COVID-19 relief options and additional resources
LEARN MORE Close

Starting

Starting a Freelance Business – How to Take Care of Legal, Tax and Contractual Paperwork

By Caron_Beesley, Contributor
Published: July 18, 2012 Updated: September 23, 2016

If you are new to freelancing or thinking of becoming a freelancer, you’ll no doubt have lots of questions, especially about the legal and regulatory paperwork you need to obtain and manage throughout the business year.

Freelancing, particularly if you are unincorporated, is one of the least paperwork-intensive forms of business ownership. Nevertheless, you are still a business and you need to be sure you have the right licenses or permits, make estimated tax payments on time, report your earnings each year, and deal with client paperwork such as contracts, non-disclosure agreements, and more.

To help you stay on top of your obligations, here’s a breakdown of key legal and regulatory processes, plus important “business-ready” documentation you’ll need when dealing with new clients.

Legal and Regulatory “Must-Dos”

Here’s what you’ll need to do to ensure you set up and manage your freelance business legally:

1. Get the Right Licenses and Permits – All businesses need some form of license or permit to operate in their state, county or city. In all likelihood, your freelance business is operated out of your home. So you may need a Home Occupancy Permit and a General Business License. You can get both from your local government website. Or simply use SBA’s “Permit Me” online tool for information about the licenses or permits you may need. Be sure to obtain these before you start doing any business.

2. Register Your Business Name – If you want to name your business anything other than your given name, then you’ll need to register a “Doing Business As” name with your local government. This guide explains how. If you use your own name, skip this step.

3. Pay Estimated Taxes – This one often comes as a surprise to freelancers, who may be used to having their taxes withheld by an employer. As a freelancer, it’s your responsibility to pay Uncle Sam and your state revenue agency almost as soon as you earn income each quarter. If you expect to owe $1,000 or more when you file your annual return, then you must pay estimated taxes on income. For information on how to calculate and make your payments, read: How To Calculate and Make Estimated Tax Payments.

4. Complete a W-9 Form When You Get a New Client – When you ink an agreement or start work with a new client, it’s likely they will ask you to complete IRS Form W-9 (you may have to ask them for it). Filling out a W-9 is straightforward: provide your name and social security number, or “Doing Business As” name. The client holds this form and doesn’t send it to the IRS; it’s a formal certification by you that your tax ID (SSN) is correct. The form also asks if you are subject to backup withholding – most taxpayers are exempt.

5. Annual Tax Reporting: The 1099 Form – If you’ve earned more than $600 in a year from a client, they have to report these payments to the IRS through Form 1099-Misc. Your client will send you a copy by the end of January each year. Be sure it’s accurate – does the amount the client stated they paid you match your records? You don’t have to do anything with the form other than it in your records and use it as a reference when you report your annual income to the IRS.  Think of it as the freelancer’s equivalent of the W-2 form.

I’ve deliberately excluded incorporation as a “must-do” legal and regulatory step for freelancers. Incorporation isn’t a legal must-do. While it has its benefits, it can also have cost disadvantages. To help you decide if incorporation is right for you take a look at SBA’s Incorporating your Business.

Essential “Business-Ready” Documentation for Freelancers

Here’s a list of some of the day-to-day documentation and paperwork that you will likely need or encounter as a freelancer:

1. Cost Estimate and Proposal Documents – Give your business a professional touch by creating your own branded template for project quotes and proposals. You can pay a graphic designer to create many of your basic business documents and graphics, or use freely available templates in software such as Microsoft Word and Google Docs. Sites such as FreelanceSwitch also offer free templates and resources.

2. Contract Documents and NDAs – Most clients will have their own contracts in place for independent contractors or freelancers. Be sure to read through the terms with a fine tooth comb. Don’t be afraid to question anything that doesn’t make sense or is irrelevant. The Non-Disclosure Agreement or NDA is usually included and is pretty standard. It requires you to agree to the client’s legal rights for protecting company knowledge or information you may have access to during the course of business, as well as intellectual rights relating to the work you produce.

If your client doesn’t present you with a contract, you may wish to protect your own interests by producing your own.

3. Statement of Work – Even if you have a client contract in place, many clients will also ask for individual statements of work (SOW) for each project. It’s a good idea to volunteer one even if they don’t ask for it. A SOW is a project-specific agreement outlining the mutually agreed scope of work and the timeframe for its completion. It sets expectations, deliverables, and the price. It may also include information on resources needed for the project, including roles and responsibilities on both sides. The secret to a good SOW is to avoid being vague – if it’s too broad and non-specific, you may end up with a dispute.  Once the SOW is agreed and signed, you are ready to begin the project.

Got questions? Post them below.

Related Blogs

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

How a Business Email Address Can Hurt or Help Your Financing Efforts

By Marco Carbajo, Guest Blogger
Published: July 17, 2012

We can all agree that email is another tool used for exchanging information. But when it comes to business, it plays a much greater role then many people seem to realize.

Unfortunately, one of the most common mistakes business owners make is obtaining a business email account from one of the many free email services available on the Internet. While a free email services does serve a purpose, it can give a bad impression to a potential customer or even hurt your chances for obtaining credit because some creditors require a dedicated business email account.

You can help your business by obtaining a business email account that clearly shows that your company has a personalized domain name. The email address you set up should have @yourbusinessname.com. Not only does this look professional, but it also shows that you are a “real” company with a dedicated communications system.

The first thing you will need to do is register a domain name for your business with an approved domain registrar.

Once you visit the site, you will need to conduct a domain search to see if a .COM for your company name is available. I strongly suggest that you obtain a .COM because it adds another layer of credibility and professionalism to your business as opposed to a .Biz or .Net name.

If your company name is not available as a .COM, then consider searching for a .COM with the extension of your structure title as well. For example, ABC Company.com may not be available, but try ABC CompanyLLC.com as an alternative.

Be prepared to supply the following information when setting up your business email account:

  1. Name, company name, address and phone number
  2. Administrative contact information
  3. Technical contact information
  4. Domain Name System (DNS) server details

The DNS server is usually provided by the web hosting company that you use to host your website. If you don’t have a website, you can have your domain name parked on your registrar’s servers until you set one up. This can be done afterwards and you can always contact their tech support for additional help.

Once you register a domain name, you will be able to set up a business email account associated with your new domain name. When you select an email address, keep it simple because you will be supplying this information on all your company documents, applications, registrations and so on.

If you decide to establish multiple email addresses like ceo@abccompany.com, support@abccompany.com and sales@abccompany.com, make sure you use only one of these email addresses on all things related to the business credit building process.

It’s essential that you understand how lenders and credit providers assess the creditworthiness of a business. Even though it may seem like a minor detail, having a dedicated business email account does play a role in the decision making process. Small details like this that get overlooked can cause problems for you later on.

About the author

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Can You Become A Part-Time Franchisee?

By FranchiseKing, Guest Blogger
Published: July 3, 2012 Updated: July 6, 2016

Is it possible to find a legitimate franchise opportunity that only requires a few hours a week to run? And, if you do find a part-time franchise, can you make enough money for it to be worth your up-front investment, and of course, your time? Let’s find out.

First off, it’s important for you to be able to distinguish a true franchise-type of business, from a non-franchise business.

In most cases, franchise ownership offers:

·       A proven business system that’s easy to replicate

·       A formal training program

·       Proprietary software and technology

·       Marketing and advertising tools and systems

·       A support team

·       Formal and lengthy contracts

·       Protected territories

Non-Franchise Businesses

Business Opportunities, or Biz Opps, as they’re sometimes called, aren’t very structured when compared to a franchise business. You won’t usually find territory restrictions with a business opportunity, and there are no royalties.*

In addition, the total investment amount is usually less than a franchise business.

While there may be training, and even some marketing tools, the support structure isn’t as tight as it is with a franchise business system.

(It's not because purveyors of Business opportunities are mean-spirited people that they don't supply a tight support structure. It has to do with the business model; in a Business Opportunity, the investment amount is collected up-front. There’s no royalty-stream coming in that could support a lot of well…support, in this type of business set-up.) 

There’s another type of non-franchise business that’s worth mentioning here; Network Marketing businesses. Also known as MLM’s (Multi-Level Marketing) these businesses are almost always marketed as “Part-Time Opportunities.”   

There isn’t enough space here for me to go over all the pros and cons of a Network Marketing business. Suffice to say, there’s a plethora of information available, including an article I found over at FTC.Gov that defines Network Marketing businesses in easy to understand terms.

 Part-Time Franchise Opportunities

While the thought of owning a franchise that doesn’t require a full-time commitment may be appealing to you, the reality is that there are very few franchise concepts around that fall into that category. Most franchises are designed to be owner-operated, with the owner on the premises.

But, if you do have your heart set on investing in a franchise that can allow you the flexibility to not be there all the time, know this; you’ll probably need deep pockets. That’s because most of the franchises that tout things like “flexibility” in their marketing methods are multi-unit ownership opportunities.

In addition to the promise of flexibility that several franchisors offer their franchisees, there’s another option offered in the franchise marketplace that may also have a nice ring to it for you. Ready?

How would you like to keep the job you have while you start a franchise business?

Right off the bat, it’s very appealing, cash-flow wise. That’s because if you can keep your day job while launching a new franchise business,* you’ll have cash coming in-via your paycheck, and that can really give you some breathing room.

To summarize, if you have a pretty sizeable net worth, want a lot of flexibility, and like the idea of maybe being able to keep your current job while your new business launches, there are opportunities available in the franchise marketplace.

*Non US-Government links

More resources

5 Franchise Tips From SCORE

 

 

 

About the Author:

FranchiseKing
Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.

Do the Credit Cards for your Business Report to your Personal Credit Reports?

By Marco Carbajo, Guest Blogger
Published: June 19, 2012

Due to the growing difficulty in obtaining traditional business lines of credit from banks, many business owners are turning to credit cards for small businesses as their primary unsecured business lines of credit.

Unfortunately, the majority is turning to the wrong sources. They end up putting their personal credit on the line and all their business credit card debts show up on their personal credit reports.

This means that anytime you use your business credit cards, your personal debt/credit ratios are affected. Did you know that drawing a large portion of funds from these types of business credit cards can result in your personal credit scores dropping anywhere from 20-100 points overnight?

Some of the largest financial institutions offering business credit cards report to your personal credit. This negatively impacts your scores.

Do your current business credit cards report to your personal credit reports?

If so, you should consider obtaining several true business credit cards that do not report. This will shelter your personal credit for personal necessities such as auto loans, mortgages, student loans and personal credit cards.

Unsecured credit lines such as business credit cards have been around for a long time. They are no secret to the wealthy and savvy business owners. When properly structured, they do not report to your personal credit reports. They can be excellent cash flow tools, as the monthly debt service is usually lower than almost any other form of financing. The rates are usually very good, too–usually between 3-7% above prime.

So where can you find business credit cards that do not report to personal credit?

Well, the good news is there are credit cards that only report to the business credit bureaus. The bad news is the credit card issuers for these types of cards do not advertise this fact.

First, while there are hundreds of credit cards for small businesses available in the marketplace, only a handful of major companies issue and service all these consumer and business credit cards.

So when you see a financial institution launch a new credit card program with its own branded label, in most cases it always includes a partnership with a leading agent credit card issuer to provide and service the actual credit card products to its customers.   

The agent credit card issuer is the company that actually underwrites, issues and services the credit card customer. As you may know, part of account servicing includes credit reporting.

You have two options if you want to locate these types of credit cards for your business. First, you can utilize a business credit service because they know firsthand which lenders are lending, which ones report to only the business credit bureaus, and whether you and your business will be a good fit for them.

Your second option is to do it on your own. But, you will need to know which lenders offer unsecured business credit without full income documentation. In addition, you will need to find out which ones do not report to your personal credit reports.

Finally, you should be aware of which credit bureaus are pulled by each lender so you can properly plan the series of applications. These are just a few of the questions to address prior to doing it on your own.

 

About the author

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Run a Home-Based Business? – Find the Licenses and Permits You Need

By Caron_Beesley, Contributor
Published: June 13, 2012 Updated: December 29, 2017

Whether you’re starting a business from home or looking to move into a home office, it’s important not to overlook the fact that your business is still subject to license and permit laws.

Why? One of the main reasons any business owner is required to carry a license is so that revenue can be tracked for taxation purposes. Businesses that sell taxable goods or services also need a sales tax license or permit. Licenses and permits are also used to protect the public and are required in federally regulated industries (aviation, firearms, alcohol businesses, etc.).

Other industry licenses signify specific expertise. For example, if you run an in-home hair styling business, you’ll need the same professional license that you’d need if you had a main street salon.

Regulations vary based on industry and location, so it can be intimidating to know where to start.

Find Your License and Permit Requirements

Select your state from the list to discover which licenses or permits you’ll need, together with information and links to the application process.

General Home Business License and Permit Guidelines

In addition to the Permit Me tool, it’s helpful to know more about the general guidelines that apply to home business licensing and permit requirements. While not all of these will apply to every business, some will: 

1. General Business Licenses – Your city or county government website can help you get one of these. Basically it’s an annual license or permit that legally entitles you to operate a business in that locality.  Typically a small fee is associated with this paperwork.

2. Professional and Trade Licenses – State governments require certain businesses or industries to obtain professional/occupational licenses, such as a child care operation or real estate license. You can contact your state's business license office – or check the website – for a complete list of occupations that require licensing. 

3. Home Occupation Permit – Many city and county zoning and planning agencies require all home-based businesses to get a Home Occupation Permit. If a permit is not required in your city, the zoning office can tell you if your neighborhood is zoned for the home business activity you plan to conduct. If your area is not zoned for your type of business, you may need to file for a variance or conditional-use permit. This guide, Zoning Laws for Home-Based Businesses, has more information about zoning laws for home-based businesses. 

4. Sales Tax Permit - If you intend to sell taxable goods or services (online or offline), you may be required to collect state and local sales taxes from your customers. If you sell your products in a state that charges a sales tax or levies a gross receipts or excise tax on businesses, you may have to apply for a tax permit or otherwise register with your state revenue agency. This blog also explains more about the process of getting a permit and collecting sales tax: Sales Tax 101 for Small Business Owners and Online Retailers.

5. Health and Safety Permits – Depending on your location and industry, you may need either a permit or an inspection from your local fire department, especially if your business requires the use of flammable materials or will likely involve the assembly of several people in one location, such as a child care business.

Air and water pollution by businesses is also monitored in some communities. You can check with your state environmental protection agency to see if these regulations are applicable. Health Department permits are typically issued by your county government, pending an inspection of the business premises, if you plan to sell food to the public or to other businesses. Additional permits may be required for food service or food preparation depending on your state. 

6. Sign Permits – Some cities and towns have sign ordinances in effect that restrict the type, size, or location of signs placed on your property. Check with local authorities.

7. Construction Permits – If you need to make structural changes to your property to accommodate your in-home business, environmental and building permits may be required for construction. It’s a good idea to check your local government’s building and planning department before undertaking any construction. 

8. Check with Your Home Owner’s Association (HOA) – While your local HOA won’t specify particular licenses or permits, if you do live in a planned residential neighborhood or complex, the HOA can restrict the type of business activities you conduct in your home.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Franchise Lawyers: When To Use One

By FranchiseKing, Guest Blogger
Published: June 5, 2012 Updated: September 16, 2016

Are you headed towards the finish line? Are you at the point in your franchise business exploration where your yes or no decision on a particular opportunity is imminent? If so, read on…

In my capacity as a franchise ownership advisor, I’ve had several clients hear variations of the following declaration from their franchise development representatives;

You are welcome to pay to have a franchise attorney look over our Franchise Disclosure Document as well as the franchise agreement, but everything in our agreement is etched in stone.”

In other words: the franchise agreement, (contract) is non-negotiable.

While that may be true, (for the most part) these documents are not that easy to read, especially since a majority of the wording is in legalese. The Franchise Disclosure Document (FDD), combined with the actual franchise agreement itself, can easily be 200-300 pages long. You probably won’t be able to digest all of it in one sitting.

Look at all of the items that are included in every FDD:

·        The Franchisor, its Predecessors, and its Affiliates

·        Business Experience

·        Litigation

·        Bankruptcy

·        Initial Franchise Fee

·        Other Fees

·        Initial Investment

·        Restrictions On Sources Of Products And Services

·        Franchisee’s Obligations

·        Financing

·        Franchisor’s Obligations

·        Territory

·        Trademarks

·        Patents, Copyrights and Proprietary Information

·        Obligation To Participate In The Actual Operation Of The Franchise Business

·        Restrictions On What The Franchisee May Sell

·        Renewal, Termination, Transfer And Dispute Resolution

·        Public Figures

·        Earnings Claims

·        List Of Outlets

·        Financial Statements

·        Contracts

·        Receipt

That’s a lot of information for you to go through, especially if you’re new at reading franchise business documents. That’s why you need to hire a franchise attorney to look the franchise documents over. A franchise attorney knows what to focus on in the FDD and in the actual contract. They’ve probably written a few themselves. They can also lay out exactly what your obligations are going to be to the franchisor.

But, you don’t need to hire a franchise attorney right way. Follow these steps first:

·        Figure out what your top skills are, business-wise

·        Choose a few franchises in which those skills can be utilized

·        Learn all you can about the ones you’ve chosen

·        Do great franchise research

·        Visit* franchise company headquarters

Once you’ve done those things and are pretty much ready to move forward with your chosen franchise opportunity, hire a franchise attorney. A good one will make sure you haven’t missed anything in your research.

As far as I’m concerned, using the services of a qualified franchise attorney is the only thing that should be non-negotiable (in your eyes), if you’re buying a franchise.

One more thing

Are franchise contracts really non-negotiable?

According to Charles Internacola, a New York franchise attorney, they absolutely are:

It is not illegal for a franchisor to negotiate the terms of your franchise agreement. While you must be reasonable with your expectations about the franchise agreement terms that a franchisor may or may not be willing to negotiate, review the franchise agreement with your franchise lawyer and develop an approach to address and negotiate some strategic points that may enhance your rights as a franchisee.”  

Read about the seven things that Mr. Internacola feels are negotiable in a franchise contract on his New York Franchise Law blog*.

Finally, I don’t want you to get the impression that franchisors are out to get you. They’re not. They just want every franchisee in the system to be on the same page. Doing so can help preserve and even strengthen the brand.

They’re just trying to protect themselves. You’re doing the same thing by hiring a qualified franchise attorney.

 

*Non-US Government link

 

About the Author:

FranchiseKing
Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.

Pages

Subscribe to RSS - Starting