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The overwhelming majority of electrologists work for themselves as sole practitioners, a smaller number work in some sort of co-operative where they have a contractor status, and a tiny minority is actual clock punching employees. This means electrologists have to take care of their own financial planning. Electrologists and sports figures have a lot in common – they are highly compensated, the public thinks they are overpaid, and they can make large sums of money in a short amount of time. They also share a somewhat limited window of earning potential, after which income will decline in direct proportion to work levels. We all know we should plan for our retirement but for most of us, that event could be many years down the road. Without proper planning for the declining end of an electrologists’ career, or heaven forbid a debilitating accident or illness, the resources needed to provide a sustaining income may not be available. We need to start planning for this right now if we are going to reach our retirement dreams. If asked take a job with a company that was sporadic with its paychecks, compensation varied wildly, work hours could be scheduled from 16 hours with little time for bathroom breaks, to split shifts totaling less than 3 hours in a day, no paid vacation time (only work related travel for CEU seminars) most of us would dismiss it outright. On the other hand, if someone offered a job with regular pay, predictable hours, periodic bonuses, a Cadillac health care plan and retirement package, with a company car and paid vacations, who wouldn’t rush to sign on? Electrologists are in the unique situation of being able to structure their job with the added luxury to be the best or worst boss imaginable. For most, the electrology practice is a business, not a hobby, and many of us are able to choose which one of those jobs we both offer and accept. But how many electrologists take the time to investigate various business structures, think about health care, vacation and retirement planning and set up the best possible combination for the ultimate job? Entrepreneurs like us have numerous options that affect how our business is structured and subsequently taxed. Options include the S Corporation or subchapter S Corporation. This is a form of corporation, allowed by the IRS, which enables the company to enjoy the benefits of incorporation but be taxed as if it were a partnership. Another alternative is the limited liability company (LLC) – a legal entity separate and distinct from the personal affairs and other business involvements of its owners (called “members”). A LLC has some characteristics similar to those of a limited partnership, some corporation-like characteristics, and still other characteristics unique to the LLC form of business organization. Some of these options allow you up to pay yourself a weekly wage; you know, a verifiable, official pay stub bearing paycheck, one that would qualify for loans. Although pay periods are flexible, federal labor laws limit pay periods so that the longest period of time one can go between work and being paid for that work is 4 weeks. There are payroll services that take care of everything, including issuing W-2’s every year. You will still be waiting until February to get them like everyone else, even though you have a one or two person operation, but at least you did not have to do all that paperwork yourself. I suggest you try to set up a system where you actually pay all fees and payments as you go, and don’t set up any automated payment plans, as this can cause nightmares with things like the timing of electronic deductions, changes and cancellation of services. For some unknown reason, when you authorize automatic payments to be deducted from your account it can happen the same day, but to cancel them seems to take weeks. As the CEO and an employee, you control all of the details, from working hours to compensation packages, from custom health care plans to the eventual retirement package available. Research these things and choose something that will provide you with a golden parachute. You can make one if you try. If you are like me, and you don’t want to bother with loads of paperwork, find a good bookkeeper to handle things, weekly, monthly or quarterly. Look into using a financial planner or other professionals for personal investing so everything is in order and runs like a well oiled machine, chugging along paying your taxes, feathering your nest eggs and setting up your retirement. To quote Marcus Aurelius (121 - 180) from Meditations on Stoic Philosophy, “It is planning not gambling that produces profit and security!” Practically speaking, you need to be the most proactive person looking after your future, because if you don’t, then who will? |
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