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How to Legally Start a Freelance Business

Oh boy, are you in for a treat! Nothing says "adulting" quite like starting your own business as a freelancer. Just think, you get to be your own boss, make your own schedule, and work from the comfort of your own home (or a coffee shop, because let's be real, who actually has a dedicated home office?

Plus, you get to experience the joys of invoicing, managing your own taxes, and trying to convince people to actually pay you for your hard work. But hey, no pressure. If you're up for the challenge, read on to learn how to set up your very own freelancing business.

The rise of the "gig economy"

The gig economy or freelancing, at its core, is the act of working for oneself as an independent contractor rather than being employed by a company. It's a career path that has gained significant popularity in recent years, particularly with the emergence of online marketplaces like Upwork and Fiverr.

Reports say that there are currently around 70 million freelancers in the US alone, making up a whopping 42% of the workforce. And this number is only expected to grow, so you're in good company.

Gone are the days of scouring classified ads in the newspaper for freelance work. Now, individuals and businesses can connect online to offer or find a wide range of services, from web design to social media management to writing and beyond. This has made it easier than ever for people to break into the freelancing world and offer their skills to a global market.

In addition to the convenience factor, the rise of the gig economy has also been driven by the increased flexibility and freedom that comes with freelancing. No longer tied to a traditional 9-to-5 job, freelancers have the ability to choose the projects they work on and set their own schedules.

Of course, this freedom comes with its own set of challenges. Freelancers are responsible for finding their own work, managing their own finances, and handling their own benefits. But for many, the pros of freelancing far outweigh the cons, making it an attractive career option in today's modern world.

Freelancing vs Being Self-employed

As a freelancer, you are essentially your own boss, responsible for finding your own work, setting your own schedule, and managing your own finances. This is similar to being self-employed, but there are some key differences to consider.

  • First, let's define self-employment. Self-employment refers to earning a living through one's own business, trade, or profession rather than working for an employer. This could mean running a small business, like a bakery or retail store, or offering a service, like lawn care or consulting.

  • Freelancing, on the other hand, is typically characterized by offering a specific skill or service to clients on a project-by-project basis. Freelancers may work with multiple clients at a time and are not necessarily tied to any one company long-term.

So, while both freelancers and the self-employed are responsible for their own work and finances, the key difference is in the nature of the work being done.

Do you really need to start a business as a freelancer?

Now, onto the question of whether or not you need to start a business to freelance. In short, it depends on the specific nature of your work and how you want to structure your career.

If you're simply looking to offer your skills or services on a freelance basis, you may not need to start a formal business. However, if you plan to scale your freelancing into a larger operation or if you want to offer a range of products or services, it may be beneficial to set up a business. This can help you establish a professional image and make it easier to manage your finances and taxes.

Steps to Setting up your business as a freelancer

If you do decide to start a business, the first step is to register your business with the appropriate authorities. This will vary depending on your location, but generally, you'll need to choose a business structure (e.g. sole proprietorship, LLC, corporation) and register with your state or local government. You may also need to obtain any necessary licenses or permits.

If you live outside the US, you may still be able to set up a business in the US depending on the kind of business you intend to start. Wyoming and Delaware are among the most popular destinations for foreigners who intend to go for LLCs and sole proprietorships.

Congratulations on registering your business! You're well on your way to becoming a full-fledged freelancer. But before you can start your career of working from bed in your pajamas (because let's be real, that's what we all dream of), you'll need to take care of a few key things. Let's talk about them.

Payments, Invoicing, and tax

setting up a payment system for all those sweet, sweet client dollars and opening a separate business bank account because let's face it, mixing personal and professional finances is a recipe for disaster. You'll also want to get your invoicing and taxes in order because nothing says "professional" like a surprise audit from the IRS.

Your Skills

As a freelancer, your skills are the ingredient sauce of your business. You'll need to specialize in something (because let's be honest, being a "generalist" just means you're mediocre at everything). So pick a niche, get better at it, and run with it.

In 2022 alone, Upwork recorded over 10,000 skills that were available on their platform. This means that there are plenty of skills in demand among freelancers, including:

  1. Writing

  2. Translation

  3. Video editing

  4. Graphic design

  5. Programming

  6. Social media management

  7. Digital Marketing

  8. Content creation

  9. Photography

  10. Voiceover work

  11. Audio editing

  12. Video production

  13. Web design

  14. Search engine optimization (SEO)

  15. Data analysis

  16. Virtual assistance

  17. Project management

  18. Translation

  19. Legal consulting

  20. Copywriting

By mastering one or more of these skills, you can offer valuable services to clients and build a successful freelancing business.

Portfolios of your work

You'll also want to build a strong portfolio to show off your mad skills and network with other industry professionals because no one wants to be a freelancer island. This can be shown on your own website/landing page or via your social media page. Note that specific skills like graphic design, web/app development, and video editing will require that you show what you are capable of. So it's best to show off your work on platforms like Dribble and the Figma community.

Running a successful freelance business

Marketing and networking

As a freelancer, you're always on the lookout for new opportunities and ways to make yourself stand out to potential clients. This might involve networking at stuffy industry events, showcasing your skills on social media, or straight-up begging for work. And let's not forget about having a strong online presence. You'll need a professional website or portfolio to show off your work and make yourself look like you know what you're doing. Plus, social media platforms like LinkedIn, Twitter, and Instagram are great for connecting with potential clients and industry insiders (aka your competition).

By constantly seeking out new opportunities, maintaining a strong online presence, staying up-to-date on industry trends, and taking care of yourself and your finances, you'll be well on your way to a successful and fulfilling freelance career.

Negotiation and pricing

As a freelancer, you'll probably have to do this all the time. You might need to discuss project scope, deadlines, or payment terms, so it's important to be clear and confident in your communication. But also be willing to compromise and find a mutually beneficial agreement. Don't be afraid to advocate for yourself and your business.

Pricing your services can be a tricky deal. This is because you want to charge enough to cover your time and expertise, but you also don't want to price yourself out of the market. Do some research and see what others in your industry are charging, but also remember to value your own worth. Don't sell yourself short!

Staying Updated

But it's not all about the hustle. As a freelancer, it's important to stay up-to-date on industry trends and continuously work on improving your skills. This could involve taking courses, attending workshops, or collaborating with other professionals (aka stealing their secrets).

Managing finances

And don't forget about managing your finances. It can be a challenge, but there are tools and resources available to help you stay organized and on top of your budget. And if you're feeling fancy, you might even consider investing in tools and services to make your business run more efficiently, like project management software or a virtual assistant.

Selfcare and stress management

As a freelancer, you'll need to be able to manage your own workload and balance multiple projects at once. This can be a challenge, especially when you're just starting out and trying to build your client base. It's important to be proactive and stay organized, but also be realistic about your capacity and don't be afraid to turn down work if necessary.

And let's not forget about self-care. As a freelancer, it's important to set boundaries and make time for yourself, as well as find ways to stay motivated and productive while working independently. This might involve setting goals, finding a supportive community, or setting up a dedicated workspace (aka a corner of your living room that you can call your own). It's also important to take breaks and engage in activities that help you relax and recharge, like taking a walk, practicing mindfulness, or indulging in a favorite hobby.

Dealing with clients

Unfortunately, not all clients will be easy to work with. It's important to have good communication and problem-solving skills to navigate any challenges that may arise. If a client becomes unreasonable or difficult to work with, it may be necessary to part ways, but always try to do so professionally and diplomatically.

Protecting your freelance work

Don't forget to protect your work, we cannot stress this enough. As a freelancer, you'll be creating intellectual property on a regular basis, so it's important to make sure you have the appropriate legal agreements in place with clients. This could involve using contracts or non-disclosure agreements to ensure your work is properly credited and compensated. You don't want anyone stealing your ideas or using your work without permission (or payment).

Final thoughts

Starting a business as a freelancer is no small task, but with the right mindset and approach, it can be a rewarding and fulfilling career path. It's important to continuously work on improving your skills and staying up-to-date on industry trends, as well as effectively marketing yourself and managing your finances. With dedication and hard work, you can turn your passion into a successful business.

By considering these key factors and putting in the hard work, you can turn your freelancing dreams into a successful and fulfilling reality. Good luck!

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