Freelancing is often the first foray into self-employment or running a business and, as such, many freelancers walk a difficult line. On the one hand they now own and operate a business of sorts, which requires special legal considerations and extra efforts to set things up properly. On the other hand, freelancing does not always amount to a full-time job and it can be difficult to justify spending lots of time and money on business structures.
While freelancers need not hire a corporate attorney or spend time setting up articles of incorporation (unless they want to) there are certain fundamental steps they should take to ensure they’re meeting their legal obligations and setting their business up for success.
Getting Your Freelance Business In Order In Gig Harbor
The first step for any former employee who is setting up a freelance business is to make sure that there are no prior contracts or agreements with old employers that would prevent you from engaging in freelance work.
If you previously worked as a writer for another company it is possible that you may have signed a non-compete agreement preventing you from engaging in similar competing writing services for a certain group of clients or for a specific amount of time. Violating these types of agreements can often result in an injunction, damages or legal fees unless they’re found to be unreasonable. If you have an existing noncompete you definitely want to have a lawyer review it before getting started.
Many employers also include clauses that prevent employees from taking or using certain material, client lists, technologies, or clients themselves with the employee upon leaving. The best practice in this instance is to review your contract and avoid using material, contacts, or clients from a former employer in order to get your business up and running.
Once you’ve determined that there aren’t any legal obstacles to prevent you from freelancing, the next step is to decide what sort of business structure you want to use. Many freelancers are simply sole proprietors by default – they choose not to set up an independent structure and simply declare their income as 1099 income on their taxes.
While this is a perfectly acceptable approach, freelancers may want to consider whether it makes sense to set up an independent LLC to govern your freelance work. A separate LLC requires minimal additional paperwork, but gives you additional security and protection from liability, and can lend a more professional feel to the work that you are doing.
Make Sure Your Rights Are Protected
So now you’ve got your freelance business up and running and hopefully you’ve been overwhelmed with requests for your services. Before you start signing up clients and taking on projects, every freelancer should have a template contract that they have developed to protect their rights in a business transaction.
Contracts can seem overwhelming and intimidating, but they don’t need to be so. Your contract should set forth the work that you’ll be doing, the pay you expect to receive, and what both parties can do in the event that the other does not perform.
Your contract should also contemplate what will happen in the event there is a dispute – will you go to court or arbitration, or try to resolve the dispute by some other means? Will one party owe the other one any legal fees? These are the types of questions to consider as you work on putting together a comprehensive contract.
Be Careful Not To Misrepresent Your Work
All freelancers are subject to the Trade Descriptions Act of 1972. Trade descriptions are how a business owner chooses to describe the work that he or she has performed, or any claims that may be made about that work. Under the Trade Descriptions Act, freelancers cannot make claims to potential customers that are misleading.
This means that you can’t exaggerate or make up clients for whom you’ve performed work, represent that a website or an app is your creation when it is someone elses, or make up false content for your website such as customer reviews. These are all potential violations of the Trade Descriptions Act.
In the beginning it can be tempting to exaggerate or elaborate on your successes in the hopes of getting more customers. Avoid such temptations at all costs. Even verbally misrepresenting your work to another can land you in hot water down the road, so it is best to be honest and truthful in all scenarios and let your work stand for itself.
Freelancers should also be aware that you must have authorization from a client or customer in order to include a testimonial or recommendation from them on your webpage, brochure, Facebook account, or any other media. You cannot simply post these accolades without permission. While it is perfectly acceptable to ask for such authorization after a project is over, you may also want to consider a clause in your contract that authorizes you to use positive feedback that a customer may give you.
Washington Attorneys Helping You On The Path To Self-Employment
Freelancing can be an extremely rewarding type of employment, offering you greater creative control, flexibility, and the ability to be your own boss. But working on your own also creates new responsibilities, including the responsibility to make sure that your work and the way you set up your business do not violate any state or federal laws, and give you sufficient legal protection. The last thing you want is to invest time and money in a new business only to have it brought down by a small mistake.
At Blado, Kiger Bolan P.S., our business attorneys work with a full range of business owners, from large established companies to single owner start-ups. We can help you identify the initial hurdles and challenges that plague new businesses and freelancers and work to minimize the possibility of problems down the road. For more information or to schedule an initial consultation, contact us online or at 253-272-2997.