Freelancers, listen up. How many of you know how to legally establish a business, set a fair rate for yourself, get your taxes right and invest smartly in a retirement plan?
Steps to Legally Establish a Freelance Business
All freelancers must learn to establish a business in order to attract clients and charge them fair prices. "The same laws that apply to salaried employees also apply to the independent contractor,” says Rob Janson, assistant director, corporate/employment law, University of Pennsylvania Law School's Luzerne County Bar Association. Some tips from Janson: Start by obtaining a business registration. You will need a private business license and a record of your primary place of business. Choose a name, but not just any name. It needs to be recognizable. It needs to be identifiable. List your name in the phone book, but contact each business and ask if they offer a special deal for a freelance journalist. Be sure you've made your address public.
The Importance of Setting a Fair Rate for Yourself
Whether you work for your own business, for a company or for another freelance job, every worker deserves to be paid a fair wage. And in a world where freelancers make up almost half of the workforce, that number is steadily rising. While many freelancers are inclined to work for as little as possible (or nothing at all), that doesn’t mean you should accept what’s offered to you. It doesn’t matter if it’s your first time being hired as a freelancer. You’ve got to offer fair rates, or no one will hire you. The problem is, so many freelancers won’t tell anyone about the rate they get, or their rates are ridiculously low. You have to be competitive if you want to bring in clients.
How to Get Started with Taxes
There are three forms that a freelancer must file every year. If you are self-employed, you must file an employer's tax form for every client you worked for last year. If you are a sole proprietor, you must file Form 2107 to determine your own rate. As an independent contractor or an employee, you must also file Form 1099-MISC, a form that details all your income, payments and deductions. With the IRS using number math as a teaching tool, be prepared to write down and then double-check all the numbers, including estimated income. For a full accounting of the forms you must file, visit IRS.gov. Finding Client Work Now that you've got your taxes sorted, it's time to look for clients. Whether you are a freelance writer, web developer or an artist, the process is the same.
Ways to Invest Your Money
If you are lucky enough to find a well paying job, don't be a fool and not save. Your portfolio should be realistic in scope, with equal or less exposure to the market. With a balanced portfolio, you can put aside a third of your income and not even miss it. If you are willing to invest in stocks, there are programs where you can invest a small portion of your income. However, investing in the stock market can be risky. Investors lose money when the market tanks, or when a new fad comes into the market. So, be careful, the stock market isn't always a win-win. As you read this, trade rumors are swirling around Apple Inc., Amazon and Netflix, some tech stocks are down considerably and if you bought them, you can try to time your trades. It's tough to time the market, but I can help.
It’s fair to say that being an entrepreneur or business owner is not for everyone. No matter how fun or rewarding a career can be, the responsibilities, sleepless nights and fears that come with it can be overwhelming. If you have decided that you want to pursue entrepreneurship as a career, we hope that the information in this guide was helpful and beneficial for you and your business.