4 Huge Downsides of Running Your Own Company

Running a small business can be a great way to make a living. I've operated my own company since I started working and I wouldn't ever want to have a traditional employment relationship, since being an entrepreneur has worked out really well for me.

But while there are plenty of benefits of being your own boss and running a business of your own, there are also some disadvantages. Here are four huge downsides to consider before you decide company ownership is right for you. 

1. The success of your business is solely in your hands

One of the biggest downsides of being your own boss is that your income and the success of your business solely rests on your shoulders. About half of all companies fail in the first five years, with 1 in 5 not even making it a year. This is a huge risk to take on, and it can be really frightening not to have the promise of a steady paycheck when you're committing to expenses like a mortgage loan for your family home.

To make sure you're comfortable with the idea of your income being solely dependent on how well your business performs, make a business plan detailing your path to profitability. You should think through details like how much money you need to operate, how your goods and services will be priced, how much time you can devote to making money for your business, and what your ongoing operating expenses will be. 

You may also want to start your business while working another job and not give up other income sources until you're confident your company can produce the funds you need to cover the bills. 

2. You may have to work a lot more hours

When you own a business, you don't have a nine-to-five job. Even if you hire employees to take on some of the work tasks, and even if you try to limit your workload, ultimately, you will be on-call at all times since you are the person most invested in the company's success (and the person who ultimately has to solve any big problems that arise). 

Around 1 in 4 business owners indicate their work weeks run 60 hours or more. While I no longer personally work that much, I did when I was just getting started. And there are definitely some weeks when I log well over 40 hours to help make sure I'm meeting my goals. 

If you are starting a business because you believe it will give you a better work/life balance, you can't count on that happening for a long time -- if ever. If working fewer hours is your goal, sticking with a more traditional job may be a better fit. 

3. There are no workplace benefits

When you work for an employer, you typically get access to several benefits ranging from a 401(k) plan to company-provided health insurance. These workplace benefits can be very valuable, with the Bureau of Labor Statistics indicating they account for around 31% of the average amount employers pay per hour worked in the U.S. 

You aren't going to get these benefits from a company if you work for yourself. You'll be on your own for health insurance and retirement savings. And if you want to take maternity leave or go on vacation, you won't have income during that time unless your business can operate without you. 

You need to have a plan in advance for how you'll deal without these benefits. For example, you should look into individual health insurance plans at Healthcare.gov, and explore self-employed retirement accounts. 

4. There's a lot of tax and regulatory issues to deal with

Finally, you have to be aware that running your own business isn't just about selling your products or services. You have to comply with tax rules, including sending in tax payments to the IRS throughout the year since you have no employer to do it for you. You'll also have to decide how to structure your business and do any paperwork necessary to incorporate or form an LLC, if you decide these business structures are right for you.

Before you jump into entrepreneurship, consider these downsides and form a plan to overcome them. If you can't, owning your own business may not be the best fit for you right now.