# How NOT to run a freelance business...



## Trip (Jan 16, 2004)

If you, or somebody you know, is planning on running a freelance business let me give you a little tip I learned:

DO NOT higher somebody right off to take care of your money for you (recieve it, count it, sort it, and distribute it)...it's not smart. They'll take the money from you and never talk to you again. ARGH!

*BTW - I did actually higher him (a friend) and told him I would pay him for his work, but yea, he stole my money.


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## cfleck (Jan 16, 2004)

i'm sorry for being a jerk, but i sometimes i just have to....

you mean hire, not higher.


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## Trip (Jan 16, 2004)

No worries, I knew I spelled it wrong, I just didn't care. Thanks for the fix.


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## BitWit (Jan 16, 2004)

Freelance is like being a treasure hunter...you gotta be VERY judicious with your trust.


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## monktus (Jan 16, 2004)

Had a look at your site, your stuff's pretty good.


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## Trip (Jan 16, 2004)

*Site update coming soon. And then I'll believe you when you say that. 

Now I just need to find a way to get clients to pay me directly.


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## monktus (Jan 16, 2004)

Just invoice them and get them to write you a cheque, works for me. You might even want to think about starting a company as a sole trader or whatever your equivilent is.


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## Trip (Jan 16, 2004)

I need a fax machine.


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## monktus (Jan 16, 2004)

Fax machines are why we have PDFs


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## Arden (Jan 16, 2004)

I guess this guy isn't such a good friend after all.  At least you learned a valuable lesson. 

What kind of trouble are you having with people paying you?  Are they trying to get you to take a credit card or something?


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## Trip (Jan 16, 2004)

Well, for one, I currently do not have a bank account setup. I planed on getting one after my first payment, but that's been taken from me. So far clients have all offered to pay via PayPal, so I hired my friend to take care of that for me until I have some way to get the money.

Yea...


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## Arden (Jan 16, 2004)

I'd say take your friend to small claims court, if the amount he stole is significantly more than the cost of going to court.


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## bobw (Jan 16, 2004)

Anyone running a small freelance, or any small one or two person business, who hires someone to take care of his money is an idiot. If you don't want to take care of the business yourself, then don't start one. If you hire someone to take care of your money, don't count on it all being your money for long.


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## Trip (Jan 16, 2004)

Thanks bobw for that wonderful insight.


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## bobw (Jan 16, 2004)

You're welcome. Always glad to put my two cents in.  The best way to learn is by doing, but this was a hard lesson for you. You're young. As you grow, you'll  learn some people aren't always what they seem.


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## Trip (Jan 16, 2004)

We've been friends for six years, I wasn't expecting it.


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## bobw (Jan 16, 2004)

That is tough. A good beating would be my choice for a resolution.


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## mdnky (Jan 16, 2004)

Trip, if he took more than $300 to $500 that's generally a felony in most states. Check the laws where you are as amounts vary, but it doesn't require much. You might be able to use that as an incentive to him repaying you. bobw's 'good beating' idea also might be a secondary option.

 As soon as you have the money, file a DBA with the local courthouse. I'm not sure about the laws/regs where you are, but here I can do that for a couple bucks then be able to get a std. business checking account to accept checks in either my name or the DBA name. There's no real tax advantages or disadvantages, just allows those checks to be written to the DBA name which makes tracking a little easier and allows you to meet 'business requirements' for most banks.


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 update
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 From Utah State Gov Website

*76-6-412**.* *Theft -- Classification of offenses -- Action for treble damages.* *(1)  Theft of property and services as provided in this chapter shall be punishable:*
(a)  as a *felony* of the second degree if the:
(i)  value of the property or services is or exceeds $5,000;
(ii)  property stolen is a firearm or an operable motor vehicle;
(iii)  actor is armed with a dangerous weapon, as defined in Section 76-1-601, at the time of the *theft*; or
(iv)  property is stolen from the person of another;

*(b)  as a felony of the third degree if:*
(i)  the value of the property or services is or exceeds $1,000 but is less than $5,000;
(ii)  the actor has been twice before convicted of *theft*, any robbery, or any burglary with intent to commit *theft*; or
(iii)  in a case not amounting to a second-degree *felony*, the property taken is a stallion, mare, colt, gelding, cow, heifer, steer, ox, bull, calf, sheep, goat, mule, jack, jenny, swine, poultry, or a fur-bearing animal raised for commercial purposes;

 (c)  as a class A misdemeanor if the value of the property stolen is or exceeds $300 but is less than $1,000; or

 (d)  as a class B misdemeanor if the value of the property stolen is less than $300.


 (2)  Any person who violates Subsection 76-6-408(1) or Section 76-6-413, or commits *theft* of property described in Subsection 76-6-412(1)(b)(iii), is civilly liable for three times the amount of actual damages, if any sustained by the plaintiff, and for costs of suit and reasonable attorneys' fees.


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## bobw (Jan 17, 2004)

One of the draw backs of filing a complaint against the scum bag, is that if you're required to report this income to the IRS, and don't.


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## Trip (Jan 17, 2004)

While we're on the topic, how exactly do I do that? You know, tell the IRS about me getting money and such. I need to start doing that if I get money in often right?


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## bobw (Jan 17, 2004)

Call your local IRS office, or stop in or visit their web site. They'll have all the info.


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## Trip (Jan 17, 2004)

Thanks for all the help bobw. 
I believe I know exactly where their office is.


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## Arden (Jan 17, 2004)

mdnky said:
			
		

> From Utah State Gov Website
> 
> (iii)  in a case not amounting to a second-degree *felony*, the property taken is a stallion, mare, colt, gelding, cow, heifer, steer, ox, bull, calf, sheep, goat, mule, jack, jenny, swine, poultry, or a fur-bearing animal raised for commercial purposes;


LOL... he didn't steal any cows or sheep from you, right? ::ha:: ::ha::


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## mdnky (Jan 19, 2004)

They have a form for it of course!  It's such a joy, let me tell you...I look forward to it EVERY year and quarter...OH YEA! (can ya feel the sarcasm?)

 You might want to see about retaining a CPA for this kind of stuff, I really whish I had.  ALWAYS RECORD your stuff, sales and purchases, when they happen.  Also, some of your clients may give you a 1099 at year end and some don't.  It varies usually by their terms.

http://ms.essortment.com/irsselfemploym_rloj.htm
 (Nice overview on the topic)


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## Trip (Jan 22, 2004)

I got the money last night. There were some factors involved that were keeping him from giving me the money, but he did give it to me last night. I'm going to get my own account now and work from there. 

So a good lesson was learned here. 

*Anybody mind if I start a "Self-employment: my beginnings" thread? I could use some more help with the tax paying, form filling, IRS dodging business...and I'd prefer a thread on that alone.


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## bobw (Jan 22, 2004)

Get yourself the IRS booklets and forms, rather than getting advice here or anywhere. You won't know if it's correct. I use Intuits TurboTax Home & Business and it covers everything.


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## Sogni (Jan 22, 2004)

That's great news Trip! Bet that's a great relief!


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## Trip (Jan 22, 2004)

It is. Now I'm motivated to work. 

Do you think the IRS would be ok with me NOT filling out any forms and telling them, until I'm 100% sure I WILL get a paycheck every month or something? Because wouldn't it be retarded to fill out all those forms and then only report income every three or four months? It's not really a business now is it...


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## mdnky (Jan 22, 2004)

If you make under a certain amount you don't have to report it quarterly.  I don't really remember what that amount is though, but it's somewhat sizable.  That is for federal, state and local are probably different.

I do know if you don't file quarterly when you're supposed to (i.e. you make over that limit) they hit you with a fine...got hit about 4 years ago myself on that.

Best bet is to retain a CPA, that's their job to know what you will have to do.  I send mine a copy of my QuickBooks file on the last day of the month and he handles everything, even my year end taxes.  I think he said usually it'd be $300/yr on average for the stuff he does for me, but we struck a deal instead.  

I designed and host his site, he handles my books.  This arangement has worked out great so far.

I believe H&R Block has some kind of 'small-business' service they offer which would give you good, fact based guidelines to follow.  If I'm not mistaken, it's a subscription type of thing where you pay so much a month and you get certain services provided to you, including an insurance policy from them messing up.


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## uoba (Jan 22, 2004)

It's always difficult when you start up, particularly being young. You can have the lack of esteem to command your fee and make sure it's paid how and when you like.

Once you build up trust and learn to toughen up, it becomes natural to laugh at (potential) clients who dislike the idea of paying a percentage upfront or not getting there design/site until full payment is received.

If you have only a few jobs on the go, then you should be able to handle the finances yourself. It's not that hard to setup an account and tell the paying client your (trading) name, amount to fill in, and when you expect it by (just make sure they've signed for the work you've done. Make's it very hard for them to make themselves look stoopid later on... but some will try  )


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## Trip (Feb 5, 2004)

I plan on going to the local IRS place to get more information, but right now I was just wondering if in my "Terms for Service" is it legal that I ask all clients to NOT put me on a 1099 form? Or is that pushing my luck with both the government and the client? Is it even needed?


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## mdnky (Feb 5, 2004)

I think alot of clients may be warry of something like that, you know...whole CYA thing on their part.

I do know that if you're considered a 'sub-contractor', then they have to give you a 1099.  It's a requirement by statue or law.


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## bobw (Feb 6, 2004)

That, in my humble opinion, would not be legal. Companies are required by law to issue 1099's to outside contractors. Anyone doing work as a freelancer, whether photo, design, mechanical, is considered a contractor.
I would just not say anything, they may not issue you one.


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## Trip (Feb 6, 2004)

What if they do though? Does it even effect me personally?


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## RacerX (Feb 7, 2004)

I'm coming into this late, so forgive some of the questions...
 Why were you using someone else for handling money? It sure doesn't sound like you were making enough money for passing off that responsibility to anyone else.
 Why are you worrying about taxes at this point? It doesn't sound like you are making enough to make much of a fuss about tax problems (usually you need taxable income to worry about taxes). Plus taxes are from year end to year end. You have a year to come up with answers depending on the work you actually do.

Personally, I hate dealing with money. For the first two years I was in business I would write out my invoices in Word or AppleWorks and just take notes as to what I was doing. I would forget to bill for a lot of the time. One year ago I got TimeEqualsMoney, and that was that. I've been on top of billing/invoicing for a full year without any problems. As for taxes, my wife does ours. Nothing too special involved. Major clients send us tax forms minor ones don't. Plus at the end of the year I sent all my clients statements of their account activity for the year (TimeEqualsMoney made it easy).

This stuff really isn't that hard. As long as I keep up on my accounts in TimeEqualsMoney and my wife keeps up on our finances in Quicken, we seem to be problem free. I keep a PDF copy of every invoice I make and most of the time I send out invoices as PDFs via e-mail (yes, other times I just hand it to them or use snail-mail). It really isn't that much of a big deal, I would think that getting clients is the real hard part of working solo.

More info:

TimeEqualsMoney Page
TimeEqualsMoney Manual
TimeEqualsMoney application


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## bobw (Feb 7, 2004)

*What if they do though? Does it even effect me personally?*

Then you need to include it when you file your taxes. Don't ignore it, because the IRS won't when they see your filing, and the 1099 from your client, that you didn't file.
As Racer said, you may not be making enough money to worry about it.


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## Arden (Feb 8, 2004)

Hey Trip, I'll go into business with you when we're both old enough.  And don't worry, I won't steal from you. 

No seriously, if you want to, I'm all up for it.  When we're both out of college (or the military, as it may be for *cough* some people), look me up.


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## Randman (Feb 8, 2004)

Yes, Arden will contribute $5 to the start-up company.


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## michaelsanford (Feb 17, 2004)

Trip said:
			
		

> While we're on the topic, how exactly do I do that? You know, tell the IRS about me getting money and such. I need to start doing that if I get money in often right?



Wait for an audit 

About the small claims, investigate that avenue. Where I am it only costs ~75$ to file (that's 54$ to you) and you can represent yourself without too much trouble; with adequate documentaiton you shouldn't have any problem recovering your money.


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