Millennials want to become entrepreneurs, but they’re too worried about student debt. Maybe you became a freelancer because you wanted to set your own schedule, leave the monotony of nine-to-five, and even work from the beach now and then. Freelancing can be a great lifestyle, but one of the hardest things about being a freelancer is there’s no one around to tell you if you’re doing things right. The first year of freelancing can be the toughest. You discover that your success and solvency hinge on so much more than just your core “billable” skills (e.g. coding, writing, design). You have handle all the legal odds and ends, as well as taxes — which can be a freelancer’s nightmare the first time around. There’s also account management, bookkeeping, business development, and the list continues. If you really want to thrive as a freelancer, you need to evolve into a business owner. This might be easier said than done, but here are five things that you can do to take control of your freelancing business and make it work for you. Pick a company structure Most freelancers will need to decide between becoming a sole proprietor, Limited Liability Company (LLC) or Corporation. When people first start out and aren’t earning a lot, they tend to just stick with the default option of sole proprietor. This might work at the beginning, but eventually many freelancers will outgrow the sole proprietorship. For example, as you start taking on larger firms as clients, you might discover that these large companies don’t want to work with sole proprietors. This means that you’ll either need to turn down the gig or change your business structure. In addition, there’s a very serious matter of liability. As a sole proprietor, you are the business. If your business is sued or loses money, then your personal assets are on the hook. When you form an LLC or corporation, this structure puts a shield between you and the business, helping protect your personal assets from things that happen in the business. It may seem strange to create a formal structure when you’re the only one involved. After all, as a corporation, you need to call a formal meeting with yourself before making any major decision. For this reason, the LLC is very popular among small and solo business owners since it limits personal liability, while also keeping the paperwork and administrative requirements to a minimum. In addition, LLCs and corporations can give you some flexibility to lower your self-employment taxes; you can discuss these options with an accountant or tax advisor. Get your pricing right Nothing impacts your bottom line more than how much you charge. The most common freelancing pitfall is undercutting prices. You might do this at first to attract new clients. But, then here’s what happens…more business comes in and your clients all love you; yet it seems like you need to work harder and harder just to stay afloat. Running a business means charging the […]
