sure what you need, contact an insurance provider. They’ll ask a few questions about your business and guide you toward the best option for your needs. You could also see if an online quote is available. With it, you can type in some general financial and business information to get an average price of what you must pay.

2. Register Your Business

Unfortunately, starting a company isn’t as simple as just getting the necessary materials and opening up. First, you must ensure that your business is registered locally to operate legally.

There are five main business entities you can register under:

• Limited liability company (LLC)
• Sole proprietorship
• Partnership
• Corporation
• S Corporation

These each have their pros and cons, so it’s crucial to research them carefully. For instance, an LLC is easy to begin, but there are strict tax rules, especially if you’re not careful with separating your business finances from your personal ones.

3. Study Tax Requirements

Trying to comprehend self-employment taxes can be extremely tricky. Unfortunately, many make the mistake of not thoroughly examining what’s required for certain businesses and understanding potential tax breaks.

One of the biggest tax regulations to pay attention to is the self-employment tax. This goes toward your Social Security and Medicare. In most cases, this rate is around 15.3%. All companies take this tax out of their employees’ paycheck, so it’s not always noticed, but because you’re self-employed, you’ll have to set aside some of your income for it.

The main tax form most will need to fill out is a 1040, which calculates and documents your yearly income tax. Remember that if your business made less than $400, you wouldn’t need to pay taxes no matter what your career is.

For companies with a partnership, there are other tax requirements. While an income tax isn’t always necessary for it, you must file your taxes regardless. Each partner must then include their income profit or loss on their personal tax return.

If you want to stay on top of things, consider sending in quarterly payments. You’ll send in a certain amount (based on your previous taxes or an estimate) to the IRS every three months. This will go toward your yearly tax requirements and prevents you from needing to pay a large amount at the end of the year.

4. Keep Track of Expenses

You must carefully document your expenses for tax purposes (especially for deductions) and to keep yourself organized and protected should there be an issue. Keeping receipts can protect you from potential fees or legal issues if something seems amiss on your taxes.

5. Watch Email Regulation Rules

Some self-employed businesses forget to follow email regulations, especially for marketing purposes. While the U.S. allows companies to send marketing emails, there are guidelines you need to follow via the CAN-SPAM Act, such as having an unsubscribe option. You could face heavy consequences if you don’t research and enact these rules.

6. Meet with a Lawyer

If you’re still unsure whether you’re doing your taxes correctly or just want to double-check things, it might be beneficial to hire a business lawyer. They can guide you around potential legal issues and verify your business follows the right regulations.

You need to be aware of many legal aspects if you’re self-employed. With these tips, you can better understand legal complexities, so your business succeeds.