The Freelancer’s Guide to Getting Started

Getting started as a freelancer? Whether you're freelancing nights and weekends (or as your full-time gig), use this short list to fast track your business set up.

1. Create your portfolio

As a freelancer, you’re selling your expertise. And the easiest way to show future employers that you’re the expert they need is to build a portfolio website. This portfolio can be as elaborate or as basic as you want. But don’t feel pressure to build something perfect -- as any full-time freelancer can tell you, your portfolio will never feel "done.”

Remember, any good portfolio contains a list of your services, of your clients, and your contact information.

2. Tell your network

The sustainability of your business depends on finding work. Once you feel like your portfolio is good enough to share with others, let your network know that you’re freelancing. All it takes is a quick email or social post. Don’t be shy about promoting yourself -- trust us, your community will want to support you.

3. Set your rate

There are many (free) rate calculators if the thought of coming up a rate on your own gives you the willies. But for those brave souls who want to DIY, the basic algebra is below. Tweak as needed.

Estimate your total annual expenses

(ex. this can include insurance, office space, tax, software, hardware, etc.)

Multiply your annual expenses by desired profit margin

(ex. desired profit margin is 25%, so multiply by 1.25)

Divide by the number of days per year you estimate working

(There are generally around 240 workable days in the year)

Divide by the number of billable hours per day you estimate working

(billable hours can include project and client management. Non-billable time includes invoicing, bookkeeping, tax management, and general admin.

This will give you your estimated hourly rate.

Some things to consider:

• Rates fluctuate by market, so it’s a good idea to gut check your hourly rate with fellow freelancers and potential clients.
  For example, while the market in Chicago for a brand or marketing strategy director is roughly $120/hr, that rate can be closer to $160–$180/hr in NYC or SF)
• Don’t be afraid to ask for more money. You’ve got expertise that others need.

4. Spend the time scoping

For many, this is one of the hardest skills a freelancer has to learn (or remember). Scoping has repercussions on your financial stability, so don’t rush through it.

Here are three keys to scoping: 

• Don’t forget to scope in administrative time. As a freelancer, you’re potentially responsible for project management, client management, back office finances, timesheet tracking, expense tracking and email responses. Oh, and you have to, actually do the work, too. Set yourself up for success by accurately budgeting in all the time spent on this job.
• Assume your project will be delayed. Protect yourself and your budget by making sure your scope properly accounts for unexpected delays. Your client doesn’t get to hold your time for free.
• Different projects may require different types of scopes. If the deliverable is uncertain, consider implementing an hourly scope as you and the client work together towards the end goal. If the project is clear cut, consider a project based fee.

5. Establish your preferred payment terms

With 60% of the independent workforce experiencing delayed or unpaid invoices, having a strong contract to protect you from delinquent clients is imperative.

These pointers can help you with payment terms: 

• Require an upfront deposit to begin work. Aim for anywhere between 25% - 50% of the overall fee.
• If there are multiple deliverables, ask for payment to be made on a percent completion basis. For example, if you complete one of three deliverables in the first phase, invoice for 33% of the total project fee (less the upfront deposit if you received one).
• Lock your terms to a clear scope to avoid scope creep, and don’t be afraid to refer back to it.
• Push for payment within net 15 to net 30 days of receipt of invoice.
• Write in late fees and hold your clients accountable to them.
• Make sure you, not the client, own the deliverables so you can use them as collateral should you need. This may require a special clause in the contract to stipulate that you own the intellectual property.
• Know your rights  --  in certain states, there are laws that help protect freelancers from clients who don’t pay. Feel free to make mention of those laws and your willingness to enforce them if needed.

6. Invoice promptly

In order to get paid, you have to send an invoice. Do this promptly  -- make sending invoices part of your weekly routine, or just schedule them to send when projects are set to close. The sooner you invoice, the sooner you get paid.

7. Set up health insurance

One of the biggest concerns for freelancers is getting insurance. The good news? Insurance is available and comes in all shapes and sizes. For those freelancers who currently have insurance, you are most likely eligible to enroll in new insurance during open enrollment. However, special circumstances (like losing your health insurance unexpectedly), can make you eligible to enroll off-cycle in a new plan or your partner’s plan (if that’s an option).

Check with your state’s marketplace, or use guides like Healthsherpa to understand your options and eligibility.

8. Create a new business banking account

By setting up a separate checking and savings account for your business, you have one place to track your income and expenses, as well as set cash aside for tax and time off.

To consider:

• If you’re a sole proprietor, you cannot open a business account because you do not have an EIN (Employer Identification Number). Fear not. Just open a new personal savings and checking account and label it as your business account. We use “Business Checking” or “Business Saving.”
• Don't forget to ask for a debit or credit card associated with your business checking account.

9. Get incorporated

For most, the idea of incorporation is enough to overwhelm. Here, we translate the legalese so you can make the decision that suits you best.

Option 1: Sole proprietorship

This is the simplest option to get started with because there are no formal steps required. In fact, a sole proprietorship means there is no distinction between the business and you, the owner. Instead of an EIN, you use your social security number.

• Best for: someone contracting on the side, in transition to a W2, or uncertain how long they want to freelance
• Key benefit: quickest way to get started (because you literally don’t have to do anything).
• Key drawback: no distinction between you and the business, which means that you can be liable for your business’s debts.

Option 2: LLC

This is the most common option for freelancers. While it has the same tax implications as a sole proprietorship, it is a proper corporate entity, which protects you personally from business liability and risk.

• Best for: someone who needs protection from business liability, but prefers to be taxed as an individual  --  most likely a dedicated full-time freelancer.
• Key benefit: Protects you from business liability and easier to set up than a corporation
• Key drawback: not eligible for corporate tax benefits

Option 3: C- or S-Corporation

This is a less common choice for a freelancer because incorporation and the administration of managing the corporation is more labor intensive.

• Best for: a career freelancer who can support the administrative costs of managing a C/S-corporation and can take advantage of the tax benefits.
• Key benefit: taxed on your corporate salary, not on dividends that the company can pay out
• Key drawback: requires an investment of time and money to incorporate, obtain a registered agent, pay annual fees and taxes. However, these costs can be deducted as a cost of doing business.

Whether you’re crossing one or all of these items off the to-do list, you’re setting yourself up to freelance on your own terms a lot sooner than you think. Have questions on anything we’ve covered? Create a Wingspan account and speak with one of our advocates.

Streamline your invoicing, bookkeeping, and taxes with Wingspan, the all-in-one-platform that handles all the administrative work for your business, so you can focus on work. Try it free for 30 days.

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This information is not intended to provide, and should not be relied on for, tax or legal advice. Wingspan is a financial technology company, not a bank. Banking services are provided by Lead Bank, Member FDIC. The Wingspan Visa® Debit Card is issued by Lead Bank pursuant to licensing by Visa® U.S.A. Inc., both only available to eligible commercial entities. Terms and conditions apply.