Did you get into freelancing so you could balance cash flows and send invoices?
We didn’t think so.
But, self-employment means more than doing what you love and making your own schedule. It also involves all of the elements that make up a business—from finding new clients to drawing up contracts and paying taxes.
The RoamHR app was built specifically for 1099 earners to help improve your financial wellbeing. So, we know a thing or two about how to launch a successful freelancing business.
No matter where you are in your business, whether you’re a seasoned independent contractor or at the beginning of your 1099 career, we created this list to help you with the business side of freelancing.
While it’s by no means exhaustive, it’s a great start to ensure you have a solid foundation for your business to flourish.
We’ll continue to update this page, so remember to bookmark it and check back often.
(Prefer something more focused on finances? Download our free Freelancer Financial Guide)
Once you decide to make the switch to freelancing, you may be wondering where to source your clients. Most freelancers (73%) locate their clients via online marketplaces. A third get clients from word-of-mouth or referrals, while 15% use social media platforms and 14% source new clients via professional networking sites, like LinkedIn.
Some of the top freelance marketplaces to check out include:
- Toptal – software developers, designers, finance experts, product managers, and project managers
- Wethos – marketing and advertising
- Gun.io – software engineers
- PeoplePerHour – web projects
- Designhill – design
- 99designs – design
- Freelance Writing Gigs – writing
- Kolabtree – scientists and researchers
Setting your rates
The flexible nature of freelancing also comes into effect when it comes to establishing the cost of your services.
Your rates will depend on your level of experience, the type of project, and your industry. Also, keep in mind any necessary bills and outgoings, as well as the cost of living in your areas.
The key is not to sell yourself short, but to also ensure you’re competitive in the marketplace. Check out some of the tools below to help land on your rates.
- Pricing 101 – How To Price Yourself As A Freelancer (CareerFoundry)
- Rate Calculator (YourRate.co)
- Infographic: How to Calculate Your Freelance Hourly Rate (CreativeLive.com)
What is a 1099 form?
When you become a freelancer, instead of receiving a W4 tax form from your employer, you’ll get a 1099-MISC form. This form shows that a person or entity gave you money.
According to the IRS, a 1099-MISC form must be acquired if you were paid at least $600 from services performed on behalf of someone or a business entity that is not your employer. You should receive a 1099-MISC from each entity or person.
- About Form 1099-MISC, Miscellaneous Income (IRS.gov)
- A copy of a 1099-MISC form (IRS.gov)
- What is a 1099 tax form? How it works and what to do (NerdWallet)
Contracts and invoicing
Before you get started with any job, there are two things you need to confirm: what’s your contract and how will you invoice for your work.
Contracts are legally binding documents between you and your client, and outline specific guidelines, timeframes, and payment terms of your relationship. They’re also the best way to protect yourself and ensure you get paid.
An invoice is a payment request in the form of a document sent to your customer or client for sales or services rendered. Invoices should be clear and accurate on what your customer or client owes and why.
Paying for healthcare, retirement, and time off
Without the safety net of employer-sponsored benefits, it’s up to you to find ways to save for retirement and health insurance. In fact, almost a quarter (22%) of freelancers worry about access to affordable healthcare, and somewhere around 19% are concerned about saving for retirement.
- 5 Places to Find Health Insurance for Freelancers or the Self-Employed (The Balance)
- Health Insurance for Freelancers: 12 Viable Options (Make A Living Writing)
- How to Build Your Own Retirement Plan (Investopedia)
Just because you’re your own boss now, doesn’t mean you won’t succumb to burnout. Most freelancers work hours comparable to full-time, salaried employees. However, while you may benefit from more flexibility in your schedule, it’s easy to forget to take breaks or skip time off altogether.
Managing your finances
Financial discipline is excellent in theory, but the real world often doesn’t cooperate. You may intend to put some money away with every paycheck. But, then your computer breaks down, your car needs repairs, or there’s a limited-run show you’re desperate to see.
Both good and bad surprises happen, and those surprises require money. Keeping your income separate from your personal finances via business checking and savings accounts and bank cards will save you headaches down the road.
Not only will separately managing your business funds help you resist the urge to dip into your funds for personal purchases, but it will also give you a complete picture of your earnings and make it easy to pull reports and identify deductions.
- Why You Need a Separate Bank Account for Your Side Job (NerdWallet)
- 5 personal finance tips every freelancer should know (99designs)
Did you know that many freelancers are supposed to pay their taxes quarterly? Failure to do so when you’re supposed to can result in fines and penalties.
Here’s who needs to make quarterly payments:
- Self-employed and contracted workers who expect to owe at least $1,000 in taxes for the current tax year.
- Self-employed and contracted workers who expect their withholding and refundable credits to be less than 90% of the tax to be shown on their current year’s tax return.
- Self-employed and contracted workers who expect their withholding and refundable credits to be less than 100% of the tax shown on their prior year’s tax return.
The IRS penalty for those who should file quarterly but fail to do so can be up to 6% for every month the payment is late. A $100 penalty is also assessed if payments are late by 60 days or more.
- Filing Taxes Quarterly to Avoid the Vicious Cycle (RoamHR)
- 4 Things Every Freelancer Needs To Know About Taxes (RoamHR)
Expenses and deductions
When you’re self-employed, out-of-pocket costs are frequent and add up. Tracking all of your business-related expenses lowers your taxable income, meaning you keep more of your money.
Check out these blogs for tips on what you can write off as a business expense:
We’ve created a handy guide to help you manage the financial side of your freelancing business. Download it today!