So you’ve decided to take the leap and become a full-time freelancer. Has your initial excitement been diminished by all the tasks and responsibilities that come along with being your boss? Or have you already been freelancing for a while but want to make sure you have all the basics taken care of?
Not to worry, we'll help. Read our guide to learn everything needed to know about managing your freelance business.
Registering Your Business
As a freelancer you are a business owner, so you need to determine which business option is the best fit. Sole proprietorship or LLC are the two most common options for freelancers.
A sole proprietorship is simpler and doesn’t require a separate business tax return. It’s a good option for those who freelance on the side.
An LLC has a more complex set-up process, but in the end, it’ll protect you as a business owner and make sure your personal assets are not subject to any professional claims or legal liabilities.
Check out this article from LegalZoom as a good resource to figure out what’s right for you and determine which option is best.
Define Where You Work and Your Workspace
Many people decide to become freelancers for the flexibility of being able to work anywhere. This doesn’t mean you should work on the couch in your sweats with Netflix in the background. Keep in mind that you need a workspace where it's possible to focus and be productive.
When working from home, make sure to have an office or workspace separate from where you relax, have meals, or socialize.
Many people like working in coffee shops, that’s an option for shorter periods if you can focus well in public spaces.
Another great option is co-working spaces, especially if you are used to and miss the more traditional office environment. Working at a co-working space gives you time away from home to focus and often can replace some of the social aspects of an office. There are membership fees so it may not be financially possible if you’re just starting out, but it’s a good option to keep in mind once your business is more established.
Finding Work
There are several different options for finding freelance work. There are many job sites for freelancers, you can send cold emails or use social media, just for starters. It’s best to try multiple avenues so that you widen your scope of job opportunities. That way you’ll also be able to figure out which resources work best for you.
For more tips on finding work check out our article on 5 Effective Ways to Find Freelancing Jobs
Managing Clients
If you’re just starting then you may be tempted to take every job that is offered. You certainly want an open mind so you don’t close yourself off to opportunities. It's hard to know when a small project can lead to more regular work down the line. But recognizing when a certain project or client may not be the best fit is also important, so choose your clients wisely.
It’s a good idea to always start with a trial project before committing to a new client. This way you can gauge if you’re on the same page, but more importantly, it’s a good way for you to vet your clients.
Here are some red flags that may indicate a client is not the best fit
Poor communication - you don’t have a clear understanding of what they expect, or they don’t provide clear feedback about your work
They don’t respect your time - if they expect you to respond to an email immediately, hop on a call on short notice, or expect you to be available on your off-hours, they may not respect or time or understand the nature of your business.
They don’t respect your rates - It’s fair to offer a one time discount on a trial project or put together bundle pricing for multiple services or larger projects, but if a client is consistently asking you to accept much lower rates than what you’ve quoted then their work will not be worth your time.
Managing Your Business Day-to-Day
Once your schedule starts filling up with projects, you should make sure you have the right organizational and productivity tools to manage the day-to-day of your business.
That’s where Indy comes in - an all in one productivity suite to streamline your business management. With Indy's tools you can track your time, send contracts, proposals, and invoices, store and share files, and more.
With the convenience of managing your business all in one place, you’ll be able to spend more time on what you love most, your work.
Paying Taxes
Part of being a freelancer and business owner is that you’ll have to pay taxes differently. As an employee, you had income tax withheld from each paycheck, and your employer paid your employment tax. As a freelancer, you’ll have to pay both income tax and employment tax in full each tax season.
It’s best to prepare early by saving a set percentage of 20-30% from each payment you receive and set that aside for taxes. That way you won’t be surprised when it comes time to pay your taxes.
Remember to take note of anything you can use for tax deductions. Examples are anything that you use to run your business like software or equipment, even a workspace.
Consider hiring an accountant. There are areas of your business you don’t have to manage yourself. Hiring a tax professional can save you money in the long run as well as reduce any stress around paying your taxes. You can rest assured that you’re doing things properly.
For more information, TurboTax has a helpful tax guide for freelancers.
Setting Up Health Insurance
As a freelancer, you won’t have any health benefits that traditional employees may have through their employers so you’ll need your own health insurance.
If you previously had a health insurance plan through your employer, then you may have the ability to extend your coverage through COBRA
If you have a partner or spouse, its possible to see if their coverage options can include you on their plan.
If you're single and don’t have COBRA then The Freelancers Union is a good resource for finding coverage.
Investing for Retirement
401Ks and retirement accounts are not just for those who are employed in traditional jobs. As a freelancer, you should also be planning for retirement. You may not be able to start investing right away, but once your business is well established, you should consider setting up a retirement account.
There are several different retirement plan options for self-employed or small business owners. You can select from an IRA (traditional or Roth), Solo 401(k), SEP IRA, SIMPLE IRA, or a defined benefit plan.
To find out which plan is best for you, an article by US News outlines these options.
Stay Connected and Grow Your Network
As a freelancer, it can be difficult to feel connected with others when you’re mostly working alone. It’s important to develop a network of freelancers you can connect with. Not only can you ask questions, learn, and find work opportunities through freelancing communities but they’re also great places to forge relationships and beat the loneliness that can result from freelancing.
For more tips on staying connected, check out our articles Finding Freelance Communities and Four Ways to Make Your Network Stronger in 2020
