Going out on your own: what changes

Consulting, freelancing, running a trade business or opening a practice: working for yourself is one of the classic paths to FIRE. You set your prices and keep the business's profits (while also carrying its costs), you set your hours and you can build something worth selling.

You also take over a lot of jobs your employer used to do quietly in the background. This guide walks through what changes, so you can plan for it before your first invoice.

This is general education, not advice. Business structure, taxes and insurance are specific to you and your state. Please talk with an accountant, an attorney and a licensed insurance professional before you start.

1. Your pay

As an employee, the same amount lands every two weeks. On your own, income arrives when clients pay, which may be late, lumpy or seasonal.

Ways people steady it:

• Keep business and personal money separate. A separate business bank account makes taxes and records far easier.
• Pay yourself a steady amount from the business account, and let the business account absorb the ups and downs.
• Hold a bigger cash cushion, both personally and in the business, than you would as an employee.
• Track a full year, not a single month, when you work out your savings rate.

2. Your taxes

Self-employment tax

An employer pays half of your Social Security and Medicare taxes. When you work for yourself, you pay both halves. The IRS sets the self-employment tax rate at 15.3%: 12.4% for Social Security and 2.9% for Medicare (IRS). It generally applies once net earnings from self-employment are $400 or more, and it's figured on 92.35% of those net earnings. Higher earners can also owe a 0.9% Additional Medicare Tax above a threshold ($200,000 for single filers, $250,000 married filing jointly) (IRS Topic 554). You can deduct the employer-equivalent half when figuring your adjusted gross income (same IRS source).

Estimated taxes

With no paycheck withholding, you generally pay tax during the year through quarterly estimated payments. The IRS says you generally must make them if you expect to owe $1,000 or more when you file, and that underpaying can bring a penalty (IRS).

Many self-employed people move a fixed share of every payment into a separate tax account the day it arrives.

Records and deductions

Ordinary and necessary business expenses can reduce taxable profit. That makes good records valuable: receipts, mileage logs and invoices. The IRS Self-Employed Individuals Tax Center is a good starting point. A tax professional is worth it in your first year.

3. Your retirement accounts

Leaving a job usually means leaving its 401(k), 403(b) or 457(b) and any match. You can generally leave that money where it is or roll it to an IRA or a new plan (IRS). One exception: a 457(b) from a non-governmental employer (some nonprofits and hospitals offer these) can't be rolled into an IRA or other plan; only governmental 457(b)s can (IRS).

Going forward, self-employment opens up two main options:

• Solo 401(k). For a business owner with no employees other than a spouse. You contribute as the employee (up to $24,500 in 2026, plus catch-ups from 50) and as the employer (IRS).
• SEP-IRA. Simpler, funded by employer contributions (the account may also accept regular IRA contributions if it allows them). For 2026, up to the lesser of 25% of compensation or $72,000, with a special calculation for self-employed people (IRS).

For both, total contributions for 2026 can't exceed $72,000. A Solo 401(k) can add age-based catch-ups on top; a SEP, funded only by employer contributions, has no age-based catch-up (IRS). Hiring employees can change which plan fits. FIRE in the trades explains both in more detail.

4. Your health insurance

Employer coverage usually ends when you leave. Your main options are COBRA for a while, a marketplace plan, or a spouse's plan. Health insurance before Medicare walks through each one, including the 2026 changes to marketplace subsidies.

If you're self-employed, you may be able to deduct health insurance premiums for yourself and your family. The IRS uses Form 7206 to calculate the self-employed health insurance deduction (IRS). A qualifying high-deductible plan can also let you save in an HSA.

5. Your other insurance

An employer often provides things you don't notice until they're gone:

• Disability insurance. If you can't work, your income stops. This is often the most important coverage for a self-employed person.
• Liability insurance for your work, and sometimes professional liability (malpractice or errors-and-omissions).
• Life insurance if others depend on your income.
• Business property coverage for tools, equipment or an office.

uFIRE doesn't sell insurance. A licensed, independent agent can explain options and costs.

6. Your business structure

You can start as a sole proprietor with very little paperwork. Many people later form an LLC or corporation for liability or tax reasons. Each has different costs and rules, and they vary by state. The SBA's plan your business guide covers the basics; an attorney and accountant can help you choose.

7. The jobs you'll do now

Being self-employed means doing (or paying for) work that used to be invisible:

• Finding clients and selling
• Pricing, invoicing and chasing late payments
• Bookkeeping and taxes
• Contracts and insurance
• IT, supplies and scheduling

Count those hours when you compare your self-employed income with your old salary. A higher hourly rate doesn't always mean a higher income once unpaid hours are included.

Questions to ask before you jump

1. How many months of expenses can I cover while income ramps up?
2. Do I have clients lined up, or just an idea?
3. What will health insurance cost for my household?
4. Does my current employer have rules (non-compete, non-solicitation) that affect what I can do?
5. What's my plan if it doesn't work? Could I go back to a job?

Many people test the waters with side work first, then go full-time once income is steady.

Next step

See how a change in income and savings moves your freedom date.

Try the Freedom Date calculator →

Owning a practice or bigger business? Read FIRE for business owners, doctors and dentists.