7 Mistakes to Avoid When Starting Out as a Self-Employed Individual
1. Forgetting the business expenses you incurred before starting
You start as a trainee architect, you start as a lawyer, as a translator in September. Already in August, taking advantage of a great opportunity, you invest in a tool necessary for the exercise of your profession as a freelancer: autoCAD for example for you who are an architect or your gown for you who are a lawyer or a strictly professional computer for you who start as a freelance translator.
Good news, the administration allows you to deduct expenses prior to your effective start date up to three months. The trick is to be able to prove the strict link to your independent professional activity: the computer on which you sort and store the latest photos of your vacation will not do the trick.
💡Also remember to keep the receipt safe all this time!
2. Start at the end of the quarter
Whether you start on the first or last day of the quarter, you pay social security contributions for the entire quarter. So, if possible, avoid having to pay social security contributions before you even have time to invoice anything! Try to start as early as possible in the quarter.
If you are starting as a freelancer with our app, you can download it before the start of the quarter and request that your start date be at the beginning of the following quarter.
3. Pay to get your VAT number
The business number, which you obtain from the Crossroads Bank for Enterprises via the business counter of your choice, is necessary for any independent activity. It costs €89.5 to obtain. Most independent activities, with the exception of certain liberal and social professions, also require a VAT number. This has ten digits and is based on the model of the business number. No need to pay to obtain it, you can simply submit the completed form 604 A to the VAT office!
4. Pay to open your professional bank account
It is strongly recommended that a self-employed individual has a bank account dedicated solely to their professional activity. It is simply the best way to have a clear view of your financial inflows and outflows. In the event of a tax audit, the auditor will also only look at this professional account and will therefore not see anything related to your private life. If you link this account to Accountable, you will also see in real time your cash actually available.
However, this is not a legal obligation: there is no need to opt for a paid account, dedicated specifically to professionals. A current account, which can be free depending on the bank, will do the job perfectly! See here our article on the different bank accounts available on the market, and how to choose the one that suits you.
5. Pay the minimum flat rate for social security contributions
In 2020, the minimum social contribution is 774.16 euros. In other words, the social insurance fund calculates that your annual income for the first three years would be 14,658.44 euros and that you pay flat-rate social contributions of 774.16 euros per quarter, while waiting for a more precise view of your income.
However, if you earn more than 14,658.44 euros per year , you must also pay more than this minimum flat rate. Make sure, from the start, to pay 20.5% of your income in social security contributions. If the amount requested by your social security fund is not adapted to your income, request an adjustment: otherwise you will face a regularization in the next two to three years!
Don't feel like calculating? Check in our app: in the "taxes" screen, under "social contributions", we calculate in real time what you should pay.
6. Use the invoice template you found on the internet
Or that of a friend… Depending on your profession, your customers, your invoice may vary. For example, if you are exempt from VAT, your invoice must always bear the corresponding legal notice. So check that your invoice template suits you and that it contains all the essential elements of a legal invoice. An impeccable invoice is also an invoice that your customers will not be able to dispute so easily!
Don't want to dive into that? That's understandable: with our application, you can create invoices in two clicks that automatically include the legal notices that correspond to your status and add your colors and logo.
7. Make an advance tax payment
The principle of advance tax payments, as their name suggests, is to pay your taxes in advance. You pay your taxes on your taxable income for the current year in four installments.
Hassan Ayed, chartered accountant, has done the math for you: “It is in your best interest to pay 75% of the total amount due in the first payment.” However, in the first year, it is very difficult to estimate what your figures will be in the months to come.
Hassan Ayed therefore advises not to make these payments the first year, but to make them the following two years: you will then receive a bonus.
After the first three years, you risk an increase in taxes if you have not made these advance payments in accordance with the rules!