April 22, 2024

How to get registered as a freelancer in the United States

John Kim

Co-founder @ Paraform

In this blog

Do I need to register as a business?What do I need to do to get started?Should I get Business Insurance as a Freelancer?What expenses can I deduct as a Freelancer?

The freedom, flexibility, and chance to be your boss are just a few of the perks that come with this exciting career path as a freelance recruiter.

But before you dive headfirst, there are some essential steps to take care of on the legal and financial side.

Here we'll go over everything you need to officially get started as a freelancer (recruiter) in the United States.

Do I need to register as a business?

The good news is, in most cases, you don't necessarily need to formally register a business entity to start freelancing. By default, you'll operate as a sole proprietor, which simply means your business is you. This is the simplest and most common setup for freelancers.

However, there are situations where registering a business might be beneficial. Here are some factors to consider:

• Business Name: If you want to operate under a name other than your own (e.g., "Sarah's Editing Services"), you'll need to register a business name, also known as a Doing Business As (DBA) name.
  
• Liability Protection: As a sole proprietor, you and your business are considered one legal entity. This means you're personally liable for any business debts or lawsuits.
  
• If you want to separate your personal assets from your business, you might consider an LLC (Limited Liability Company).
  
• Tax Advantages: While sole proprietors report business income on their personal tax returns, some business structures offer tax advantages. Consult a tax professional to see if this applies to you.

What do I need to do to get started?

Even as a sole proprietor, there are a few key things you should do:


1. Obtain an Employer Identification Number (EIN): An EIN is like a Social Security number for your business. It's not mandatory for sole proprietors, but it can simplify tax filing and opening business bank accounts. You can apply for an EIN for free on the IRS website.

2. Get a Business Bank Account: Mixing personal and business finances can get messy. A dedicated business account helps you track income and expenses more efficiently.

3. Understand Your Tax Obligations: As a freelancer, you're responsible for paying self-employment taxes, which cover Social Security and Medicare. Familiarize yourself with tax deadlines and estimated tax payments to avoid penalties.

4. Research State and Local Regulations: Some states or localities might require additional licenses or permits depending on your industry. Check with your state's tax authority for specific requirements.

Should I get Business Insurance as a Freelancer?

Business insurance can provide valuable protection for freelancers against liability and in some cases, droughts where you have no income. Consider purchasing general liability insurance, professional liability insurance (errors and omissions insurance), or a business owner's policy (BOP) to safeguard your business assets.

What expenses can I deduct as a Freelancer?

Freelancers can deduct business-related expenses to reduce their taxable income, such as home office equipment, software, professional development courses, travel expenses, and health insurance premiums. Keep detailed records of your expenses and consider consulting with a tax professional for guidance on deductibility.

By following these steps and best practices, you'll be well on your way to a successful and fulfilling career as a freelancer.

Embrace the challenges, celebrate your wins, and enjoy the freedom!