I Want To Start Freelancing. Do I Have To Set Up As A New Small Business?
I plan to start work as a freelance translator/editor. To do this do I need to set up as a new business - or inform the government in some official way - or do I just keep all my invoices/expenses and do a tax return when the time comes?
Thanks for your replies!
I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.
It depends on your clients.
1) If you have some clients that you can do work for as an independent contractor - then you could just do a 1099 tax form without having your own business (basically, you get paid your full amount, you keep track of it all, then at the end of the year you owe all the taxes for your earnings).
2) If you don’t have any clients yet, you may need to advertise to get some. That is usually easier if you have a business name, cards, license and such. Then you would have a separate tax ID and invoicing and the works
3) If you don’t have any clients yet but think you can get them without a business & formal marketing etc, then you could also just do a sole proprietorship. This is a basic business license (an easy cheap form) that tells the gov’t that you are doing business for yourself. It limits your personal liability and is sort of the middle ground between the other two options.
Check your state & county resources for small businesses - they can more clearly define them for you.
Good Luck!
(Please vote for best answer if you think I deserve the extra points - thank you)
Please ignore the last paragraph (about sole proprietorship) in the other answer as it is wrong.
A sole proprietor is personally liable. As a sole proprietor your assets are at risk!
In order to protect your assets you should form a Limited Liability Company. You will still need some form of errors and omissions insurance to protect your personal assets in the event a disgruntled client decides to sue you. (I think this is particularly important for a translator since it is necessary to deviate from a literal word-for-word translation due to language differences.)
Come tax time file you can file your federal taxes as a sole proprietor using Form 1040’s Schedule C to report your business income and expenses. (This gives you the best of both worlds)
Hope this helps
Jerry-the-bookkeeper