Being your own boss sounds attractive but it comes with a lot of paperwork and financial challenges. Provided, however, you are well organised, it is not an insurmountable task.

A study conducted by the University of Sydney's Workplace Research Centre, titled Australia at Work: The Benchmark Report, found the self-employed make up 14.9 per cent of the 2007 workforce - up from 14 per cent last year, when Work Choices was introduced.

Of this group, 8.9 per cent were contractors and 5.9 per cent owned their own business.

If this trend continues, a large number of Australians will have to get their heads around the requirements for setting up shop on your own.

Wayne Wilson, Asgard's director of sales and distribution, says establishing the right business structure is the first step, whether it is as a sole trader, partnership, company or trust.

"It's great if you can establish a business structure at the start which is the right one for the long-term position of the business because having to change it midway through the development of the growth of your business can create all sorts of problems," he says.

A second consideration is keeping personal and work-related finances separate.

Momentum Planning director Philippa Elliott says: "Small self employed businesses just starting out don't seem to understand the value of separating personal and business expenses."

She says the inability to do this often leads to higher levels of stress and a higher tax liability as some deductions that can be claimed through the business structure cannot be easily identified.

If personal and business finances continue to be intertwined, it can also have consequences further down the line, particularly if the ultimate goal is to sell the business.

"At the end of the day, who would want to buy that kind of business? If you're going to become self-employed, one of the key things we've heard from business coaches . . . is to start the business as though you want to sell it from day one," Elliott says.

Michael Hutton, a partner at HLB Mann Judd, says this can be easily solved: "One thing [that] works very well and should be step number one when people become self-employed is to set up a separate bank account. So have a private bank account and a private credit card, along with a business bank account and business credit card."

Insurance is another important consideration. What happens if you fall ill and your income ceases immediately?

Gerald Cummings, the managing director at Premier Wealth Management, says income protection insurance is essential to help you financially until you can get back to work.

"Ultimately that's going to carry on giving you an income if you're off work," he says.

However, it can be more difficult (but not impossible) to get cover in the first two years of self-employment. Wilson says the hurdles can be overcome, especially if you prepare in advance before you leave your employer.

"There are some covers you can put in place before you leave an employer that you can carry with you and don't need to be re-underwritten just because you've become self-employed. So if you had death and total and permanent disability cover through your super and you carried your super contract with you, then you can maintain that cover," Wilson says.

Super is another important area for the self-employed. Unfortunately, it is often overlooked because contributions are not compulsory and tight cashflows sometimes make timely contributions difficult.

Katrina Pulbrook, ANZ's senior relationship financial planner, says one use of super is as a protective measure against creditors in the event of business failure.

She says as long as the profits of the business have been allocated to the person's super fund, legally creditors will be unable to claim any of the money.

Rob Thomas, the national manager of technical services and research with AXA, says many self-employed people see the need for insurance but because of funding pressures are not willing to fork out.

"They may be able to arrange more of their insurance through super. That's a good thing as they'll use their super money to fund their insurance and it means they'll get a tax deduction for it as well. Life insurance normally isn't tax deductible," Thomas says.

Super is also often ignored by the self-employed because people plan to fund their retirement from the eventual sale of their business.

However, the business cannot always be sold when the individual wants to retire and the selling price may not be sufficient to fund retirement.

Thomas says regular super contributions can help minimise the risk.

"A lot of people do look at their business as their retirement nest egg and they can suffer from a lack of diversification. They can use super to diversify the investment in the business," he says.

The new rules brought in under the Simpler Super regime have made super contributions by the self-employed a lot easier. Now all contributions up to the allowable limit are tax deductible and the self-employed are also eligible for the Government's co-contribution scheme.

But the new contribution limits of $50,000 for those under 50 years of age (and $100,000 a year for the next five years' only for those over 50) mean people can no longer make larger tax deductible contributions when nearing retirement.

Greg Barter, an adviser with Centric Wealth, says the self-employed now need to make regular contributions to super as soon as they can: "Before July 1, we would often tell people not to worry about getting money into super too early because once you reach 50 years of age we can really ramp the contributions if you're self-employed and claim a tax deduction of $100,000.

"But if they're capping it at $50,000 for everyone, it means in order to shovel the same amount in you need to start a lot earlier."