If you have been following this series, then you’ll recall that to date we have discussed: what a VA is and does; how to decide which services to offer; whether or not to become certified; and how much equipment is needed. Now the next question is, how will you structure your VA practice?
The good news is that there are only two “structures” or practice models in which to choose. There is the solo-VA practice and the multi-VA practice. While the definitions themselves aren’t difficult to understand, there are pros and cons to both. However, the practice model you choose will determine how you write your business plan and your contingency plan.
Your practice model will also determine your tax structure as well as what you name your business. For example, multi-VA practices have been known to use words such as “staffing” or “hub” in the business name.
Obviously, the simplest structure of the two would be the solo-VA practice. In the common vernacular of the day, you would be considered a freelancer. As far as the IRS is concerned, you would be considered a sole proprietor. Your taxes would be filed under your social security number—just as if you were working a regular job. Even while operating a business under your own name as a freelancer, you would need to apply for a local business license. While you can use your own personal checking account, the IRS prefers that you open a separate checking account for business.
If you did choose to operate under a business name other than your own name, you would still need to apply for a business license at your local county courthouse. However, since you are operating under a different name other than your own, this license would allow you to operate under a DBA (Doing Business As) account. This would be your “fictitious” or business name. When you open your business checking account at your local bank, you would sign your checks using your full name, writing DBA (doesn’t have to be case-sensitive) below your signature, and then your business name below DBA.
Now, to become a multi-VA practice you will need to apply for an EIN or Federal Employer Identification Number. You will also need to fill out tax forms for each of your “employees” or if they are operating as ICs (Independent Contractors) then you will need to remember to file a 1099 for each employee—regardless of whether they earned over $600 annually. Legally, you don’t have to send them a 1099 if they made under $600 for the year, but it doesn’t count against you if you do. Also, you never want to trigger any kind of tax audit.
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You will also need to have everyone in your multi-VA practice sign a legally binding contract either identifying himself/herself as either an employee or an independent contractor with terms and conditions spelled out. My advice on this one: Hire an accountant and an attorney.
While a multi-VA practice may seem like a hassle, the main “pro” is you will make more money. Not only will you be able to handle more work from more clients, but you will be able to “take a cut” from everyone who works under you. The main “con” is that you are responsible to the client if anyone makes a mistake or leaves the project.
In a solo-VA practice, you probably won’t be able to handle more than five to ten clients at a time. Therefore, the “con” is you won’t make as much money. Then again, you won’t have all of the paperwork or responsibilities as the multi-VA practice. That said, you probably will want to set up a network of other VAs or freelancers who offer services that you don’t. This way you will have a good referral network setup either to refer clients or to work jointly with other VAs on given projects.
Can’t decide whether to make your VA practice a solo-VA practice or a multi-VA practice? Go solo first and learn the ropes. Even consider sub-contracting your services under other VAs while you learn the industry. Always remember, it has to feel right to you. After all, it is your practice.
In upcoming issues, we will be discussing how to choose a business name, financing your VA practice, and transferring from a full-time job into your VA practice. As always, I am here to answer questions or you can visit my website.
- How to Save for Retirement When You Work from Home
- What Will You Name Your VA Practice?
- Understanding Virtual Assisting – Part 13 – Networking and Organizations for Your VA Practice
- Understanding Virtual Assisting – Part 9 – Financing Your Virtual Assistant Practice
- Understanding Virtual Assisting – Part 10 – Transitioning into Your Virtual Assistant Practice