The Work Seminar
The Work Seminar
Ep. 27: The Realities of Self-Employment w/ Entrepreneur Brian Bohley
Before Brian hired employees to support his three businesses, he was a solo practitioner in the payroll and financial services space for six years.
And in today’s bonus episode, we’re tapping into Brian’s 10+ years of experience helping self-employed clients get off the ground. Brian dives into the realities of starting your own business, including:
- How to prepare for entrepreneurship before making the leap.
- Passion vs. practicality in starting a business.
- The extra work that self-employment demands.
- How to register a business name and weigh the pros and cons of different business entities (namely a sole proprietorship or an LLC — don’t worry, we explain each).
- What additional taxes and liabilities you may face, and how to pay yourself.
- How to bring on extra help if business is booming, and whether those workers are contractors or employees.
***And just to be on the safe side … This episode does not contain or constitute legal advice. You should really contact a CPA or business attorney if you want advice about your (aspirational or realized) business.***
Resources mentioned
Where to find Brian & his businesses
Brian @ InFocusPayroll.com
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Hey everyone. Thanks for joining me for another episode. I'm your host, Jesse Butts. Today, we have a bonus episode, and this one is all about the realities of self-employment. I'm chatting with Brian Bohley a payroll expert with years of experience being self-employed before hiring his first employees. Brian and I met when we were both working for a small business online payroll company, when that was still a little bit of a novelty. Brian is now the founder and owner of InFocus Payroll, goodbookin', and, coming soon, BookAssure. Brian, welcome to the show. Thanks for joining me.
Brian Bohley:Jesse, thanks for having me today.
Jesse Butts:Yeah, absolutely. So Brian, can we start a little bit with your background? Can you tell us what you were doing before you ventured out on your own?
Brian Bohley:Well, I, I spent many years doing customer service, , at all levels. So I started out as low as a the grocery store, moved my way up to customer service desk, then cashier. I really enjoyed working with the customers, making them happy. So during college and just after college, I took on some customer service representative jobs and at the online payroll service, that's where I met you. I was working there and servicing 35,000 small businesses, answering their questions, helping them resolve issues. One of which you might remember was Twitter back when they only had five employees.
Jesse Butts:Vaguely. I do remember that. Yeah.
Brian Bohley:Yeah, So I, I, I, I had a problem with, , with how the customers were being helped. So I went into the tax department because I thought that's where I could solve their issues. The troubles were just so much deeper than that, that I really felt like either I had to get out of the industry altogether or do something about it. Instead, right away, I found a position working for Aon, which was serving large Fortune 50 companies. Bank of America was one of them. And the corporate culture just wasn't for me. It was really toxic. That was where I was forced to decide whether or not I was just gonna go and do something else, change careers altogether. Or if I was just gonna try to do something within the payroll industry. And that was when I decided to start InFocus Payroll.
Jesse Butts:And, and what timeframe was this roughly that you started?
Brian Bohley:Well, I, I incorporated in February of 2012, so just over 10 years ago. And that was about a month after I had started with, with Aon. So I kind of had an idea pretty early on that it wasn't gonna work out with them. And then I launched right after leaving Aon. In July, I got my first client. That was pure luck and happenstance. I, I was at a networking event, a chamber of commerce networking event. And it was my very first one. I think I had a hundred business cards. I thought that'd be enough. I had a, a business owner come to me. He says, I need payroll. And I just thought, Well, this is gonna be easy. I'll just get a client at each networking event and I'm gonna be highly successful.
Jesse Butts:And did that pan out as you, as you thought it would?
Brian Bohley:No, no, it was, uh, it was a disaster actually. Cause then I went into each networking event trying to pitch my services to all the other people there to, you know, trying to make long lasting relationships with other colleagues. And there, I was trying to sell them on payroll.
Jesse Butts:For, for a little more frame of reference too. So you started your business, InFocus Payroll, a little over 10 years ago. How long were you doing that solo, just yourself?
Brian Bohley:So I ran into some difficulties pretty early on. Having my first child in 2013 did not help the situation. It kind of put a strain on our finances. And so I started taking on some consulting gigs, and so that allowed me to be solo for much longer than I probably should have been. Then as I started to feel like I could go back to the business and grow it, we had our second son in 2015, and so I started taking on some more consulting gigs, all the way through the end of 2018 I did those. And then I kind of had an issue with a client, my largest client, more than 50% of my revenue. And I had to fire them, which was a really tough decision, obviously. And that was when I was like, okay, I have to take this seriously now. It was almost like a fork in the road. Again, just like before I was like, Either I gotta make this work or get a regular nine to five job. So that was when I hired my first employee. And he did not have any payroll experience. He came highly recommended, from his aunt who I had actually trained in payroll. Yeah, he's, he's been great. He's still with me and he's like my right hand man.
Jesse Butts:Nice. Congratulations. So, so Brian, now that we have kind of a sense of your high level story, wondering if we can kind of tap into that expertise. So I'm curious, based on your experience going solo, if there's a listener out there who's been considering that, what should they do or consider at this point, if, if they've been toying around with the idea for a little bit?
Brian Bohley:Well, it's, it's different for everybody obviously. I keep thinking back to earlier on, in my career when I could have started sooner. And really, if you can do it, if you can get started before you have kids and a mortgage, maybe even before you're married, that makes life a whole lot easier because you're gonna wanna put everything that you have into this. It's not as glamorous as people think. It just takes a lot of work and it can put a strain on relationships, especially when you're married and you have kids it's, it's no longer about you. Every decision you make is about us. So that's, that's kind of, my biggest piece of advice would be to try and strategically plan the timing, , so that you have the least number of roadblocks in the way or any kind of things that could complicate the issue. And then second after that, you either wanna make sure you have a proper runway, so depending on what kind of business it is, it's a product, then a lot of times you have to have, you need to start up with a lot of capital. If it's a service business, like I, like I started, it's a little less of an issue. You're only charging for your time and maybe some software. And then third, you might want to, before you quit your job, just kind of use friends, family colleagues, as Guinea pigs to, to see if they're as excited about your idea as you are. Sometimes, , you can kind of get stuck in your own little bubble and think that you have this really great idea. It turns out that it's, it's only gonna help a small few. And you might be one of those small few.
Jesse Butts:Can you elaborate a little bit on that comment you made about, self-employment not being as glamorous as it, as it's made out to be?
Brian Bohley:Sure. I think, I think that's touched on a lot in, in various different self-help books and, and everything. They try to really paint a picture of just like what it really means to, to start a business and , it it's nice and it's rewarding to be called the founder or to be referred to as a business owner. It's, it's... it can feel like a prestigious title. But really you're not just the founder and the owner. When it's just you, you're the, you're the bookkeeper, you're the administrative assistant. You're the janitor. You're pretty much everything that you wish you could be and never wish you could be at the same time.
Jesse Butts:So, for example, if you have a passion for photography, this spans a lot of creative endeavors and you want to do more of that. People think, I can do more of that if I go on my own. And what most of their time, and it sounds like this is what you're mentioning too, is occupied with is, you know, booking the gigs and paying vendors and updating your website and answering inquiries. So that time for the actual practice of what your business is continually shrinks, especially as you grow.
Brian Bohley:Yeah. I mean, you certainly have more creative freedom when you're calling the shots. And, and you get to decide what projects you're working on. It becomes really tough when you're starting to have to decide between the ones that, the projects you want to work on and the projects that you need to work on that are gonna actually help you pay the bills and keep the lights on. Definitely the bigger your business becomes, the more layers of complexities there are. And, my father-in-law, who's a serial entrepreneur and one of my mentors. He told me right when I started the business, he's like, Well, this is great. Now you only have to work half the time. And I thought this was odd for him to say, because he worked like 70 to 80 hours a week. He's like, Yeah, , you get to pick which 12 hours a day, seven days a week you wanna work. And so it's kind of like in order to get to the things that you really want to get to, you have to spend a lot of time working at the things that you need to work on. So I think of it as you could probably work eight hours a day, five days a week and, and maybe get by. But you would only be getting done the things that you need to get done. The things that you want to get done are the things you save for after you get through all of the, tough stuff, all the things that need to get done in order for the business to survive.
Jesse Butts:And earlier when you were talking about going into to payroll or, or excuse me to a payroll business for yourself. You had mentioned that, you'd hit this crossroads where you'd seen the problems and you felt like it was either try to solve them or make a, a career change. So, I'm curious how we can frame this a little bit around, you know, the passion debate. For listeners who might be wondering, like, Do I pursue my passion? Do I pursue something I'm good at? And, and I don't wanna put words in your mouth. So, so please, you know, correct me or, or disabuse me of any incorrect notions. But it, it sounds like maybe you, you did develop a, a passion for this, but it was really more like you saw this opportunity and felt that you could solve it versus being, you know like, payroll is the thing that I love more than anything. Like what's your, your take on going self-employed in the, you know, passion versus practicality realm.
Brian Bohley:Well, let's, let's just take a couple steps back real quick. Payroll was not always my passion and, I get asked that a lot. Like, what made you wanna do this? What made you wanna start a payroll service? It's even sometimes I, I take a step out and I look at myself and I'm like, How did you get here? But I saw an opportunity to make a difference and to provide a kind of service that didn't already exist. Customer service is not really highly valued within the payroll industry. Mostly geared towards the technology end with low paid, undervalued reps, glorified customer service reps talking to the clients, telling them, You're gonna have to talk to your CPA about that. Or, you know, we can't comment on that. Or it's gonna be 12 to 16 weeks until you get your amendment done. It doesn't matter what you're needing it for. and that was just frustrating for me to see. And at the time I didn't really have any other thing that I thought stood out to me that needed to be solved. So payroll it was.
Jesse Butts:So, you know, for people who are really interested in, in self-employment, should they form or incorporate some type of company? Or should they just work under their own name? Like, what are, what's your take? What are you typically recommending to, to, to people?
Brian Bohley:Well, it depends on who you talk to. What they recommend. And really if you're gonna start out anywhere, if it's not a, if it's not a business where there's a lot of liability where you could get sued being a sole proprietor is absolutely the simplest most straightforward option, especially when you don't have any revenue yet and you're just incurring expenses. And then once you get enough revenue to where you can think about paying yourself, that's when you need to talk to an expert like a business attorney or a CPA.
Jesse Butts:If you want to start working with a business name, is that permissible being a sole proprietor or do you have to form a business if you want to, instead of, you know, Jesse Butts Writing, something like, The Best Damn Writer Ever, hopefully you don't use that name.
Brian Bohley:Yeah, that would be tough to fit on an IRS form. You can have a DBA as a sole proprietor.
Jesse Butts:A DBA is a?
Brian Bohley:Doing business as. So you would file that with the secretary of state. And it's, it's pretty straightforward. Anyone can do it. You would need to, uh, publish in a newspaper your information and that your your name is being used as a DBA, and it's representing you as a company. So once that's published you send that, in proof of the publishing to the, with the application. Then it can, be official. So anyone can do that. When you're a DBA it doesn't really shield you from anything from a liability standpoint. If that's what you're mainly looking to do, then it's, it's better to, form a a formal entity.
Jesse Butts:If I'm a sole proprietor, that means that, you know, the IRS and whatever your state's revenue department, they don't see any difference between what I do for work and what I do with my personal finances. It's all one and the same. Is that
Brian Bohley:So there's opportunities to write off business related expenses from your income. So that's one way to differentiate your expenses from personal. The main thing is, is that you have to pay self-employment tax because you are the individual and the business, you're both of those things. And so that is where the employer, in case you don't realize it yet, the employer actually matches the Social Security and Medicare on your regular W2 income. A lot of people don't know that. And then when they start their business, they're really shocked when they get hit with the self-employment tax, which is the employer portion as well. So, so there is a difference, but it's all filed under the same tax return, if that's what you mean.
Jesse Butts:And what, how much is that, like percentage-wise, that self-employment tax?
Brian Bohley:Well, it comes across as 15.3%. 7.65% is the employee portion. 7.65 is the employer portion.
Jesse Butts:So when you're a W2 employee for a company, you're only paying half of that. But then once you're self-employed, and we're talking about sole proprietor, you're paying all of that yourself.
Brian Bohley:Exactly. And that's why when you do become a consultant or you do work for yourself, your billable rate should be much higher than what your rate would've been as a W2 employee. To cover all the extra taxes, all the paperwork, the liability, and the hassle of, of, of setting up your own entity.
Jesse Butts:So why would somebody choose to create an LLC, which, you know, I see so many small business names have LLC at the end. Why would they choose to do that versus being a sole proprietor?
Brian Bohley:I mean, I'm not a, I'm not a business attorney, so this isn't legal advice, but... when you set up an LLC, you're basically making that announcement or you're differentiating you from the business. That, that shields you from liability. Now, of course, you don't get that for free. You don't get to just do everything exactly the same way. There's a lot of extra hoops you have to jump through. You have to hold board meetings. If you're the only board member then it's with yourself basically. Yeah, you just have to basically record everything as if you are a business and not just an individual.
Jesse Butts:And you mentioned the liability. Or a liability aspect, I should say. So what does that mean?
Brian Bohley:The liability of owning a business, can span into many different realms. But for an example, I'll just use payroll. You could make a mistake that would damage one of your clients either financially or emotionally, and, and then they could come at you for damages. So as long as you have your business operating under an LLC, and you're not piercing the corporate veil by treating the LLC, operating account as your personal piggy bank, you're not commingling personal expenses with business expenses then r eally you should have business liability coverage. And between that and the entity itself should shield you from any personal liability, which means if you have a house and you have savings that would be shielded from any kind of lawsuit.
Jesse Butts:And that business coverage liability is that some type of insurance policy that you were mentioning there?
Brian Bohley:Yes. So there's general business insurance, and then there's also professional liability. So professional liability... you can think of it as like an endorsement for specific types of, types of industries that you're in. So, professional liability means, you could make a mistake that would have a negative impact on your clients. Whereas there's other businesses where there's not really as much risk and it can all be covered under a general policy.
Jesse Butts:So Brian, when you are self-employed and, and let's, you know, just keep this simple. So like, you know, you've chosen the sole proprietor or maybe the LLC option. How do you actually pay yourself? Do you need payroll if it's just you and you're a sole proprietor or an LLC?
Brian Bohley:If you are an LLC, ideally you want to be paying yourself guaranteed payments, which are basically the same as owner distributions, which is just taking money out of the, the account to use for personal reasons. The guaranteed payments go on the, they actually go on the profit and loss statement, which can help you decide whether or not your company is truly profitable. Whereas if you don't take guaranteed payments, it might look like you're actually making more money than you really are, especially if you're trying to sell the business, uh, eventually.
Jesse Butts:So, so let's just make this very simple. If you're a sole proprietor, can you just, as needed withdrawal funds from a business account to your personal, or do you have to do anything formal around paying yourself?
Brian Bohley:No, when you're a sole proprietor, you can pretty much treat the business account as your own savings account. But it's not recommended, obviously you wanna keep it separate if you can, but there are no real regulations or requirements.
Jesse Butts:So let's say you, you're self-employed and, and you're doing well. let's say you're a designer, and you have more work than you can handle. Do you need to hire a W2 employee if, if you've just decided that I can't do this, I need some help? Or is there some other way to get that help, without hiring an employee that's, you know, still, obviously above board.
Brian Bohley:Well, just like a lot of these other topics we've been discussing, I, I always try to introduce my clients to a professional that can speak on these more formally. But, I will say that you never wanna just jump to hiring a W2 employee. That's, that's a commitment that, if it doesn't work out, could lead to issues down the road. However, it's not always as simple as just hiring a contractor either. Contractos need to be treated as their own individual companies that can make their own decisions and operate when they want and how they want, up to a certain extent. If you're gonna hire somebody and you're gonna say, This is where we're at right now. This is where we need to be. Go get 'em. Then that can be a contractor. But if you're gonna say, This is where we are. I want you to come in these hours. Here's a computer that you can use. Make sure you use this software. And I need it done by this date. Then that's an employee.
Jesse Butts:So if you had a scenario where maybe keeping with the designer thing... and, and again, I, I totally realize that , this is not legal advice. This is just a hypothetical. But let's say you're a designer and you have this big contract and you find another designer and say, you know, This is where we are. I need these images in these formats two weeks from today. Ping me, if you have any questions. It, it sounds like, if I'm understanding you correctly, that's a pretty legitimate contractor situation versus an employee.
Brian Bohley:Yes. I mean, When it comes to something that, detailed you really don't have a choice, but to lay it out for them. You know, this format by this, by this date. But at the end of the day, you're still not telling them how to do it. You're still not telling them when to do it necessarily. Cause they could do it ahead of time. You're simply giving them some, some constraints to work work within.
Jesse Butts:And I assume if you are in a position where you do need to hire an employee because, you know, you, need them to work certain hours. You, you have to tell them every little thing that they're... I don't mean that like negatively, but if you have to give them a lot of instruction and training. What do you need when you hire an employee? Do you need like worker's compensation? Do you have to start payroll at that point if you haven't already?
Brian Bohley:Even if you don't hire an employee, if you hire a contractor, you may still need to get workers' compensation. Or at least make sure that they have liability coverage. So definitely wanna still make sure that when you hire a contractor, you have, you have that. With a W2 , they're, they're kind of like your responsibility. I joke and I call my employees, my kids. It's like taking care of my, my kids. You have to make sure everything is above board and that you are transparent and reporting everything about that relationship. So you need to do a new hire reporting to the state. You need to collect I-9 verification and all their identification you need to verify to make sure that they are authorized to work in the United States. You need to have them fill out W4 forms so that you know, how much tax to withhold. And then, for insurance purposes, you definitely need to get workers' comp, even if they're working out of their home or your home it doesn't matter. If they get injured while they're working, then that's a liability.
Jesse Butts:So, so Brian, as you over the last 10 years, as your business has evolved, and as you have started new businesses, what resources have you found most helpful in all of this?
Brian Bohley:Good question. Let's see. Well, my father-in-law, who's a serial entrepreneur, as I mentioned before, he's, he's probably been my best resource. He's, he's let me figure things out on my own quite a bit too. Yeah, it was pretty tough. I didn't really have too many people to lean on in the very beginning. I just had to really work on building relationships professionally, to find out who I could trust and for what. Yeah, I think I, I think I learned the hard way a lot. I did join some networking groups and there was, I don't know if you're familiar with mastermind groups, but there were some mastermind components. There were some coaches that I worked with. I've worked with three coaches. One was an absolute disaster. It was like every time I went to him with a problem, I, I left with five times that, from the meeting. That was a very tough situation. Coaches can be a good thing, but they're expensive. So I'm, I don't know. I, I'm still trying to figure out really who, uh, who , who's a good, where, where a good resource is. Actually for my, for my app that I'm just now trying to get built, I've actually joined a community called 1871, which is an incubator in downtown Chicago. They're a nonprofit, they have all kinds of resources and different workshops and, and things. So I would say that going to a nonprofit organization that is geared towards helping a business, small businesses or someone in the industry that you're looking to get into, that's probably your best bet. Because they shouldn't have too much of an ulterior motive other than just to help.
Jesse Butts:So Brian, if, a, if a listener is a little bit curious about what you're doing, where can they find more about like the payroll service that you offer? And I know that you do bookkeeping and, and you mentioned an app that you're developing. Can you just share a little bit about those?
Brian Bohley:Sure. I, I don't spend a lot of time on social media. But I, I am on LinkedIn. So, the profile is, is Brian Bohley C-P-P. And then also the websites I have, InFocusPayroll.com. It's the payroll website. And then GoodBookin.com without the G at the end is the bookkeeping website. And my email address is Brian@GoodBookin.com or Brian@InFocusPayroll.com.
Jesse Butts:All right. Well, Brian, thank you so much for joining me. This was a pleasure.
Brian Bohley:Yeah, no problem. Thanks so much for having me. It's been great.