The Transition from Employed to Self Employed Part 3

Let’s now move onto the 3^rd option in the transition from employed to self employed.  The 3^rd main option for making the transition from employed to self employed is through a 3^rd party contract service, such as the one we use called Job Works.  A third party contract solution allows you to have a steady contract with one company, similar to being employed with the same company.  The main difference is that you would be legally on contract, saving lots in tax through deductions, income splitting, dividends and more!  The key here is legal structuring as you don’t want CRA to come back and say you are an employee!  In a 3^rd party contract solution, you would have a corporation set up that contracts with the 3^rd party contract provider.  The 3^rd party contract provider has a contract with the company that pays the 3^rd party contract provider for the services that you will provide and then the 3^rd party contract provider has you fulfill the work that the company is looking for.  So in essence, your corporation that you work for and are an owner of, works through a 3^rd party contract provider to provide services for a company that has contracted with the 3^rd party contract provider.  There are many people who have been employed by a company and then the company that they worked for agreed to go through the 3^rd party contract provider allowing them to transition from employed to self employed!  For more information on Job Works, a 3^rd party contract service provider, you can go to www.jobworksinc.ca 

If you want to discuss your transition from employed to self employed, or the possibility of making the transition, don’t hesitate to contact us.  Also if you are an employer or a business that is looking to hire or transition your current employees, do speak with us first!

The Transition from Employed to Self Employed Part 2

We’ll pick up where we left off on my previous blog where we started our discussion on the first option for the transition from employed to self employed.

As we mentioned already, a gradual transition is when you continue to work while starting your business on the side.  The bad thing about a gradual transition is that it will now be like having 2 jobs, where you will work days, nights and weekends.  The workload will be much more, and as the business grows you will get to a point where you feel that you can’t manage both the job and the business.  When it comes to that point, it is time to look at the full transition to self employed!

The second option to make the transition from employed to self employed is to do an instant transition.  This means that as soon as you cease to be employed, you are going full time into your business!  The issue with using this method is that you will no longer have the steady paycheck of employment, so if your business is struggling to make enough income at the beginning, you and your family could be affected by having little to no income for a period of time.  The key to making an instant transition is to either have capital in reserve, have a spouse that can cover your closed circle budget, or to have business arranged that will generate enough income to run your business immediately and provide for you personally!  In looking at the option of gradual transition and instant transition, you may want to look at a combination of the two.  For example you may want to change the employment from full time to part time for a period of time until you are ready to fully leave the employment.  There are many options to look at, and all of the details revolve around planning.  If you are considering a transition, don’t hesitate to come see us to assist in planning your transition!

We’ll discuss the 3^rd option on my next blog. 

The Transition from Employed to Self Employed Part 1

Many people who are employed at one time or another in their life, consider making a transition to being self employed.  Be it a dream of opportunity, more freedom, more time to spend with family, more options to travel, or other dreams and goals, many things can draw the employed to becoming self employed!  Although these things may draw people, they forget that it can be much harder work, longer hours, and less free time when the self employment starts!  This of course is not always the norm, and if you work hard at the beginning, you probably will have more free time later down the road!  Becoming Self Employed is a major decision and should not be taken lightly.  If you are considering becoming self employed than you want to ensure your family is on side with this decision because the more support you have in becoming self employed, the better chance you have of succeeding.  Self Employment is not for everyone, so weigh out everything very careful when making this decision.

There are many ways people make the transition from employed to self employed, however they mainly fall into 3 categories:

1. Gradual Transition
2. Instant Transition
3. 3^rd Party Contract Services

In this blog series we will discuss all 3 of these options.

Let’s start with the first option – Gradual Transition. 

The first option to make the transition from employed to self employed is through a gradual transition.  This means that you would continue to stay employed while starting your business on the side.  The good thing about a gradual transition is that you will continue to have stable income from employment while you build your business slowly. If the business doesn’t work out, you still have your job.  Many businesses do not start with a lot of income, so in the case where you will build up income in your business slowly you will still have the comfort of a steady paycheck.

We’ll continue our discussion on Gradual Transition on my next blog post!