by Arthur Piccio . May 29th, 2012
Conceptually speaking, few things are easier than starting a business. Exchange a product or service for something else – done! Freelancers and other people engaged in microbusinesses do this sort of thing all the time.
We have laws in place requiring businesses to be registered, not just to help the government collect taxes, but to afford everyone- businesses and the general public included – some protection for their basic rights.
This should be the first order of business. Unless you’re already a CPA, in which case this article will do nothing for you. But I digress. A good CPA will save your hide and basically tell you everything you need to properly set up and register your business.
If you can afford a CPA, get one. Once your business reaches a certain size, chances are you will save more money if you pony up the scratch to get a CPA than you ever could doing accounting work yourself.
Depending on where you do business, this is relatively affordable and should cost you anywhere between $300-$600. An LLC is an unincorporated entity (an important distinction as LLC are different from corporations) that helps you limits your liability so in case you run into problems with your business, you won’t be completely personally accountable.
Note that this might not be feasible if you don’t do freelance or do business that often – in some states you might spend close to $1,000 in fees before you see revenue. In these cases, it might be wiser to build up capital before doing registering (duh).
Also note that it doesn’t have to be an LLC either, but anything that shifts the liability from your personal assets to a business entity is normally a good thing. In any case, refer to number one and ask a CPA.
This actually holds true whether or not you’ve been registered. Contracts are there for a reason – you really can never be too careful. Registering might be the best time for you to finally get into the habit of really taking things seriously.
Many freelancers and small business owners take such a casual approach to registration, it’s not surprising contracts are treated the same way too. This is even when they’re registered under an LLC or an Umbrella company or whatever – and that’s not a good thing. I’m not that cynical but off the bat, I’d say about half of the instances when microbusiness owners and freelancers are screwed in a deal is because they don’t have a contract in writing.
Hopefully, now that you’re registered and done with all the legalities, it should now be far easier for you to ask for money down before taking on a contract.
Always, always, always ask for 30-50% down before you start on any work. I know this isn’t the norm in many industries these days, but since we’ve seen so many freelancers get burned this way, it’s always good to ask yourself what you think you’re really worth.
Arthur Piccio manages YouTheEntrepreneur and has managed content for major players in the online printing industry. He was previously BizSugar's contributor of the week. His work has appeared multiple times on The New York Times' You're the Boss Small Business Blog. He enjoys guitar maintenance and reading up on history and psychology in his spare time.