Working as an independent contractor in the United States is often confusing. While there are many benefits, such as a flexible schedule and more control over your daily schedule, there are also drawbacks.
In this post, let’s examine one of the most common questions we get from freelancers: when it comes to working as an independent contractor, is freelancing legal?
We’ll go over the laws that govern your right to work independently, how you can make sure you’re fulfilling your tax responsibilities as a freelancer or contractor.
| Takeaways |
|---|
| Freelancing is legal in the US, but it is important to understand the legal aspects and regulations that apply to contract workers. |
| Freelancers should be aware of their tax obligations and consider consulting with a tax professional for guidance. |
| Understanding the distinction between being a freelancer and an employee is crucial, as it impacts rights, benefits, and responsibilities. |
| Freelancers should protect their rights and intellectual property through well-drafted contracts and clear ownership agreements. |
| It is essential for freelancers to stay informed about industry-specific regulations that may affect their work. |
Are Freelancers Legal?
Yes! They’re independent contractors, not employees. This means that you are responsible for your taxes and benefits (like health insurance).
So it’s important to think about how much money you’ll need from one job versus another.
It also means that if you want to take a day off or go on vacation, nothing is stopping you from doing so as long as it doesn’t violate the contract rules set out by your client.
Freelancing can be a viable full-time career option for many individuals. Discover the ins and outs of freelancing as a full-time job in our comprehensive guide on Does Freelancing as a Full-Time Job Really Exist?.
Everything You Need To Know About Being A Contract Worker In The US
If you’re ready to leap into freelancing, here’s what you need to know.
How do I get started? If your company offers a telecommuting option and doesn’t require you to work in an office, that’s a great place to start. If not, it might be time for some career research.
Look at job listings online or in print (you can find many of these on LinkedIn) and see if any opportunities appeal to you.
Read up on common freelance jobs like marketing or copywriting and see if any positions match what interests you.
You may even want to consider taking an online course on how to write an effective resume or how-to market yourself as a freelancer so that when it comes time for interviews, they aren’t completely foreign territory!
How do I find clients? This can be tricky because many potential clients don’t like dealing with contractors.
They prefer more permanent employees who come with benefits like health insurance coverage and 401k plans.”
1) Create A Business Plan
A business plan is a document that outlines what you want to achieve, how you will achieve it, and why you want to achieve it.
It’s a living document that can be updated as your business evolves.
A good business plan doesn’t have to be complicated or long; it just needs to detail the basics of your goals and strategy.
The purpose of creating a business plan is not only for clarity of vision but also for helping you make good decisions about important aspects of running your freelance business, such as marketing and pricing.
Understanding what freelancing truly entails is crucial for success in the field. Our article on What Freelancing Is and Isn’t provides valuable insights into the nature of freelancing and dispels common misconceptions.
2) Define Your Target Market
Now that you have a better idea of what your ideal client looks like, it’s time to focus on creating content that appeals to them.
You should also think about the competition in this market. Who are they? How do they compare to you? Are there any companies that specialize in what you’re doing? What kind of demographic do these companies target?
The answers to these questions will help guide your marketing campaigns and determine how much money you can spend on advertising.
3) Research The Competition
Before you start freelancing, it’s important to do some research and learn about the market you are entering.
You need to know your competitors to understand what they are doing and how their customers feel about them.
This will help you better position yourself and differentiate yourself from other freelance writers or marketers who may be providing similar services.
Once you understand the competition, it’s time to learn more about your customers so that they can be accurately targeted with content that solves their problems or meets their needs.
4) Set Go-To-Market Strategies
To successfully engage your target market, you’ll need to identify the kind of person or company that would benefit from your services. You may want to consider the following when figuring out your target market:
Who is most likely to use my services? The best way to figure this out is by analyzing where you are currently working and speaking with other contract workers in similar fields.
Also, try looking into what types of people have been asking for help on job boards like Upwork and Gigster lately.
This will give you a good idea of what skills are in demand right now and which ones might be worth learning if they’re relevant.
Where can I find these people? If many freelancers live in one specific geographic location (e.g., Los Angeles).
There are likely several local communities where they can meet up regularly and if not already established, create their groups!
In addition, some contracting sites have built-in search functions that allow users to filter results based on various criteria such as skill level or location so that it’s easier for them when searching for new contractors/employees
5) Organize Your Legal Setup
If you’re going to be freelancing, you’re going to need a legal entity. You don’t have to form an LLC (a limited liability company) but it’s highly recommended that you do so.
It will protect your assets from creditors and will make sure that any debtors can only go after the assets of the business rather than your ones.
There are other advantages as well but I won’t go into detail here as I’ve already written an entire article on setting up an LLC if you want more information on this topic!
When it comes down to taxes, there are two main types: sales tax and income tax. Sales tax is charged when goods or services are purchased from someone else in other words when customers buy what we sell in our freelance businesses!
Income tax is collected by employers who remit these funds into government coffers at regular intervals throughout the year for their employees’ salaries;
However, since most Americans earn their living through self-employment rather than traditional salaried employment modes (this includes freelancers), we’ll focus on income taxes instead of sales taxes for now!
There are other things besides having a legal entity that you’ll also need before launching into full-time work mode though.
Business licenses come first among these necessities because without one none of these other things can happen either!”
Are you considering a freelance career? Explore The Reasons You Should Become a Freelancer to discover compelling motivations and benefits of embracing the freelance lifestyle.
6) Brand Yourself
Branding is the process of creating a unique name, symbol, and design for your product or service.
It’s how you differentiate yourself from the competition, establish your credibility as an expert in your field and express what makes your business unique. As such, branding is essential to any business success story.
The importance of branding cannot be overstated: if other people are going to put their trust into working with you (or paying money for what you have to offer).
They need a way to identify who they’re dealing with so they can feel confident that they’re dealing with someone reputable and professional.
That means making sure that everything that represents who you are as a freelancer both online and offline.
Reflects up-to-date information about what services/products you provide, who works at the company behind those services/products (if applicable), where customers can get them from (and how) etc.
7) Create An Online Presence
While every freelancer doesn’t need to have a website, your clients and potential employers need to be able to find you online.
There are many ways to go about this: You can create your website, or you can use existing platforms like WordPress (free) and Squarespace ($8/month), which offer built-in domain name registration.
If you’re not sure how to build an attractive, professional-looking website on your own, there are plenty of free tutorials online that can help guide you through the process of getting started with web design.
And once it’s done, make sure that all-important contact information is visible on the site!
To complement your web presence (or replace it), social media profiles are also an extremely useful tool in promoting yourself as a freelancer.
These days nearly everyone has at least one social media account, so if yours isn’t up yet or doesn’t reflect your brand well enough yet…get cracking!
You never know when someone might need some help from someone like yourself who knows what they’re doing.”
8) Use Social Media To Reach Out To Customers And Prospects
Social media is an excellent tool for freelancers to connect with their clients and prospects.
It’s also a great way to engage with your audience, promote your brand, and build relationships all things that will help you do well as a freelancer.
When it comes to social media marketing, I recommend using Facebook Groups and Twitter.
On Facebook groups, you can create a private community where people in the same industry can share information and support one another.
This is especially useful if there aren’t any other local freelancers nearby who are available for hire!
On Twitter, you can use hashtags (#) so others can find your content easily after searching keywords related to your business (like “freelance writing”).
You should also keep track of trends related to whatever platform(s) you choose; this way when someone searches those terms online they’ll see both old content along with new projects being created by members all over the world!
Juggling college and freelancing can be challenging, but it’s a great opportunity to earn income and gain experience. Learn effective strategies for making money as a freelancer while in college by reading our guide on How to Make Money Freelancing While in College.
9) Optimize Your Website For Google Search Engines (SEO)
If you want to be found online, you’ll need to optimize your website for search engines (SEO).
Google is the most popular search engine in the world and has more than 80% of the global market share. SEO helps websites rank better in Google’s organic results.
This makes it easier for visitors to find your site when they’re searching online. The more visitors a site gets, the more money it can make through ads and affiliate marketing which is a win-win situation!
There are many benefits of SEO:
More traffic means more qualified leads or sales opportunities (depending on what type of business you run)
It allows people who weren’t looking for you before but might be interested now that they’ve found out about what services/products exist in just one location instead of spending hours researching keywords like “web developer” or “branding consultant”.
10) Establish Customer Service Expectations With Clients
What Is Customer Service?
Customer service is the first and most important part of being a freelancer. You should always be open to communicating with your clients, providing them quality work, and responding to their questions promptly.
If you don’t have time to respond right away, let them know when they can expect your response.
Also, make sure that everything you do for the client is documented so that there are no issues later on down the line!
How Do I Define Customer Service Expectations?
You will need to define what “good” or “bad” customer service means from your end. This could include communicating with clients every month.
Returning phone calls within 24 hours or responding in person within 30 minutes or less (if possible).
Once these expectations are set up internally it will be easy for everyone involved because there won’t be any surprises!
11) Plan Your Pricing Strategy And Invoicing Processes
The first thing you need to do is decide how much to charge for your services.
Think about what the going rate is in your region, and then consider whether or not you’re willing to undercut that price by a certain amount.
For example, if the average hourly rate in your area is $60, but you’re willing to offer services at $55 an hour because it’s only part-time work for you right now, that may be fine. However:
If someone else offers a lower rate than yours but still at least equal quality you could lose out on business because they have lower overhead costs than yourself.
If the market is too competitive (in other words, there are so many contractors offering similar services that no one can charge more than anyone else).
Then raising prices isn’t an option either; clients will just go elsewhere if they find out everyone has similar pricing structures anyway!
12) Get Help From A Bookkeeper To Keep Track Of Expenses And Income
Once you’re making money as a contractor, it’s important to get help from a bookkeeper.
A bookkeeper can help you keep track of all the expenses and income related to your freelance work.
They’ll be able to provide you with much-needed accountability for your financial situation, which is especially helpful if you’re new to freelancing or if this is still new territory for you.
Many benefits come with having someone take care of the accounting side of things:
- It allows them to see trends in how much money comes in compared to how much goes out, so they can better predict future income based on past expenditures
- It gives them insight into what kind of costs are associated with running an independent business (this helps them find ways they might save money)
- They have access to resources that aren’t available through mainstream banking institutions (like small-business loans)
The downside is that working with an accountant will cost more than doing it yourself, depending on what type of organization you have set up (see above).
This may not matter too much because either way there will be some sort of fee involved when filing taxes annually.
Either through your accountant or via TurboTax software like other self-employed workers use every year when filing taxes electronically online themselves!
Health insurance is an important consideration for freelancers. If you find yourself without coverage, our article on What to Do If You’ve Got No Health Insurance While Being a Freelancer offers practical tips and options to navigate this situation effectively.
13) Outline How Products Or Services Will Be Delivered To Clients
This is another important section that you need to include in your contract. You should outline how the product or service will be delivered to clients, and what the process is for acquiring it.
For example: Are you going to email an edited manuscript? Do you have a software program that will handle all of the work for you?
Do you print out copies of paper documents and mail them out via USPS? How long does it take for this process? What kind of communication do clients expect from their freelancers during this time (i.e., status updates)?
Do they expect regular phone calls or emails communicating progress on a project at regular intervals throughout its completion period?
Once again, outline everything so there’s no confusion later on down the road when something goes wrong with delivering services as promised. Include costs associated with delivering products/services here too.
This includes everything from materials used (if any), shipping costs, etc. as well as payment terms (i.e., how often will payments be made).
14) Build Credit With Vendors And Financial Institutions
Building credit is important for freelancers because it can be difficult to get loans for things like a car or a house when you’re self-employed.
Credit card companies and banks may also be less likely to offer you the best rates if you don’t have any experience with them.
The best way to build credit is by paying your bills on time and keeping up with other financial responsibilities like taxes and insurance payments.
If you have trouble maintaining a steady income stream as a freelancer, then it might be helpful to look into alternative sources of funding such as crowdfunding or peer-to-peer lending services (see below).
On the flip side of this equation: having poor credit hurts your ability to get business loans from financial institutions.
Having too much debt could also cause problems when applying for new jobs with firms that check applicants’ backgrounds before hiring them even if those debts aren’t relevant!
Conclusion
By doing research into your legal rights and responsibilities as a freelancer, you can build the best foundation possible for your career.
It’s crucial to understand what you can and cannot do under current laws; this will allow you to protect yourself from liability without sacrificing quality work or creativity.
The life of a freelancer is a rewarding one, but it does come with some risks and unfortunately, not every risk is avoidable.
Further Reading
Here are some additional resources to further explore the topic of freelancing and related legal considerations:
What Freelancers Need to Know About the Law: A comprehensive legal guide specifically tailored to freelancers, providing insights into the legal aspects of freelancing and essential information for freelancers to navigate the legal landscape.
Managing Work Categories: A Guide for Freelancers: This article offers practical advice on effectively managing work categories as a freelancer, helping you streamline your workflow and improve productivity.
Contract vs. Employees: What You Need to Know: Explore the differences between hiring independent contractors (freelancers) and employees, understanding the legal and practical implications for businesses and freelancers alike.
Frequently Asked Questions
Is Freelancing Legal?
Yes, freelancing is completely legal. However, there are some things you need to be aware of before you start working as a contractor.
How Can I Find Work As A Contract Worker?
There are several ways to find work as a contractor. The most common way is by searching online job boards or social media sites.
But you can also network with other contractors in your niche who may have openings in their company or recommend you for opportunities that they hear about.
What Are The Requirements Of Being A Contract Worker?
To be able to work as a contractor and not have it fall under “employee” status, you must meet certain criteria established by the IRS and Department of Labor.
This includes being able to set your hours and having no expectation of continued employment after each project ends (unless otherwise specified).
And being paid on an independent basis rather than receiving benefits like a health insurance through the company which hired you for that project.
What Is A Contract Worker?
A contract worker is someone who works for a company but may not be considered an employee. They are hired for specific tasks, and their work is limited to those tasks.
Contract workers can be paid on an hourly basis, by the project, or by the job. They typically do not receive benefits from their employers, such as health insurance or paid time off.
Contract workers are also called independent contractors or freelancers; they are often hired to perform specialized tasks that are not part of their employer’s core business.
How can freelancers effectively categorize their work?
To effectively categorize work as a freelancer, it’s helpful to establish clear criteria or project management systems. Time tracking tools, such as Clockify’s guide on Managing Work Categories, can assist freelancers in organizing their tasks based on different categories or projects.
What are the differences between being a freelancer and an employee?
Freelancers typically work independently, have more control over their schedules, and are responsible for managing their own taxes and benefits. On the other hand, employees work for a specific employer, follow a set schedule, and receive benefits and tax deductions through their employer. Contract vs. Employees: What You Need to Know provides further insights into the distinctions.
How can freelancers protect their rights and intellectual property?
Freelancers can protect their rights and intellectual property by using well-drafted contracts, clearly defining ownership of work, and including confidentiality and non-disclosure agreements when necessary. Understanding the legal aspects and seeking professional advice, as outlined in What Freelancers Need to Know About the Law, can help safeguard their rights.
Are there any specific regulations for freelancers in certain industries?
Certain industries may have specific regulations or licensing requirements for freelancers. It’s important for freelancers to research and understand any industry-specific rules or regulations that may apply to their work. Consulting industry associations or legal resources can provide guidance on industry-specific regulations and requirements.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.