The idea of freelancing is sexy, but there are many non-sexy things you need to cross off of your to-do list to run a legitimate freelance business. All too often aspiring freelancers forget to do some of these tasks.
Neglecting the business element of the process and going right into onboarding clients can get you into trouble with Uncle Sam, but it’s also bad for your mindset. I don’t know about you, but instead of setting up the boring business stuff I got lost down the rabbit hole of reading blog posts and books about business strategy. Don’t get stuck digesting marketing information and not doing the actual dirty work to set yourself up to succeed.
A business that’s not officially set up as one feels more like a hobby and can stunt your growth. Here are things new freelancers need to do as soon as possible:
Make a Decision on Entity
The entity that you decide to form to run your business depends on the type of services you’re offering. The IRS has an entire breakdown of the entities here (sole proprietorship, partnership, LLC, etc.).
I started out as just a sole proprietor and then decided to form an LLC. In both cases, my business income and expenses are reported on my own personal tax return. There are positives and negatives to this approach. You should speak with an accountant to decide which one will be right for your business.
Set Up a Business Account Strategy
Money shouldn’t flow right into your personal account when you’re running a business. I won’t lie — I used this method for a while and it was a terrible idea. It’s harder to save for taxes, save for business expenses, and more when your money isn’t separate. If you ever get audited, it’s also going to be much harder to show what you’re money has been doing.
I have an entire suite of business accounts connected together using Capital One 360. I have an expenses account, tax savings account, and profit account. Money goes to these accounts first and then I pay myself.
I learned this method from the book Profit First by Mike Michalowicz. I highly recommend it if you’re having trouble managing your business finances.
Check to See If Your City Requires a Business License
Some areas require that you have a business license even if you have a home-based business. Check to see if these rules apply to you so you can avoid any costly surprises.
Come Up With Daily Rituals and Routines
Lastly, rituals can take you far. These are habits or routines that you do throughout the day to keep yourself focused and your mindset positive. Every morning, I like to listen to part of a self-improvement audiobook. I’m currently working through Daymond John’s book Rise and Grind. I also take walks in the early afternoon to clear my mind and strategize what I’m going to work on for the rest of the day. Getting fresh air is very important to me.
Trust me, when you start freelancing or blogging, you’re going to need a push to keep going. No one is there to push you, you have to push yourself. Rituals like listening to music, writing down things you’re grateful for, or meditating can keep your spirits high. Come up with a few routines that you do everyday without fail. It brings structure to a day that could easily lack structure because you’re working from home.