Freelance or Business?

Trip

Trip

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I was wondering about this lately and thought of coming here and seeing what you all have to say about this. And seeing if you can help me...

...you know how you need a business license to run a business? Well if you're doing freelance work do you still need a business license? Technically you're not running a business, but you are making profit of work you do for other people. And would it be considered a business if a bunch of freelance artists got together and shared "clients"?

Basically does anybody know where I can read up on the business license and freelance things of society today?

Thanks.
P.S. I'm very tired. If some of this (or all of it) didn't make sense please excuse me. I'm about to fall over. :(
 
It depends on the area you live in, as well as the area you're going to do business in. In short, it's a "grey area" (I know, too many areas in this post, sorry) as to the need of a business license for freelancers. As a freelancer you are considered an independent contractor, at least by the IRS.

I would error on the side of caution to be safe. Your best bet would be to contact a lawyer who specializes in business law and get their opinion on the matter. If you're going to do business, you'll need one anyways and you can find some firms that do a prepaid system for a reasonable amount.

http://www.creativemoonlighter.com/

That's a kinda job search engine for freelance pros, projects are posted then members bid on them. It's a very popular site, kinda like the e-bay or yahoo of the industry. There may be some info there to help you out.
 
No problem, had many a night of posting while tired and makeing no sense myself. Good luck with it.
 
A buddy and I started a little business venture. We were going to stay as a freelance but some clients can and only will make a check payable to a company name and not an individual. Don't ask me why. So, in Pennsylvannia we needed to apply for a fictious name so we can cash checks that are made payable to Double E Media. However, since we are owners with no employees I am sure that we do not have to pay employee taxes and/or apply for a tax ID. I am almost 80% positive on that.

However on fictious name, if your business name incorporates your name like Bubba Ray Smith's Plumbing, then you won't need a ficitious name.
 
Hmm, so would I be able to make JAB Multimedia my business name and not have to apply for a fictitious name license?
 
i think taxes are financial security are also an issue. obviously you are taxed differently if some of your costs/income come from your own business. also, there is some safety in being "incorporated". for example, you make a product that is crap. people sue. if you are not incorporated, your personal estate is at risk and is basically fair game in the court room. this is not the case if said product is made by your incorportated business.

i'm not sure if my terminology is absolutely correct, but i think the idea gets through.
 
The Scoop:

Freelancer - You are as someone else mentioned an independent contractor. You do not need a business id (or state tax id) for this, you are simply contracting out. You accept money payable to you (your name, not JAB Multimedia) and you cash them to your personal checking account which will only allow you to deposit checks made payable to you, not a business name. You are required to keep track of your income and pay taxes. Businesses should issue you a 1099 each year that they pay you more than $400 or $500 I believe. Some will do with much less, just depends on their practice. It is your responsibility to set aside money for taxes from what you are paid.

Business - Two types, a Corporation, either S-Corp, C-Corp, LCC or whatever are bigger than what you'd want for now, if you grow or expand, an S-Corp might be good. But laws are changing on S-Corps so not sure what is best anymore.

The other type is a Sole Propriotership. All you do is make up your name "JAB Multimedia" and you contact the state internal revenue service to register it, in most cases it is FREE. They will issue you a state id number, but your tax id number remains your social, like as a freelancer. You can then get a commercial checking account to accept checks payable to "JAB Multimedia". You just have to report your income to the state, they mail out something to you when its due. If you have no taxable sales, write "No sales" and send it back. Service performed for people outside your state or in some states, services like designing graphics are not taxable and such you'd never have to pay taxes to the state. But any income will be taxed at the federal level. Companies will not have to issue you 1099's, which is why companies prefer to pay a company, not a individual as another poster didn't know why.

When I was 16, I got my first business id from the State of Kansas. I've had many since then. :)

On a side-note, some cities will require that you have a business license if you operate out of your home, this may or may not include internet companies. These are usually $25 or whatever for a year. I would venture to guess you do NOT need one of these for designing graphics or websites.

If you want to be listed in the Business or Yellow-pages, you need a business telephone line, which is usually double the cost of a standard phone line. (same service).

If you have employees, not contactors (1099 folks) then you will need a Federal Tax ID number, which is what folks with Corp's need.

If a bunch of you are getting together to share business, consider an LLC. Which comes at a higher cost, paperwork, etc.

Enjoy!

Scott
 
You could also consider getting an address in Qatar and register your business there. The US government isn't worth the tax you pay them :D
 
ok, thanks for all the help scott. but still some questions from what i don't understand...

...so if i am working from my home laptop doing freelance design or something do i have to pay taxes on that

SORRY, my keyboard is broken, shift does not work, and my other keyboard is currently in-use. please forgive me for any typing errors or such.

thanks
 
Any income, unless otherwise allowed to be tax free by the government, is considered income and taxable. The state would also consider that income as well unless it's tax free.

The business id or tax id number from the state is so that you can a) have a business name, and b) collect SALES TAX, not to be confused with income tax. However, some services are not taxable, check with UTAH laws on that. However, all income for doing your freelance work is taxable.
 
Thanks for the info, Scott! Quite a big help.

What do you think the situation would be if, say, Trip & I started a business as a partnership (which you forgot, basically a sole proprietorship run by 2 or a few people)? That could get complicated with interstate regulations, depending on where our headquarters are located...

Which is ONLINE! Un-taxable and free! :D If only...

Kjetil, hardly.
 
Be warned: the state/nation will tax the hell out of you if you're a freelancer. I freelanced for about a year and quickly found it was a bad way to do things, at least for me. Out of about $2500 I made, the federal income tax on it was almost $1000. That's roughly a third of what I made! The hassle of having to keep track of my own taxes was a burden, as well.

I found it much easier to just work "for the man" and have him to all the paperwork. If you're a good freelancer, and you built quite a reputation and client base, most companies will negotiate with you about making your salary working for them roughly equivalent to what you were making freelancing.

If you're serious about starting a business, start one... don't freelance unless you can hack it. It's a tough way to make a living, freelancing, even if you do have steady work. Find someone who knows the ins and outs of the paperwork required and the taxes and what-not and pay him/her -- it makes life that much easier and growing the business that much more enjoyable.
 
Amazing this came up, cause not a day or two later it looks like I'm working on 3 startups now.

Thank god only one is my baby. One is for the guy I currently work for, and I'm just handling marketing materials on, the other is for a friend and will be tied into mine through a larger parent copr with ownership in both companies.


Scott brought up the copreration thing, I would look at one if you're really interested in this. You could do the sole prop. way, but an LLC is very easy and cheap to form with advantages over the sole prop. direction.

If I wasn't getting a large chunk of Venture capital, I would go LLC with mine. Instead, we're doing an s-corp and will be issuing shares, hoping to do a IPO in 6-8 years.
 
About 30% of your money goes to taxes no matter what. Anyhow... if your 25-55 and your trying to make a living, your situation is different than if your 16.
 
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