Follow these simple steps to set up your business as a freelancer…
So you’re going out on your own! Congratulations!
Let’s go through what you need to get your business set up as a freelancer. I know, I know… it’s the boring stuff that nobody wants to think about.
I promise you’ll thank me when tax season comes around.
1. Decide if you’re going to incorporate or be a sole proprietor
There are tradeoffs between choosing to incorporate as a business or choosing to do business as a sole proprietorship.
The main difference being liability and risk of your personal assets.
A good rule of thumb to ask yourself:
If I listen to my own advice as a professional, and it doesn’t work out… could I possibly want to sue myself?
If maybe… then you may want to go down the route of incorporating (which does cost a little more).
Either way, you’ll want to make sure you have a contractor agreement in place. Here’s a free independent contractor agreement template.
2. Set up your separate bank accounts for your business
Your future, tax-season-going self will thank you for doing this. You want two accounts:
- A business checking account for any income to come into, and any business expenses to come out from
- A business savings account to set aside any tax dollars
A good rule of thumb: Roughly a third of your net income should be put aside for taxes.
3. Make accounting easy
Whether you use a free accounting template designed for small businesses, or you use a software solution (like Able) – the important thing is that you have something to keep track of all your income and expenses.
And when you’re thinking about expenses, and what can be written off, here’s a basic list to start with:
- Sales Tax (if applicable)
- Professional insurance (if applicable)
- Fees from credit card processing
- Dues and subscriptions
- Office expenses
- Capital assets
- Other transportation (not car)
4. Put a system in place for your operations and administration
If you’re just starting out, and you’re not sure if this is going to be something you will be doing over the long term. Start out with a spreadsheet, a free cloud storage solution and a booking link.
Essentially, you want a way for people to schedule time with you, organize any files, documentation and communication, and be able to pay you.
All the while, looking very professional to your clients (even if you’re just starting out).
If you don’t want to spend hours trying to figure out how to tape together free solutions, and you’re taking this more seriously, then you’ll want a CRM that has all those same capabilities and more.
Most CRMs are completely overkill for individual businesses, so you’ll want something like Practice, that’s built specifically for businesses of one.