If you’re ready to take the leap to leave your day job and start your own business, the process may seem simple.
After all, you just need to quit your job and start working for yourself, right?
Not so fast. Although you may already have a side hustle, being a full-time entrepreneur is a whole new ball game.
To successfully transition from employee to entrepreneur takes a lot of work and planning.
Here are ten steps you can take to ensure a successful transition:
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1. Save up for the unexpected
The first step in transitioning from employee to entrepreneur is building an emergency fund. An emergency fund will help you fund your lifestyle in between earnings from your day job and earnings from your new business.
To create this buffer account, start by opening a separate, dedicated savings account. There is a lot of debate on where you should keep your emergency fund. A good rule of thumb is to have it easily accessible in the event you actually need to tap into it. An online savings account is a good place for that. You’ll want at least one month of living expenses, but preferably three to six to be safe.
2. Get a business credit card
As you rack up more and more business expenses, you’ll find it more difficult to keep them separate from your personal expenses. A business credit card solves that problem. Come tax time, it’ll be a lot easier to deduct the applicable expenses if they’re all being charged to a dedicated business credit card.
In addition, a business credit card serves as a revolving source of capital. If you have a business credit card, you’ll eliminate the need to take out small loans to fund things like a new office or equipment.
Another reason to get a business credit card is because some business credit cards offer rewards on purchases you’re likely to make for your business. For example, the Chase Ink Cash business credit card offers 5% cash back on the first $25,000 spent on office supplies, cell phone and landline service, Internet, and cable TV.
3. Figure out your health insurance coverage
If you work at a company that employs more than 20 people, you’re entitled to temporary continuation of health insurance coverage under your employer’s plan. This government mandated benefit is called COBRA (Consolidated Omnibus Budget Reconciliation Act).
Temporary coverage usually lasts 18 or 36 months depending on the circumstances that led to your need for COBRA. Employers can offer coverage for an even longer amount of time. It’s important to check with the Human Resources department before leaving your day job to make sure you know how long your health insurance coverage will last under COBRA.
The cost of continuing your health insurance coverage after termination will likely be higher than your premiums were when you were employed. If this is the case, you may want to consider buying a new health insurance plan on the marketplace.
No matter which route you choose, make sure you are insured. Come tax time, you’ll be charged a fee if you’re not.
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