Whether you freelance on the side or as a full-time gig, you need to protect yourself. But the process is daunting…where do I start? What protections do I need? Will it cost me a lot? Here are the steps I took to protect my self and my assets in my freelancing business.
I went ahead and formed a single-member llc. By doing this, my personal assets are protected, but I still just file one tax return that includes both my personal and business finances. Forming an llc doesn’t cost much but allows really important legal protections.
Read more about the benefits and protections of setting up a single-member llc.
Depending on your state of residence, the requirements are different. You can file directly with your state’s Secretary of State, you can go to a local business lawyer, or you can file online through a site like LegalZoom.
Depending on the work you’re doing, and in what industry, your insurance needs will vary. Again, I’m not an expert. As a copywriter, proofreader, and digital marketer, I have a general liability coverage through Hiscox for a few hundred bucks per year.
Business Bank Account
To fully protect your personal assets, you’re going to want to separate your personal and business bank accounts. You can move money back and forth between the accounts freely, but deposit revenue into your business bank account, and pay business expenses out of it. I use Spark from Capital One. Setting up and getting approved for the account is more complex than creating a personal account—you’ll need paperwork from filing your llc and a few other identification validation steps.
I’m not a big fan of having my personal cell number out there for the world to see. So I got a business phone number to protect myself. I have it set up so when someone calls my business number, my personal phone still rings. So I get have just one phone, but two phone numbers. It gives me a sense of privacy, and is worth the monthly cost. I use Grasshopper*, and they’re top of the line, but I’ve also had success in the past with Phone.com.
Managing your finances is probably the last thing you want to do, but as a business owner, you’re going to have to do it. Luckily, there are some great system that help make it really easy. I also recommend hiring a reputable local accountant who will be there when you have questions. I reviewed a few accounting systems in a previous post about freelancing tools. Here are the top choices: And.co, Quickbooks, Freshbooks*, and Xero.
These were the logistics I found important to set up when I started my freelance business. As always, if you have questions, don’t hesitate to contact me!
Disclaimer: I’m not a lawyer or accountant, and this should not be considered legal or tax advice.
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