Before consulting, there are some considerations freelancers should keep in mind. Consulting may not involve the same amount of paperwork that other business owners have to fill-out. However, consultants are still business owners. As SBA.gov points out, this means that “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”. Let’s dive into two considerations for freelancers.
Prior to working with any clients, make sure that your business is legally set-up by fulfilling these obligations:
- Get the Right Licenses and Permits – All businesses are required to have a license or permit to operate in their state, county or city. If you’re working from home you may have to get a Home Occupancy Permit and a General Business License.
- Register Your Business Name – Unless you’re using your given name, you’ll have to register a “Doing Business As” name with your local government. This guide explains how. If you use your own name, skip this step.
- Pay Estimated Taxes – As a freelancer, you are responsible for paying taxes on your incomes. You can use the guide How To Calculate and Make Estimated Tax Payments for more information.
- Complete a W-9 Form When You Get a New Client – Whenever you sign an agreement, or being work with a new client, you may be asked to complete IRS Form W-9.
- Annual Tax Reporting: The 1099 Form – If you’ve made more than $600 in one year from a client, then they will have to report these payments to the IRS through Form 1099-Misc.
Here’s our next consideration for freelancers – As a freelancing consultant, you’ll also need the day-to-day documentation and paperwork like:
- Cost Estimate and Proposal Documents – Create you own branded template for project quotes and proposals through Microsoft Word, Google Docs, or sites like FreelanceSwitch.
- Contract Documents and NDAs – It’s not uncommon for clients to have their own contracts for independent contractors or freelancers. So, make sure to review the contract before signing it. If you need advice with creating your own contract, use Setting Up a Client Contracts. Most of the time, the Non-Disclosure Agreement or NDA are straightforward.
- Statement of Work – This outlines the scope of work that you and the clients have agreee upon in the contract.