In the wise words of Jay Z, “I’m not a businessman, I’m a business…man!” (or woman : ). In these times, whether or not you have a full time job, it is always a smart move to set up a business for yourself. This will lead to new opportunities as a full time or part time freelancer. If you have a full time gig and want to do work “on the side”, a few pointers:
- Be transparent with your current job, let them know you are doing other work and make sure it is ok with them.
- The additional work should not conflict with your current position, i.e. if you work for a non-profit, only do side work for for-profit clients or vice versa.
Now that we got that out of the way, what do you need to start your freelancing operation? I will cover these items in detail and give some recommendations based on my experience.
- A Business Name & Registration
- An EIN (Employer Identification Number)
- A Bank Account
- A Website
- An Email Address
- A Time Tracking Tool
- An Accounting Tool
- A Contract, or SOW (Statement of Work)
- An E Signature Tool
- A Project Management Tool
- A CRM
- A Virtual Meeting Tool
- A Vendor Payment Platform
- A Bookkeeper
- A Business Network
Business Name & Registration
The first step is to come up with a name, I’ll leave that up to you : ), and register your business as an LLC. I had a great experience with https://www.delawareinc.com/ in the past and you can register your LLC in Delaware for a few hundred dollars. Registering your business in Delaware has some tax benefits, but you can consult with your accountant based on your location. This process usually takes a day or two to get the needed paperwork.
EIN (Employer Identification Number)
Once you set up your business the next step is to get your EIN. The EIN is like a social security number for your business. When you work as a freelancer you are responsible for your own taxes, so the clients pay you all of the money without withholding taxes. When you sign on your first client they will send you a W9 form to fill out. On this form you have to enter your business name, address, and EIN number. The client then uses this information to send you a 1099 form at the end of each year. This is the clients way of reporting the payments that were made to your business ensuring that you report the correct income to the IRS. Although the business registration website may try to generate the EIN for you at an extra cost, you can do it yourself for free in 10 min on the IRS website.
Business Bank Account
Now that you have your business registered, the last step in setting up the actual business (and most important part since this is how you will get paid : ) is to set up your business bank account. You will take your business registration papers and your EIN and go to your local branch to open a business account. Your clients will make checks out to your business name, so you need to be able to cash those checks.
You are now in business! The rest of the items on this list are the tools needed to run your business. You don’t have to get them all at once, you may find yourself adding some in the beginning and adding others down the line as you grow.
You will need an email address to communicate with your clients. G-Suite is way to go here at a great price.
Time Tracking Tool
Starting out there are some great free tools such as 14 Dayz which give you a few projects you are able to track. As you grow you may want to use something like Harvest, which I have had a great experience with, but does cost more. The time tracking tool is important since this is what you will use to show your clients the hours you spent on the project and what you are billing them for.
Quickbooks Online is a great accounting tool for freelancing. It is important to have all of your clients and payments here as you will need this to do your taxes at the end of the year. You can also use quickbooks to invoice your clients and accept credit card payments (for an extra fee).
Contract or SOW (Statement of Work)
This one is a bit tough for some people starting out. How do you write a contract? Below is an example to look at!
*Disclaimer- This is not meant as legal advice or the exact contract you should use, it is just an example. It is recommended to run any contract by your lawyer before using it and/or sending it to a client.
E Signature Tool
Project Management Tool
You have your first project, how do you manage it? You can go one of two ways. If you’re working on smaller projects you can use Basecamp for a task based format to keep track of the project. If you’re running an Agile shop using SCRUM methodology I would use Jira. If you are looking to build actual project plans to go along with Basecamp or Jira you can use MS Project or Smartsheet.
Take a wild guess….Salesforce of course! You will need to keep track of your leads and sales, you can start out with essentials and move up as you grow.
Virtual Meeting Tool
Vendor Payment Platform
Once you start growing and you bring on other contractors, you will need a way to pay them. I had a great experience with Bill.com.
You may not need a book keeper to start, but as you grow you will wish you had one early on. Unless you’re an accounting Wiz, then you can do it yourself! Having a book keeper will really help out at the end of the year when it’s time for taxes.
Having a strong network is critical when you’re a freelancer. You may land a big deal that you can’t handle on your own and you will want to have a network of like minded freelancers to tap into when needed!
So there you have it, everything you need to know to start a freelancing business that hopefully can turn into a full consultancy! Leave a comment below with any questions and I hope this helps you take the next step in starting your own business!
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