Starting a Business: What I've Learned Along the Way

So you're thinking about starting or getting into business? Let me share what I've learned about setting things up properly. Quick heads up, like most things on this blog, this is just my personal journey, not professional advice. Always chat with experts for your specific situation!
 
Ways to Structure Your Business
 
Let me break down the main options I've learned about:
1. Sole Proprietorship - The Simple Route [This is the most basic way to go]

• Instead of giving out your SSN, you get something called an EIN/employer identification number (think of it as a SSN for your business)
• You can get an EIN here - https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
  
• Don't worry - you won't need to file a separate tax return! The EIN is just linked to your SSN
• Tax folks call it a "disregarded entity" (fancy way of saying it doesn't exist separately from you)
• The catch? No liability protection. But if you're just doing low-risk stuff like medical surveys, consulting, or medical directorships, that might be totally fine!

 
2. Single Member LLC - A Step Up [Sole Proprietorship's cooler cousin]

• Gives you liability protection (always nice to have!)
• Super flexible - you can either keep it simple or turn it into an S-corp later
• Great for real estate stuff or if you're just starting out with locum work
• Perfect when you're not sure how big your business might get

 
3. S-Corporation - The Heavy Hitter [This is what people often use when they're making serious money]

• Can save you some serious cash on taxes (more on that in a sec)
• But here's the thing - you might not know if you'll make enough to justify it when you're just starting
• Pro tip from my tax person: Start with an SMLLC, then switch to S-corp later if it makes sense

 
Let's Talk About FICA Taxes (I Know, Sounds Boring, But Stay With Me!)
 
FICA taxes are basically:

1. Social Security (6.2%)
2. Medicare (1.45%)

Adds up to 7.65%
 
Here's the deal with FICA:
 
When you're a regular employee:
- You pay half (7.65%)
- Your employer pays half (7.65%)
 
When you're self-employed:
- Surprise! You're both employer AND employee
- So you're stuck paying both halves (15.3% total - ouch!)
 
Let me break it down with a simple example:
 
Say you make $100k:
1. As self-employed:

• You're paying $15,300 in FICA taxes (brutal!)
• Take home: $84,700

 
2. With an S-corp [people generally will say the break even point of S-corp is around 60-70k in profit]
You pay yourself a "reasonable" salary (usually around 40% of profits)

• So on $100k, maybe $40k is salary
• You only pay FICA on that $40k ($6,120)
• Take home: $93,880
• That's about $9k more in your pocket!

 
Quick Reality Check
- You'll still pay regular income taxes on everything
- Your tax bracket stays the same
- The savings are just on FICA taxes
- Definitely talk to a CPA about what salary makes sense for you
 
Want to learn more about FICA? Check out [NerdWallet's guide] (https://www.nerdwallet.com/article/taxes/fica-tax-withholding).