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Financial advice for beginning freelancer

Jan 2005

I am starting to do freelance work. What kind of tax and legal implications does this type of work carry? Can someone tell me what I can do to best protect myself and get the most benefit out of being a freelancer?

Nolo Press has great books about this. There used to be one called Wage Slave No More, and another called Tax Savvy For Small Businesses. I also went to the SF Public library and spent an afternoon browsing; the title I remember finding really useful was Troubleshooting For Small Businesses. It presented case studies of various little (failed) businesses, grouped together under various subject headings, and while many of them weren't applicable to me, enough of them were that it helped me get into what I think was a useful mindset for me. My experience has been that trying to think of myself as a very tiny, one-person business (rather than as an employee who just happens not to work on site, for example) was really crucial for getting the most out of my freelance life. The worst is to be thinking and ! acting like an employee when you are actually a contractor, and being treated by your clients like a contractor. Each status has good points and bad ones but if you're not careful you can mix-and-match and end up with the worst of both worlds. That's why the Troubleshooting book was good for me; even though most of the advice was for larger businesses than me; there were enough stories that hit the mark that it made it clear to me for the first time that I was, in fact, attempting to start a business, and at the same time showed me what kinds of questions I needed to be able to answer, and what kinds of systems I had to put in place, to start my freelance life in a way that had a better chance of working long-term (it's been 8.5 years and it's going nicely). Coriander

I don't know what kind of freelancing you plan to do, but I was a freelance writer for 14 years and would ! be happy to share my experience with you. Most of my concerns had to do with taxes. As a self-employed person, all -- or at least most -- of your business expenses are tax-deductible. So a percentage of my heating bill -- the part that covered my office space -- my rent, my cleaning service, etc. were all deductible. Any magazine subscriptions, equipment, stationery, my internet connection, etc. If you don't have an accountant already, I suggest you find someone. In my experience, this was really the only outside professional I needed, but he was essential. Freelancers also need to pay estimated taxes 4 times a year (Jan. 15, April 15, June 15 and September 15 -- don't ask me why the year breaks down that way). Some people estimate what their income will be and pay a percentage of this; I figured out how much I'd earned each quarter and paid a specific -- albeit varying -- amount. My accountant would send me the needed forms every year, but you can also get the information off the IRS' web site ( Some freelancers -- depending on the work and if you have any employees -- may also need a form of liability insurance. I was able to avoid this, although one of my clients was rather insistent that I get coverage. When I pointed out that I would not be operating machinery or putting employees in harm's way with my word processor, they finally backed down. But you may want to talk with your insurance agent about business policies or even some umbrella coverage. I never needed the services of a lawyer, but it's not bad to know someone who can give you advice about writing contracts, overdue payments, etc. Hope that helps. And again, don't hesitate to contact me if you have any other questions. I had a very successful business for many years, and really operated on a shoestring. susan