If you are employed, your employer calculates and pays for all or part of two Federal benefits: Social Security and Medicare. When you are self-employed you pay a Self-Employment Tax of 15.3% up to specified thresholds. It consists of 12.4% for Social Security and 2.9% for Medicare.

These are in addition to income taxes. A caveat: if you employ other self-employed individuals who don’t pay their tax, you as their employer may be liable for it.

These are important to keep current because Social Security can provide disability income prior to retirement, and Medicare is the foundation of medical care in retirement.

Sole proprietors do not pay FUTA and SUTA (Federal and State Unemployment Tax Act) because they don’t have other employees. Also, without an employee group, you will depend on the ACA market for health insurance. If you form a business entity and employ others, you can provide unemployment compensation and access to group health plans.

It is important to understand these gaps and how you can bridge them. Just as you have a business plan to stay actively employed, you need a health plan to remain healthy. Lack of work or lack of health can interrupt income.

Employers typically add benefits to foster health productivity and growth. Examples include: disability insurance, income replacement insurance, life insurance, along with programs for financial, physical, mental wellness, plans to fund dental, vision, hearing costs, and support for childcare or ongoing education. There are many private options available that can help you recruit and retain employees as you grow your business.