Starting a Freelance Business: 4 Legal Obligations You Can’t Ignore

Starting a Freelance Business: 4 Legal Obligations You Can’t Ignore

The first time someone told me freelance writing was a business, I laughed.

I was 22, and had stepped into freelance writing quite by chance. After an illness made me quit my full-time job as a journalist, I started working as a writer to make some money while I recovered.

Imagine my horror when I realized freelancing is a lot more work than just writing content for websites. I had to learn to manage my accounts, keep track of money and figure out my business structure.

To make matters worse, I had no idea how to deal with contracts, invoices, taxes and insurance.

I ended up doing everything wrong.

Freelancing is a wonderful profession, full of flexibility and the joy of doing work you love, but there are certain parts of the job new freelancers learn the hard way.

The legal side of freelancing is one of them.

New writers with no experience in business often find legal jargon confusing and complicated. Too often, this makes writers overlook the legal aspects of freelancing and believe they can do without.

Don’t make that mistake.

Not knowing the legalities of your freelance business can not only cost you money, but could also get you in trouble.

Whether you’ve just started out or are planning to break into freelance writing, here are four legal aspects of freelancing you must never overlook.

1. Work contract

If you’re like me, the thought of a contract probably brings to mind 100 page behemoths full of technical clauses and jargon. Not surprisingly, the very idea of writing a contract is enough to make creative people break into a sweat.

The good news is that a freelance contract or agreement is a lot simpler and less technical than a traditional business contract.

It’s usually around five pages or so, and is written in lucid English you don’t have to tear your hair to figure out. Contracts can also be verbal, but written agreements carry more weight and make it easier to ensure the terms and conditions of your work are clear for both parties.

Emails are also a kind of written agreement, so in case you don’t have a work contract, make sure you get your client to confirm the logistics of a gig in an email, along with the price.

But whether you have a contract crafted by an attorney or use a simple email message as an agreement, you must never work without a written contract. Having a contract in place shows that you’re a professional and gives prospects the impression that you know your work well and cannot be swindled.

2. Taxes

As a newbie freelancer, I didn’t know anything about taxes.

The first time I learned that freelancers had to pay their own taxes was when I started working independently through my website.

I have always been woefully pathetic at math, and when the time came to figure out my taxes, I cried.

Figuring out your taxes on your own often proves to be difficult for a freelancer. In such a case, it’s ideal to register with a certified tax authority or hire an accountant. It may sound like an expensive investment, but at the end of the financial year, if you fail to file your tax returns, you could be subject to penalty charges. An accountant will explain this to you, as well as handle your taxes, while you focus on your business.

Another important element is to put money aside for your taxes. In my case, I put aside 20 percent of every paycheck and put it into a separate account. This helps me save money come tax time.

3. Trade descriptions

Many freelancers aren’t aware of trade descriptions. I wasn’t either when I first began.

According to the Trade Descriptions Act of 1972, you can’t make misleading claims, written or verbally. So if you claim on your website that you worked with a certain brand when actually you didn’t, you are breaking the law.

New writers venturing into freelancing sometimes think it’s OK to put just about anything on their website. False testimonials and brand associations are one of the biggest mistakes freelance writers can make on their website.

When you work with brands or individual clients, and want to use their names or testimonials on your website, you must seek their written permission to do so. It should preferably be a clause in your work contract, signed by both parties.

4. Insurance

Working from home as a freelance writer is certainly convenient, but it’s also tricky, particularly when it comes to insurance.

If you have a home office, it can become even more confusing. Should you get home insurance or public liability insurance? Or perhaps both?

Simply put, public liability insurance covers the expenses that result when a client suffers damages of any kind because of you (a lawsuit, for instance), while a home insurance covers damages to your property, within or outside business hours.

Freelancers often underestimate the importance of insurance, even when they work from home. You might think  home insurance is enough to cover any damages that take place in your home office during working hours, only to realize later, it’s not. Home insurance may also not cover the cost of broken or stolen office supplies or furniture.

Things can go wrong at any time, and in case you find yourself subject to such damages it could deal a big blow to your freelance business. When you have public liability insurance, it covers you against any loss or damage to your home office, and helps you get back up and running within the shortest time.

A career in freelancing is both rewarding, and also stressful at times. For a writer with no background in law or business, it can be difficult to get familiar with every legal aspect of running a business.

If you follow these four legal guidelines when you’re starting out as a freelancer, you’re well on your way to a successful freelance business that complies with the law.

Are there other legal obligations that confuse you when it comes to freelance writing? Let us know in the comments.

Filed Under: Freelancing

Featured resource

Your Freelance Business Blueprint

A plug-and-play framework that automates the marketing, accounting, and administrative systems of your business, so you can focus on the writing.

6 comments

  • I just started working as a freelance editor. Do I need to take the same steps? I thought paying taxes depended on how much you made that year? I probably wouldn’t make enough to file but I still need to do so?

    • Cynthia says:

      Hi Christopher,

      The best thing to do would be to talk to a tax consultant. They can guide you best on what you should do.

      Thanks for reading!
      ~Cynthia

  • Barb Johnson says:

    Wow! Thank you Cynthia. I had never thought of these points and I’ve been writing for years. My business has not exactly flourished, so no problems yet.
    But I intend to grow so this info is definitely great.
    My grandson is a lawyer so I have access to help which I will ask for this weekend.
    thank you!
    Barb

  • Belva AGreen says:

    Can I count writing expense for work on mss done in other years (that has not been counted yet)?

    Is there a list that will help me for this year?

Speak Your Mind

Your email address will not be published. Required fields are marked *