Note:  I was fortunate to have a support network in getting my business off the ground, and I’m happy to pass along the favor to others doing the same.  So, the posts in this series will be slightly longer than the promised four-minute read rather than mailing it in for the sake of a self-imposed character limit. 

Interested in leaving the corporate world to do your own thing?  You’re not alone.

Freelance work in the US was rising even before Covid-19 accelerated the gig economy.  Approximately 35% of the workforce freelanced at some point in 2019, up 7.5% from 2014.  During that same period, share of full-time freelancers increased from 17% to 28%.

But, you don’t care about the numbers.  You care about you.  Hanging your own shingle is a big career step that carries a lot of risk (but also reward!) regardless of what’s going on out there.  The unknown can be scary, especially if you started with zero clients in the pipeline like me.

Fortunately, I was able to take some time off to focus 100% on launching the right way (with some extended R&R along the way, mind you).  Given today’s groundswell in solopreneurship, I thought I’d use this as an opportunity to help others do the same.

This isn’t about figuring out your service, shaping your marketing plan, or building your sales strategy.  Those are things you (hopefully) know best about your business whether you’re a copywriter, graphic designer, web developer, IT consultant, or other independent contractor.

This is about the basic building blocks—including some things that may not have occurred to you—that should be in place on day one to present yourself as a polished professional.

The following three-part series will walk through 30 different items across three different categories:  administration, communications, and branding.  Keep in mind that none of this includes specific legal or financial advice, just key considerations to help you build your own roadmap.

Without further ado, I give you Part 1:  Administration.

1. Type of Business

This is number one on the list because it should be one of the very first things you consider.  Sole proprietorship, LLC, S Corp….you have options, and it’s important to understand which make the most sense for the type of work you intend to do.  All business structures have their pros and cons, with implications for everything from liability protection to tax filing.  Choosing yours isn’t particularly difficult, but it does tend to determine what other documentation you need and eventually comes into play in future transactions.

2. Government Paperwork

Articles of Organization, operating agreement, industry-specific business licenses, etc.—a  fully-functioning business requires some formality.  For instance, if you’re set up as a limited liability company, there are a handful of LLC documents you need to make it a legal entity.  You can check with your state’s Secretary of State to see what, how, and where you need to register your business.

3. IRS Stuff

That whole withholding thing you used to set and forget with your old employer?  Now it’s on you, buddy.  You will be taxed, and the government needs to know how to tax you.  You’ll need a federal tax ID known as an Employer Identification Number (EIN) if your business structure or line of work doesn’t allow you to use your Social Security Number.  You’ll almost certainly need a W-9 form, which is for self-employed contractors like you providing services as non-employees (in most cases).  Companies that require a W-9 may provide a blank one to fill out, but you can always have one ready to go (hey, customer service).

One final note on this, and it’s an important one.  You now need to file quarterly instead of all at once in order to avoid penalties.  Welcome to the world of estimated tax payments.

4. Business Insurance

Do you need property insurance for your operation?  How about professional liability insurance?  Put it this way.  If you’re an artist painting still-lifes alone in your basement, this is less of a consideration than if you’re a bladesmith giving demos in your forge.  There are various resources out there to help you figure out whether you need business insurance and what kind if you do.

That said, if you call an agency, keep in mind the source.  A Ferrari dealer is going to tell you that you need a Ferrari.

5. Health Insurance

Here’s another corporate benefit that just went out the window.  This one might sting a bit, but for most people it’s absolutely critical.  You may be able to go with COBRA coverage that continues your former employer’s plan for a while, but eventually you’ll want to explore your options.  If you need guidance finding the best health insurance plan for you (and your family), brokers can help and there’s no fee to use them.

6. Accounting Platform

How are you going to keep track of your millions (yeah!) in cash flow?  How about software, the answer to all of life’s digital ills.  There are various free and paid accounting platforms to pick from depending on what you want and need in a system.  Functionalities to consider include estimates, invoices, reporting options, bank connections, reconciliation, tax prep, and payroll, among others your business may need.

But hey, if the back of the closest napkin is good enough for you….well, good luck.

7. Bank Account & Credit Cards

Again, I’m not doling out hard-and-fast financial advice here.  That said, I’d give some serious thought to separating church and state on this one.  There are a lot of reasons having a separate business bank account from your personal one is a good idea, with organization and protection being near the top of the list.  Same thing goes for credit cards.  Plus, and this shouldn’t be downplayed, it’s professional and optics count for a lot.

8. Payment Acceptance

You want money in return for your service?  If yes, how are you going to get it?  Are you accepting credit cards or bank transfers only?  How about PayPal or Venmo?  Are you open to sharing checking account info for direct deposit by retainers?  There are others, and even the good old-fashioned check isn’t as rare these days as you may think.  Regardless, it’s a good idea to have multiple forms of payment on hand since not every client will be able to transact the same way (particularly smaller businesses).

9. Contract Legalese

There are exceptions to every rule, but I wouldn’t get in the habit of doing work without contracts in place.  Not only does it fail to hold clients accountable, but it’s just not professional (there’s that word again).  The language you use doesn’t have to be anything crazy.  I know hugely-successful, millionaire freelancers whose T&Cs are under two pages with generous line spacing.  Of course, it also depends on your field.  Maybe you do need 10 pages of indemnifications, warranties, representations, and so on.  If you’re not sure, it may be a good idea to consult a lawyer for templates (e.g., term sheets, addendums, NDAs, etc.) customized to your business.  Otherwise, should something unfortunate happen, you could be S.O.L.

10. Rate Card

Ah yes, how much are we going to charge for our very valuable service that no prospects in their right minds should be without?  Heming and hawing when the inevitable “How much?” enters the conversation isn’t a good look.  In fact, it can be a red flag for the other side.  Whether by hourly rate, set fee, or variable range, you should know how you’re going to charge ahead of time.

This may require some digging to determine standard market rates for your field.  You don’t want to scare people off, but you also don’t want to undervalue your offer.  And by the way, this isn’t set in stone.  Maybe you start out on the lighter side to get your feet wet, build your portfolio and network, and run through the full administrative cycle a few times.  Gain confidence and experience and adjust your rates accordingly.

Congrats, you’re a living, breathing business owner!  Part 2 will run through communication and organizational resources you’ll want to consider to help manage your shop and clients. Then we’ll cap things off with creating cachet in Part 3.

Go to Part 2.