When you realise those little ‘side jobs’ you’ve been doing are taking up more and more of your time, it might be worth considering turning your freelance work into an official company.
Not only does converting your client base and workload into a compliant business have possible and significant tax benefits, it also provides a formal framework from which to establish a reputable brand in your specialty area.
Knowing where to start in the conversion process can be difficult, especially if you have never run your own business previously. Here are some tips to help you manage the process:
Covering the legal stuff
Make your freelance business legally compliant.
- Create and register a business name. It’s good to think about a business name that you can build as a brand and also lets others know what type of work you do. Check out the guides provided by ACRA at https://www.acra.gov.sg/how_To_Guides/
- Determine if you want to go beyond operating as a sole trader and register as a company. There are many reasons why this may be worthwhile, especially when it comes to protecting your personal assets and establishing a different tax status. If you are not sure what is the best thing to do, it might be a good idea to meet with an accountant to discuss your options.
Drawing up relevant business documents
Be sure to follow a formal process for every client you are seeking to get or retain. This standardised process will help ensure you have covered all aspects of the relationship to minimise any misunderstandings or issues that could arise later:
- Create a business proposal document that you can customise for each client that serves as a template for bidding on projects. This offers a professional way to let potential or existing clients know how you work.
- Provide a contract and non-disclosure agreement (NDA) so your clients will know you are completely transparent and trustworthy in your business dealings. This will help establish a level of trust from the beginning, as well as protect the information and activities shared during the course of working together.
- Use an online invoicing system that offers professional templates and a standardised process for charging your clients for work completed, a monthly retainer or recurring charges. The ability to receive an email invoice that links to payment systems has been found to increase the probability of being paid faster or on time, thereby enhancing your cash flow.
These are the basics of getting started on formalising your freelance work into a professionally branded and managed company that can grow as your talent attracts more clients. You will then need to think about other types of legal, tax and business actions.
For now, though, check with an accountant on these recommendations before you take any action related to your particular freelance business to ensure you are making the best decision possible.