How to Start a Freelance Business in 5 Steps
Have a great idea or leaving your corporate job to go out on your own? Good for you! Starting a freelance business will transform your dream into reality, making it possible to offer your paid products and/or services to people who will find them valuable. Whether you’re starting a side hustle that’ll help you make extra money or plan to build a full-time freelance business, here are five things you must to do get started—along with a few of our favorite tools and resources for each.
1. Craft a business plan.
Having a document to guide you will be key to your success as a new freelance business owner. While writing your business plan, consider things like your overall business goals, any investment you might need and how you’ll make money.
If you’re not sure where to start, consider Career Contessa founder Lauren McGoodin’s tips. “Get specific about your goals and outline clear actionable ways you can accomplish them,” she says. If you need more help, look for people who have been there and done that—and don’t feel like you need to reinvent the wheel. Says Lauren, “The great thing about the digital age is that you can read sample business plans and download templates online for free, like this comprehensive business plan guide from Entrepreneur and Strategyzer’s Business Model Canvas.”
2. Register and insure your freelance business.
Once you have your plan and your business name, register your business. Sites like RocketLawyer or LegalZoom can help you understand what structure might work best, such as an LLC, LLC with an election or a corporation. They can also act as your registered agent to help you handle notices and updates, as well as provide additional services that might be useful for your service or product-based business.
Do you plan to freelance or work as an independent contractor? If so, research the implications of working as a sole proprietor. You’ll want to be fully aware of personal liability in the event a client or customer should take legal action against you or your work. A sole proprietorship also means you’ll be personally responsible for all burdens and debt.
3. Set up a business banking account.
Once you’ve registered your business and have received paperwork from the state you’ve registered it in, head to the bank to set up a business bank account. Carefully consider which bank will work best for you—look for offers, fees and anything else that might be useful or effect your new company. If you have questions about business banking, make a list before you visit your banker so you can discuss them as you set up your new accounts.
Your new business bank account/s will come with a debit card you can use to make purchases on behalf of your business. Interested in using a credit card too? Be sure to ask what’s available for you while you get each account squared away. Using a credit card is an excellent way to build credit while earning points and rewards on business-related expenses. We especially love the business programs and credit cards at CHASE.
4. Create a process to track your earnings and expenses.
Now that you’re raring and ready to go, it’s time to start earning money and tracking your expenses. Tools like Freshbooks and Quickbooks make creating invoices for payments a cinch, while you can choose to track expenses with a tool such as Xero, or even manually, in a spreadsheet. Whatever you pick, be sure to keep detailed records of your earnings and expenses regularly, such as at the end of each month. Be sure to save and organize copies of both your digital and paper receipts; you’ll need these when you file your annual taxes. If you have employees, a company like Gusto can help manage payroll, benefits and HR for a monthly fee.
How you pay your taxes will depend on how your business is structured, so make note of any key dates for quarterly payments, state franchise taxes and other payments. If it’s useful, hire an accountant to guide you through tax season; a professional can help you categorize your expenses and maximize your deductions.
5. Ensure your personal needs are taken care of.
If your business will be your full-time job, you’ll want to carefully consider handling things like health insurance, finances and retirement options—it’s easy to forget about aspects that might’ve been previously handled by your employer. No need to feel overwhelmed: We love Oscar and Stride for finding health insurance plans, while Vanguard offers a wide-range of investment options from Mutual Funds to IRAs and 401(k) plans.
Need more tips on making your side hustle your full-time gig? Check out our guide to creating an authentic personal brand, and our tips on being super productive when you work from home.