Starting a freelance business, whether full-time or part-time is not an easy task. You are often required to perform multiple jobs within your freelance business that take up a number of roles. However, owning a business also comes with its perks and immense freedom in terms of workflow, schedules and of course, creativity.
Every city comes with its own legal requirements and terms for getting started as a business entity, and it may seem a bit challenging. However, don’t be discouraged as San Francisco makes it easy to give professionals and aspiring entrepreneurs an opportunity to turn their skills into profitable income. Here’s a step-by-step guide that explains how to start a freelance business in San Francisco and takes you through the process simply and clearly.
Select a Freelance Business Structure
The very first step to setting up a freelance business is to choose the right business structure that works best for you. There’s a spectrum of business structures, but most freelancers are well-covered under Sole Proprietorship or a Limited Liability Company.
A sole proprietorship is the easiest and the simplest business structure which also doesn’t call for any complicated paperwork. As a sole proprietor, the moment you start transacting you are considered an independent business. However, with that said, make sure to research the various implications that go with being a sole proprietorship such as taxes and liability. In this structure, you are personally liable for all the debts and burdens of your business, along with all the legal affairs. On the flip side, they take no effort to set up by being the default option and all taxes are simply reported on your personal tax return.
Limited Liability Company (LLC)
While registering yourself as a limited liability company involves more paperwork and fees, it provides a great deal of protection to your personal assets and funds. If your business involves complicated operations, more people or certain risks, it’s recommended to go for this business structure. Many states make the process of creating an LLC trivially easy, and although you’ll have to operate it as a separate entity from your personal affairs, the protection it provides can shield your personal assets from lawsuits and liability. In addition, compared to a sole proprietorship, an LLC allows you to add business partners if you so choose and file taxes separately from your own. If you are the sole owner of your LLC many states allow for passthrough taxation so you still have the option to file taxes under your personal return.
Register Your Freelance Business
Once you choose the right structure for your business and decide on a name, it’s time to register it and get a business license. Most freelance business licenses are issued either by your county or your city, and some cities make it mandatory to obtain a business license. You may also need to incorporate through your state first, depending on your specific business structure.
The City of San Francisco and San Francisco County requires you to have a proper business license within 15 days of commencing business in the city. It’s called a ‘Business Registration Certificate’. No matter how small your business operations are, you must register with the city. In San Francisco, the entity that handles business registration certificates is the Office of the Treasurer & Tax Collector.
You can always browse through their website for more information on the registration process. The Office of the Treasurer & Tax Collector lets you get things done online but you can always pay them a visit or call their office to get a better understanding of the individual terms. Registering your business requires you to pay a fee depending on the type and size of your business. It also calls for registering or incorporating with the CA Secretary of State if you are setting up as an LLC.
Get Business Bank Accounts
Apart from sorting out the creative part of your freelance business, you also need to have an in-depth management of the finances of the business. To begin with, you need a new bank account dedicated for your business finances that separates things from your personal expenses and savings.
This not only makes your finances easy to manage, but also makes your business more credible. In addition, if you have an LLC and want to be shielded from personal liability, you are required to have a separate business account or your personal assets will still be at risk. Speaking of taxes, a separate bank account for all your business fund-related deals ensures a proper trail of earnings and expenditure, thereby making your tax audits a hassle-free affair.
Once you get all the completed paperwork from the state after the successful registration of your business, choose a reliable bank to set up your freelance business account. Take everything into consideration, including the various offers, services, fees, convenience, customer support and all other aspects that may affect your business operations.
One of the most reliable services out there to take all the finance-management stress away from you while you focus on your freelance business is Hatch. Hatch lets you set up a business checking account online with utmost ease, featuring zero NSF fees, great cashback rewards on your debit card purchases, and useful offers. Your company or business doesn’t need to make any minimum deposits and Hatch ensures that you get a seamless and secure banking experience.
Keep a Record of the Financial Operations
Once you set up everything, it’s a must to create a streamlined process to keep track of your income and expenses. Make spreadsheets or use accounting tools to get it done, but record everything at timely intervals. Always make proper copies of your receipts to make the annual tax filing hassle-free. Your business structure determines how you pay your taxes, so always stay updated with the rules, regulations, and deadlines for your type of business.
Consider Getting Insurance
While working with an employer doesn’t call for worrying about certain aspects, it’s a good idea to consider getting appropriate insurance when starting up a freelance business. You need to make sure that all your personal needs are also taken care of so consider getting a health insurance plan as well as the different investment options and retirement options available out there to make things more secure for you and your business. You may not be able to afford all of these plans when starting out, but don’t put them on the back burner for too long either as you are now your business’s greatest asset.
Renew your Business Licenses
Simply getting a business license once doesn’t end your responsibilities – you need to renew it every year and pay an annual renewal fee as well. Missing the renewal date may lead to penalties being levied, so make sure to take note of the dates and keep yourself reminded of the deadlines.
The steps we mentioned should cover almost everything you need to get started with your freelance business, right from selecting what business structure matches the day-to-day management of your business to having it registered and getting things ready for tax time. Once you know how to obtain the licenses and what you need to operate things in a legal and hassle-free way, you are all set to kickstart your freelance business and handle all the little hurdles with absolute ease!