As Doulas and Newborn Care Specialists there honestly isn’t a lot of guidance out there to help us navigate the ins and outs of how to manage things like taxes, pay, and legal stuff.
While we are beginning to see more business training as part of our typical Doula and NCS training, it’s usually not a huge focus, and because the trainers are not business coaches, lawyers, or CPAs there is still a lot of misinformation and opinions out there that can get you started on the wrong foot. Let’s dive in and figure out what this all means to you as an individual working in this industry. The truth lies in the legal definitions and requirements federally and in your individual state. Check out the video below where Tonya Sakowicz of Newborn Care Solutions and I chat about all of your options.
Business Owner
This is where we all start. While there may be a few exceptions out there, if you are a Doula or NCS in the U.S. and you are not receiving a regular paycheck with taxes being taken out, you are self-employed my friend.
That means you own a business and are liable for self-employment taxes and income taxes at the end of the year. You can be a sole proprietor or have an LLC, (more on these later) but if you have not done the bare minimum in your state, county, or city to register yourself as a legal business entity, there could be pretty serious repercussions if you get caught.
Make sure you are aware of the laws and requirements where you live because you must report your income either way.
Employee
As a Doula, this is rare. While there may be a some hospitals or birth centers and even some agencies beginning to employ doulas as part of their staff, it is still currently the least common option.
NCS and Doulas who have come from the nanny industry, or who work with a single family for a long period of time may prefer to be a household employee.
This means that the FAMILY, agency, hospital, or other entity you are working for is paying you a regular paycheck with taxes taken out, and following the benefit laws in your state. You receive a W2 at the end of the year. You file your taxes at the end of the year as an employee of the entity that provided you with the W2. You can have multiple employers in any given year.
If you receive a 1099NEC (non-employee compensation) at the end of the year, you are NOT an employee and are not protected in any way by the entity providing you with that 1099.
You may also pay yourself as an employee of your own business and file as a Scorp, but that is information for another post.
Independent Contractor
This is where a lot of confusion happens. Per the IRS website:
“I am an independent contractor or in business for myself
If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor)”
As we have previously established, if you are not an employee, then you are a self-employed business owner.
You are ONLY an independent contractor if YOUR BUSINESS contracts with ANOTHER BUSINESS to provide services. This is when you receive a 1099 NEC at the end of the year. Because you are a business owner, you are still required to report your income and are liable for income AND self-employment taxes, because no one else is paying those on your behalf.
Sole Proprietor or LLC?
What should you do? The choice is yours when it comes to how you run your individual business when you work directly with clients, but agencies you contract with may have a preference because of liability and this is important for you too.
As a Sole Proprietor, by law, you are running a business and putting yourself as an individual entity out there as being liable for that business.
This means that if anything happens when you are at a client’s home, at birth, or even if misinformation is given on the phone, via email, or text, you, SOLELY are responsible. This leaves you open to being sued directly. This means that the bank accounts you deposit your money into, the house and care you pay for with that money, the land you and your spouse own together, ALL of it is open to be seized as assets if you lose a lawsuit.
If you Register your business as a Limited Liability Corporation, the value is right in the name. This limits your personal liability as a MEMBER of the business. Nothing is fool-proof, but unless you are independently wealthy, this buffer could be a very important piece of whether your family finances survive. This is the same reason that an agency you are contracting with might require you to have an LLC when working with them. They want to protect you as an individual, they want to add another layer of protection between you, your business, and their business, AND it is one more check in the box to prove that you are indeed an independent contractor running a legitimate business, and NOT an employee of their agency.
Should I Have Insurance?
The short answer is yes for the same reasons you would want to have an LLC. In the eyes of the law, and the families you work for, you are running a business. In order to protect yourself from lawsuits, and to help you pay for legal fees in case of a lawsuit, insurance gives you that added protection.
Because the insurance is insuring your business, and not you as an individual, it provides another layer of protection between yourself and your assets. It’s a tool to use to ensure that, if you were to be found liable, the money to be paid out in damages, comes from the insurance company instead of your personal accounts.
