Dr. Freelance, what do you recommend as the basic freelance writing business formation steps? I’ve been successful at getting clients, but am not sure if I should pursue a trademark or LLC first, and so on. I didn’t know if you had any advice or an order that has been more successful.–H.E. Saunders
As I discuss in The Science, Art and Voodoo of Freelance Pricing and Getting Paid, I am a big believer in forming a legal entity for your freelance writing business at the outset. A next step includes getting an Employer Identification Number (EIN) rather than using your Social Security number–it takes only a few minutes and it’s smart practice with today’s concerns about identity theft. Finally, with those in hand, you can get a separate business bank account. I know that there are freelancers who are successful without going through the formalities, but you need to do what makes sense for your own situation.
Here’s the SBA’s handy state-by-state list of the agencies that you need to contact when forming a business. In Arizona, you can form an LLC on your own inexpensively and fairly easily; some states are more complicated, but it shouldn’t cost too much even if a lawyer does it. I’ve recently had colleagues go the S Corporation route for the tax advantages, so you might review the options with your friendly CPA. Finally, others use a Doing Business As (DBA) name; not all states require registering, so check the state-by-state link.
The “Whys” of Creating an Official Freelance Writing Business
There are a couple of reasons I recommend establishing a formal freelance writing business structure: 1) It makes the business more “real” to you and separates your personal and business finances, 2) it signals clients that you are serious about being in business, 3) it offers clients assurance that they don’t have to be concerned about crossing the independent contractor/employee line, because that is something the government is cracking down on to increase their tax haul. Uncle Sam prefers payroll employees–biweekly checks are a far steadier income source than those of us in the 1099 brigade. Theoretically, it’s also liability protection, but that’s something to address with your friendly attorney, in case your business warrants additional coverage. (UPDATE: As Cathy points out in the comments, Jenn Mattern at AllIndieWriters.com addressed this same topic today. Her detailed caveats about liability are well worth reading: “Freelancers and LLCs: Not as Much Protection as You Think.”)
Trade names and trademarks are a separate issue. Start by researching your proposed trade name at the U.S. Patent and Trademark Office’s TESS database and in the appropriate state database before you commit to a name–even if you don’t decide to secure the trademark. Part of the reason I chose Boomvang for my freelance writing business name was *because* I could trademark it. (Backstory here.) It cost something like $1200 to have an IP lawyer do it, but well worth the peace of mind to me.
In the comments: Which structure, if any, did you choose for your freelance writing business–and why? Do you have a trademark on your trade name?
Photo courtesy of Joanie.