While freelancing remains a great way to dip your toes into the world of small-business ownership, the marketplace is getting much more crowded. In fact, 34 percent of the U.S. workforce identify themselves as freelancers — which doesn’t make it any easier to stand out. While there’s a thin line between freelancing and running a full-fledged business, you might consider taking that additional step to secure your future. Here’s why.
1. People Don’t Always Take Freelancers Seriously
Chalk it up to a lot of web designers dragging out projects endlessly, or temperamental freelance writers giving up mid-project. Those proverbial bad apples mar freelancers’ image on the whole. Why fight it when simply moving toward operating a full-fledged business can get people to believe in you?
Enough businesses have had bad experiences with freelancers that there is now quite a bit of information out there to help businesses avoid a potentially bad freelance experience. Even if you deliver only top quality services on time, you may bump up against the reputation that others have created after taking the money and running or dragging out a project for months.
Many clients may not take you seriously because of how you project your own image. Maybe you’re still using a mysite.wordpress.com URL rather than purchasing a unique domain name. Maybe you freelance on the side, and have missed deadlines or are not available to talk, since you only work in the evening hours. Whatever the reason that you find it difficult to instill trust from others, you need to clean up and get serious about what you do.
2. Incorporating as a Business can Protect Your Personal Assets
While it’s not a necessity to create a corporation or LLC if you’re moving in the direction of business ownership, you can glean serious perks. If someone were to sue your company, they couldn’t touch your personal assets. As a freelancer, you put yourself at certain risks, but there are measures (one being incorporation) you can take to be safe.
Also, incorporating can also help you pay less in taxes because the federal income tax rate is lower for corporations than individuals. Those home office expenses, too, can be deducted on your taxes, which helps cut down what you pay.
3. Some Companies Won’t Work With Freelancers
Some corporations have company policies against working with freelancers, especially if there are confidentiality issues in play. You limit the projects you can take on if you operate as an individual rather than a company.
4. You Can Hire Help
As a freelancer, you do it all. If you don’t have the time in your schedule, you can’t take on the project. But as soon as you shift into running a company, you free yourself up. You can hire other writers, designers, or accountants — whatever services you provide — to expand what your company can do. You can take a cut of the profits for the work they do while continuing to make money on your own work.
If, when you think about where you want your business to be in a few years, you envision yourself managing others and growing a business, you simply can’t do that if you look at yourself as a solo freelancer. It may be a simple shift of your mindset, but as soon as you add in other people, you’re essentially running a business.
5. You Can Make More Money
In addition to having more people help you bring in money for your new company, you can increase your profits in other ways. But you can also charge more as a company, especially if you start charging a flat rate as opposed to billing hourly. For example, if you price your press release-writing services at $500 (even if it takes you an hour to complete the work), you want clients who are wiling to pay that. You’ll likely find a number of clients who are more willing to invest that kind of money in a company over a freelancer.
Onboard? Here’s How to Transition
If you’re ready to move from freelancer status to business owner, start with these steps:
- Change your name to an appealing and memorable business name. Register it with your state.
- Create contracts for every project you work on. This will protect you and make the client more comfortable.
- Decide if you want to change your business structure.
- Beef up your branding under the new name.
- Let existing clients know that you’re transitioning, and assure them they’ll benefit as you expand your offerings.