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Things To Consider Before Quitting Your Corporate Job

Once I had fully committed to switching careers and pursuing my baking business full-time (you can learn more about why and how I made that decision here), I started to think about everything I needed to consider before quitting my corporate job.

I had so much to figure out. My immediate concerns around starting my business were:

  • How was I going to have health insurance if I was self-employed?
  • How was I going to save for retirement without a company-matched 401k?
  • How much would I need to save to be able to pay my taxes at the end of the year?
  • Should I establish an LLC?
  • What would my cash flow look like each month? 

Health Insurance

Health insurance is a tricky topic when you’re a freelancer of self-employed, but there are a few routes you can go:

  • The easiest by far is to simply be married and be added to your significant other’s insurance.
  • If you aren’t married, but in a serious relationship, you can request to be added to your significant other’s insurance as a domestic partner (must be in a relationship and have lived together for 6 months in the state of NY).
  • If you are single, you can get insurance through the Affordable Care Act as an individual (you can enroll here). In 2018, the average cost per month for an individual was $440. 

None of these options are cheap (all are at least $400/month for standard health care options), but health insurance is an absolute must in my opinion.

Continuing to Save for Retirement

Saving for retirement as an entrepreneur is another concern. Assuming your business is successful and profitable, you’re going to want to continue to save for the future.

While you may not have a 401k or company match anymore, there are plenty of tax-advantaged saving options.

There are different rules and caps on how many pre-tax dollars you can contribute based on whichever option you pick, so I highly recommend reading through them. I plan to set up a SEP IRA next year.

Tax Planning

Another super important part of being self-employed is withholding taxes from your earnings to be sure you can pay your taxes each April.

This may sound crazy but living in NYC and being taxed by both the city and state, my tax rate is over 40%. If I didn’t set aside money from each partnership or plan accordingly to have significant savings to pay my taxes, I would be totally screwed. 

It’s also something to keep in mind when negotiating rates or setting prices; know that you will only get to keep 60% (or whatever your tax rate may be) of your earnings.

How to Legally Establish Your Business

Then I began thinking about the legal implications of running my own business.

I had previously established Chelsweets as a sole proprietorship. It was tiny, I wasn’t making a ton of money, and I wasn’t worried about any liabilities I might face down the road.

I spoke with my Dad (who is the best accountant I know) and he recommended establishing a single member LLC, to limit my liability if something ever goes wrong with my business.

The requirements and price to establish an LLC vary by state, but for most it takes less than hour to do and the average costs is around $150.

me smiling adding frosting to side of cake

Understanding Your Cash Flow and Managing Your Expenses

And then my final concern… MONEY! I have recurring monthly expenses and income as a freelancer/entrepreneur is anything but steady.

While I knew partnerships would come in waves, I wanted to make sure I had enough money coming in every month to pay for rent, health insurance, phone bill, groceries, etc.

I literally made a table of cash inflows and outflows in excel – you’d almost think I was an accountant… ?

The most important thing to having steady income is to have diversified revenue streams. Each month, I make revenue from:

  • Advertising on my blog
  • Ads on Facebook (you can monetize videos with ad breaks if they are 3+ minutes long)
  • Advertising on YouTube
  • Contract with the Food Network (creating content for their social channels)
  • Paid brand partnerships
  • Teaching private cake lessons

Being able to earn money in different ways gives me peace of mind. That way, even if my YouTube earnings are tanking one month, my blog might be getting a ton of traffic! 

There are a lot of things that I can’t control about income with what I’m doing, but the more ways I can make money, the more secure I feel.

This is just scratching the surface, but I think these are some of the most important things to think through. 

Taking a Leap of Faith

Making a career change and becoming self-employed is definitely scary, but the idea of it is much more manageable when you feel like you’ve thought it through and have a game plan.

If any of you have made a similar switch to becoming a freelancer/entrepreneur, or are thinking about it, I’d love to hear your experience or thoughts! I’d also love to know if you have any concerns I didn’t touch on 🙂

me with bench scrapper

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Taylor

Friday 18th of February 2022

Hi Cheesy! It’s great to see how far you’ve gone in your business! That’s amazing! Our backgrounds are similarXD, I’m an accountant and recently have been thinking about my side business idea. I was originally thinking about if I should quit my job and try out for 6months or 1 year or should I work full time and bake part time. My current job doesn’t really make me have energy to do it at night or on weekends. But after reading your post, I feel it’s too risky to just quit my job since I don’t even have anything going yet. I have the baking skills, but I still need to rent kitchens, get permits and stuff.

One question tho, did you register as a sole proprietorship when you started and then change to LLC later?

Again, thank you very much for sharing your post as I feel the same that it’s a scary change and it’s not a career path to most people but do want to do something I like! Thank you!

Taylor

Taylor

Friday 18th of February 2022

I’m so sorry Chelsey. I typed your name wrong! I’m not sure if it’s Chelsy or Chelsey.

Nikki

Wednesday 21st of August 2019

I love watching your videos!!!! You create some beautiful cakes!

Chelsweets

Wednesday 21st of August 2019

aw thank you Nikki!! <3

Lisa He of Borderlands Bakery

Monday 27th of May 2019

Thank you for such a concise post that touches on some of the very real concerns we have about making the shift from a stable, high-paying day job to pursue the "potential" of a passion gig. I'm currently in the process of making Borderlands Bakery a more revenue-generating business -- I started out doing custom cookie orders, but also ended up on Netflix and winning a Food Network challenge, which has helped my Instagram grow a ton. In the last 6 months, I've moved way more toward teaching, blogging, videos, etc instead of doing, and am starting to revamp my website to optimize it for ads, etc. Eventually, I want Borderlands to be my full time gig, and your posts (about WHY you quit your corporate gig & this one) are some of the best practical advice I've ever read for folks like us to desire security/peace of mind but also want to pursue the things we love and can share with others. I have a running list of things I wish to accomplish and definitely need to make some tradeoffs, but for the first time, I'm starting to see how I can potentially make it on my own, so thank you!

Chelsweets

Monday 3rd of June 2019

I'm so happy to hear this resonated with you Lisa! Congrats on winning a Food Network challenge and being on Netflix, that is incredible!

I've actually started teaching more too! It's a great way to connect with people, and have an additional source of income. It also gives you the freedom to get creative when you do bake (rather than doing just orders)! It sounds like you've definitely thought it all through, and I wish you the best of luck with Borderlands :)