Freelancers are self-employed and often referred to as independent contractors. Freelancers are hired by other companies on a part time or short-term basis, but they do not receive the same compensation as full-time employees or have the same level of commitment to any particular company.
Setting up as a freelancer is a little bit like setting up your own business. While every country has its own laws and types of business structures available for freelancers, the key factors to consider remain the same regardless of where you live or work. So, are you really interested in freelancing?
Then here’s what to consider when setting up as a freelancer:
1.Type of legal entity to work under. To start working as a freelancer (that is, officially), you’ll need to register your business with the local government. Keep in mind that the legal entity you choose (e.g. Sole Proprietorship, Limited Liability Company) will impact the amount of taxes you have to pay, your personal liability and the amount of paperwork required — not something that should be brushed aside carelessly!
2.Paying taxes (invoicing, expenses, tax returns, etc.). Once you register your business, you’ll be legally required to file tax returns and pay taxes. Putting a robust invoicing and expense-tracking system in place from day one can prevent you from plunging into complete chaos at the end of the financial year.
3.Choosing an insurance policy for freelancers. Even if you go freelance, you should be able to enjoy the same security and peace of mind that you get when working for a company. It’s worth thinking about paying for a special health, business or income insurance for freelancers to protect yourself from the unexpected.
4.Opening a business account. In many cases, freelancers are not legally required to open a bank account, but most do it anyway. Being able to separate personal and business finances makes it significantly easier to claim expenses and work out the business profit at the end of the financial year.
5.Building a client list. Building a client list prior to going freelance is a great way of getting enough work even during the quiet times of the year. Plus, as many freelancers will testify, there’s no better way of advertising your services than getting a client referral.
6.Drafting your own freelance contract. A freelance contract is a legal document you and your client should sign before starting any work on a new project. What may seem like a boring formality at first, is actually your best way of protecting yourself against non-payment, liability and potential legal troubles. There are many freelance contract templates available online that you can download for free and adapt to your business.
With the number of freelancers on the rise year on year, many describe the decision to go freelance as life-changing. Here are a few of the commonly touted advantages to quitting the standard 9-to-5 job and becoming a freelancer. Flexibility to decide how, when and where to work One of the biggest perks of being your own boss is that you don’t have to ask anyone’s permission to work from home, start late or work while you travel. You decide your own business hours and you choose where to work from. If that means taking Wednesdays off to visit your grandma or working late into the night and sleeping until noon – so be it!
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