Becoming an entrepreneur from a permanent job: 10 tips to take the plunge

Many people dream of becoming an entrepreneur. Because what could be more inspiring than being able to fully focus on what you like, earn extra money and organize your work completely according to your own insight? However, it does take a good dose of guts to actually take that step. You put a lot of certainties overboard and especially in this corona time that can deter you. A smart way to set up your own company without immediately burning all the ships behind you is to start from a permanent job. You will then remain part-time in paid employment and combine that with entrepreneurship. But how do you do that? And what are potential pitfalls?

Financial safety net

Part-time entrepreneurship offers the opportunity to start a business without running a major financial risk. Because you have a salary that you can fall back on, you don’t have to worry about being unable to pay the bills. In addition, your pension accrual, protection against incapacity for work and accrual of unemployment benefits continue to a certain extent. Such a financial safety net also reduces the pressure to act hastily. You can think about each step calmly, which reduces the risk of beginner mistakes.

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… but sometimes difficult to combine

The combination of a permanent job and your own company can be tough. For example, you are not always reachable and available for (future) customers. You must also be able to plan tightly in order to be able to properly separate the activities, because your boss is of course not waiting for you to handle telephone calls for your company during working hours. Because you cannot go all the way, it also takes longer before the company really gets off the ground. You might miss out on interesting deductions

Another disadvantage of part-time entrepreneurship is that you often miss out on interesting tax deductions, such as the self-employed deduction (a deduction of 6,670 euros on your taxable income). To qualify for this, you must put in at least 1,225 hours per year in your company. If you assume four weeks of vacation per year, that amounts to an average of 25 hours per week. Moreover, you have to spend more hours on your business than on your job, the so-called fifty percent rule.

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Fortunately, you can also count non-billable hours, such as the time you spend on administration, travel, recruiting customers and setting up a website. Nevertheless, it should be clear that you have to put serious time into your company in order to reap this advantage.

This brings us to another disadvantage of entrepreneurship.You should not underestimate the time involved: it sometimes involves doubling the number of billable hours.

Employer can interfere

If you start as an employee, you also have to deal with your employer. If you work in payroll and you want to start a webshop in children’s clothing, your boss will probably not be difficult. But if you want to go fishing in the same pond as him, then it is of course a different story. Perhaps your employment contract states that you are not allowed to engage in secondary activities next to your job. Or that you are not allowed to approach business relations of your boss (non-relationship clause) or compete with your employer (competition clause). Such provisions can hinder the start of your own company. If you want to pursue your entrepreneurial dream despite these hurdles, it is important to organize this well-considered. The following tips can help you with this.

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1. Map out all financial consequences

Before you take the plunge, it is important to map out all the financial consequences of entrepreneurship. How many hours do you have to remain in paid employment to be able to (largely) continue to pay the fixed costs? How realistic is it that you can live in the future of your business? Do you offer services, what is a realistic hourly rate and how many billable hours do you have to work to get by well? Does your income affect any allowances, such as rent and health care allowance?

2. Talk to your boss

Also discuss your plans in advance with your employer. Is it possible to work fewer hours? Can this be combined with your own company? And what consequences does a reduction in working time have for the content of your work? Read your employment contract and collective labor agreement carefully to avoid a legal conflict. Record agreements you make in writing.

3. Check whether you are an entrepreneur for income tax

Of course you have to pay tax on every euro you earn. The question is how to specify it. There are two options for this:

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  • as profit from business or
  • as a result of other activities

In the first case, you can claim various deductions under certain conditions, such as the self-employed, starters and investment deductions. That is of course favorable, but a registration with the Chamber of Commerce is not sufficient to be regarded by the tax authorities as an entrepreneur for income tax purposes. It depends on a combination of factors.Ensure proper administration

If you are an entrepreneur for income tax purposes, keep a good record of your hours from the start, so that you can justify this if the tax authorities request it. Also ensure proper administration.

5. File a sales tax return

If you sell goods or services that are taxed with VAT, you also have to deal with turnover tax. You then have to levy VAT and remit it to the tax authorities. You may deduct the VAT on costs you incur for your company from this, as input tax. This tax is separate from income tax. It is therefore possible that you are not an entrepreneur for income tax, but you are for VAT; For example, if you make sales, but no profit.

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6. or make use of the small business scheme

The turnover tax leads to additional administrative burdens. You can avoid this if your annual turnover (excluding VAT) is lower than 20,000 euros. You can then claim the Small Business Scheme (KOR). In that case, you may be exempt from VAT: you no longer have to pass VAT on to customers, but you can no longer settle the VAT that other entrepreneurs charge you (for example for the purchase of a computer). You also no longer have to submit a VAT return. You can decide for yourself whether you want to participate in this. Think carefully about whether you want this, because this arrangement does not work out well for everyone. For example, if you make a lot of investments and can therefore deduct a lot of VAT, the KOR can turn out unfavorable. But if you have many private customers, for example, who cannot deduct paid VAT, it may be wise to make use of this arrangement. It depresses the price of your product or service if you do not have to charge VAT.

Also read: A quarter of working Dutch people also expect to partly work from home after corona – that reduces traffic on the road and public transport use.

7. Arrange your insurance

If you are going to start your own business, check which insurance policies you need. Think not only of business insurance, such as legal assistance or liability insurance, but also cover for disability. Disability insurance is quite expensive. But there are also cheaper alternatives, such as a bread fund, which offers you cover for two years.

8. … and your pension accrual

If you don’t want a meager old age, see if you can save or invest extra for your retirement. In this article you can read more about the possibilities. A tax-friendly option is an annuity. You can read here how that works.

9. Build a financial buffer

Furthermore, it is always wise as a future entrepreneur to take setbacks into account. Build up a buffer if possible. When applying for a mortgage, play it safe by assuming a lower income.Take the plunge

A pitfall for part-time entrepreneurs is that they keep putting off taking the plunge, so that the company never outgrows the start-up phase. If you are ambitious with your company, consider in advance when you will quit your job, so that you can go for it one hundred percent. It is exciting to take that step, but remember that entrepreneurship always entails risks. If you don’t dare to do that, the question is whether you are better off in paid employment.

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Author: Jobly