This month, I thought I’d share with you some of the administrative things I’ve had to learn and complete when it comes to starting my freelance science writing business.
Business Planning for a Freelance Career
Author :
Amber O’Connor
This month, I thought I’d share with you some of the administrative things I’ve had to learn and complete when it comes to starting my freelance science writing business.
Having your own business means that you charge for services to earn income, and that you are responsible for assuring the legality and disclosure of these transactions to the appropriate entities. I will discuss the main options for business structure, the basic requirements for a first time business owner, and some special considerations you might consider in the field of academic writing/editing services.
It is very important that if you are going to do writing/editing for any company on a contractual basis, that you protect yourself from liability and take on projects legally. If, on the other hand, you are lucky enough to get a position with a company and are an employee, your legal responsibilities are fewer.
Being a contractor, however, generally requires you to start your own business, file and pay taxes, and in some cases, register with government entities. There are several sources for this type of adventure, and the details I will share with you today are only superficial ones, as I am still learning much of the process myself. However, I hope I can provide some insight and tips for your use along the way.
Business Structure
There are a few considerations when deciding which type of business to form.
There are many “types” of business that vary in terms of the number of people forming the company, the number of employees, and the financial structure. The most simple and common structures for a small business are a sole proprietorship (SP), limited liability corporation (LLC), and an S Corp which each have their own parameters.
An SP is the most simple business format, wherein the owner is responsible for all assets and liabilities. The main disadvantage of an SP is that there is no distinction between personal and business assets. If your company is sued or goes bankrupt, this will affect your personal credit and assets (home, savings, retirement). However, it is a very simple business model and easy to start.
An S Corp is a subtype of Corporation. You have to form a Corporation first then have it designated as an S Corp by the IRS. Because of this, there is often more paperwork, regulations (taxes), and specifications in launching an S Corp.
Generally there are multiple shareholders who finance the S Corp, and each have to be paid an income, pay their own income taxes on that money, and the business is subject to business taxes on profits/losses as well. The primary advantage of a Corporation/S Corp is that the shareholders’ personal assets are protected from any business related legal and financial events.
In addition, this model is common for businesses with multiple shareholders requiring initial capital investments.
Finally, the LLC is a hybrid of the two, and is a good option for most small business owners. An LLC can be formed by one or multiple entities, and taxes on any profits/losses are reported via the personal income taxes of the shareholders. The business itself does not pay taxes.
In addition to this streamlined taxing method, LLCs provide similar liability coverage, protecting the personal assets of the shareholders. The main considerations when choosing a business type are:
a) The number of shareholders. If it’s just you a SP or LLC would be sufficient. Having a few partners while remaining a small business would fit under and LLC;
b) How much personal risk you are willing to assume. If your business is low risk, the easier SP is reasonable. If you have assets you want to protect and there is moderate risk involved in the business, then an LLC may be a safer option.
Basic Requirements
One of the first pieces of advice I was given when starting my own business was to start relationships with a banker, a CPA, and insurance broker.
First, you will want to have a separate business account at your bank. This will be required to cash/deposit checks made out to your business. This will also be very helpful when keeping your personal monies separate from business monies, which is very important.
Most banks will have basic business checking and savings accounts, you likely won’t need any specific types of account or products, just a distinct business account.
Second, it will be worth your time to meet a personal accountant (CPA) to assist you with keeping up, and filing your taxes as you’ll most likely have to pay quarterly. They’ll help you understand and abide by “write off” laws, so that if it is necessary that you invest in equipment or services, you can be sure to get any tax credit for those transactions.
Third, it would be prudent to meet with an Insurance broker to see what coverage you have and may want to obtain. In general, if you will have customers meeting you at your office or home. You need to make sure you have general liability coverage; however, your homeowners insurance may provide you with this coverage.
Personal liability coverage should only be necessary in areas of high risk specialized consulting, but this is something to consider. Finally, at some point you may need/want the services of a lawyer. For most small business needs, a “fee for service” arrangement will be the most economical and beneficial.
Special Considerations
I wanted to be able to offer my services as a vendor at Universities. That is, I wanted to be able to do work for professors/PIs, who would then pay me with their grant monies.
To do this I was required to register as a federal contractor to be able to accept federal grant dollars. This was the most administrative and laborious part of the process for me.
First, I had to obtain a DUNS number, register with the System of Award Management, and then determine my NAICS and SIC codes. I followed the outline provided by the Small Business Administration here.
Another element you may want to consider is having your business listed as a small business or a woman-owned business. These are designations that you may qualify for and that may allow you to obtain specific contracts.
In sum, this process logged my business in a government registry that is perused by non-profits and other governmentally affiliated entities, when looking for specific services. It provides you with flexibility, being able to accept government contracts/monies, and serves as free marketing as your business is specifically suggested by being in their registry.
Advice and Resources
There are many resources available to describe and facilitate your decision making.
The Small Business Administration (SBA) website has tons of articles, descriptions, guidelines, and links to help you in forming your business: www.sba.gov
SCORE (www.score.org) is another great resource, with webinars and tips on their website. In addition, they have local chapters for meetings and mentoring. Their mentoring program is of particular interest, as you can get paired with a vetted successful business owner to serve as a mentor.
The IRS website actually provides a lot of information and guidance for knowing when and what taxes to file. Again, a CPA would also be a great resource to protect you from an expensive tax oversight.
Since you will have to abide by local and state regulations, see your states website and make sure your city/county/parish responsibilities are met. Unfortunately, I have very little advice about this. Navigating the required forms and registries varies by business type and location, and there is very little similarity in requirements between locals.
Use these resources to get started:
http://www.sba.gov/content/register-with-state-agencies
http://www.sba.gov/licenses-and-permits
Good luck, and remember “Ideas are easy. Implementation is hard.” —Guy Kawasaki
Amber O’Connor
Owner of akoWirintg LLC, a science writing and editing service.
www.akowriting.com
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