With the excitement and anticipation of embarking on a freelance career, we can easily get caught up in the ideas of freedom, of getting paid for doing what we enjoy, and working on our own terms.
One of the most overlooked aspects of starting a freelance business is the fact that you’re actually starting a business.
When you start a business, you become a business owner. You cannot do just the creative work and ignore the business side. This requires a mindset shift from that of a creative to that of a business person. This is the biggest step you can take. Freelancers who do not develop a business approach to their work will quickly run into problems.
When you start a business you become a business owner.
Freelancers are independent contractors. Most will start out as sole proprietors, which is the simplest type of businesses to launch. Costs are minimal and income potential is big. You can spend very little and get big results if you do things the right way.
There’s a lot of advice available on how to market and promote your work, how to stay inspired, how to organize and present a portfolio, and how to price your services. There is far less information presented about the foundational aspects of setting up a sustainable business.
In addition to your business plan, marketing, website, social media and, of course, portfolio, there are foundational items you will need to take care of that legitimize your enterprise as a real business. I’ve outlined some of those things here, but discuss them in detail in my Freelance Road Trip digital course.
1. Choose your business name.
Your business name should make sense to your client base and represent your services accurately. Your business name can reflect your work directly, be visionary, be succinct, be humorous. It should be distinct, memorable and simple enough to be practical for use in email addresses, URLs and on promotional material. You must select a name for which you can obtain a domain. The new TLDs are making this easier, but the competition for names remains fierce.
2. Decide on your legal structure.
Most freelancers operate as sole proprietorss. Some form LLCs and some incorporate. Partnerships and larger design firms would form LLPs or incorporate. If you are working with clients in return for being paid you are in business, and you need to establish a legal business structure.
3. Decide where you’ll work.
Will you work out of your home ? Will you work in an office suite or set up a maker space? Will you rent an office or storefront? If you work from home you may not want to meet clients at your house or use your home address. Then you will need a post office box for deliveries and mail, and decide where will you meet clients. I meet clients at a local coffee shop or restaurant —anywhere there’s strong wifi.
4. Obtain business licenses and permits.
Depending upon the state, county and city in which you operate, you’ll need one or more business licenses. A business license gives you the authority to transact and operate in local commerce. These licenses are usually renewable each year. Many are based on your gross income from the previous year. Check into the licensing authorities in your state, city and county.
Another type of license you may need is a resale license. In some states, whenever you transfer tangible goods to your client you are required to charge sales tax on that transaction. Then you get to remit those taxes to the state.
Be sure to not only register and obtain your sales tax license but understand your state’s sales tax requirements. These laws change regularly and you can be penalized if you do not keep up to date.
5. File your DBA.
Most businesses are required to file a public notice of business operations, including business name, address and legal structure. If you neglect this, you may not be able to open your bank accounts. Beware of filing services that charge to file for you. It’s easy and far less costly to file the DBA yourself.
6. Open your bank accounts.
Separate your personal finances from your business finances. Establish business accounts and credit cards that link to your personal account, but that you can account for separately (helpful for taxes and proving you own a business).
I recommend having dedicated checking and savings accounts, and a line of credit in the form of a credit card, not an equity line.
You may want to consider business funding for necessary equipment purchases, but be very careful to steer clear of debt. Debt will hold you back, so avoid it as far as possible.
7. Set up your books.
You will want an easy and accurate invoicing and bookkeeping system. What you choose should fit the requirements of your business and your level of accounting knowledge. I recommend a program that includes budgeting, invoicing, accounting and reporting.
You might describe yourself as a freelance designer, illustrator or photographer. But what you are really doing is running a creative business. You’re an independent business owner. Always take care of business first, so that you have the security you need to pursue your creative work.
What questions do you have about starting your freelance business? Submit them in the comments section below.
Resources:
Small Business Administration https://www.sba.gov/blogs/starting-freelance-business-how-take-care-legal-tax-and-contractual-paperwork
DISCLAIMER: This information is offered in good faith for general information purposes only and is not an exhaustive list. It is not intended as legal advice or opinion. I do not make any warranty about the completeness, reliability, or accuracy of this information. I do not guarantee your level of success Any action you take based upon this information is strictly at your own risk. I am not liable for losses and damages in connection with the use of this information. You should seek legal and other professional advice when establishing a business.