Forming a Freelance Company
According to bizee, freelancers can make an average of $500 monthly. Given this, why don’t more people freelance? For many, it comes down to not knowing how to establish their own business.
A typical response is the requirements for starting a freelance business seem too complicated. Do I need to form a Limited Liability Company? What about state taxes? How will I charge for my products and services, etc.? These are just a few of the many questions you may be asking yourself or that may be stopping you from taking the next step.
Step 1: Decide on a business structure
Before starting your business, you’ll want to decide on a business structure, and file the appropriate paperwork. Do you want to operate as an LLC? S corp? Sole proprietor? You can do all this on your own to save money, or if you have limited time several online services can execute many of these foundational formation steps. Legal Zoom or ZenBusiness can provide all the support required.
Step 2: Understand your state and local requirements
States and the federal government are making it easier and more accessible for new companies. Since private enterprise is one of the growing sectors of the economy, it is essential for them to make it as easy as possible for private enterprises to form and become successful. This does not mean that the government is hands-off. They want you to fulfill your business obligations. Sites like Delaware.gov’s business guides are available for every state. Regardless of your approach, please take time to understand your state and local requirements for operating a business.
Step 3: Assess your risk
Determine the level of risk that you are planning to accept. You can do this in several ways. The primary method for doing this is to know your customer base. If you plan to service independent business owners, the risk of getting sued is significantly lower than that of dealing with professionals like doctors or lawyers.
The second method for assessing your business liability is to talk to others who either have a similar client base or do similar work. You should speak with freelancers who have been out there for at least two years–they may be able to provide insight into additional pitfalls you might not have thought of yet.
Regardless, I suggest purchasing business insurance. Details regarding your current or anticipated customer base will help the insurer determine the appropriate coverage. Many different companies sell business insurance. Please take the time to compare quotes from at least three insurers.
Once you’ve decided to start your own business, keeping accurate financial records is crucial both for reporting your income to the government, and planning for your business’ future. Partnering with an experienced bookkeeper to do the accounting tasks can free up your time to do more of what you love. If you’re interested in learning more about working with a Breakaway advisor, reach out. We’d love to hear from you.
