If you are thinking about being a consultant, a freelance developer, or a writer, you may think you can just hole up at home in front of your computer and run your business. To an extend, this thought may be true, but there are other costs you should remember to budget for. If you prepare for them before you strike out on your own, you can avoid being blindsided by them when you are already stretched out by starting your own business.
In order to run a business, you need to apply for either an LLC, S Corp, or partnership. Most freelancers have an S Corp. Even if you are planning to just be a sole proprietor, you may need an EIN for your clients.
You need business insurance just in case anything happens while you are running your freelancing business. Hiscox is one of the easiest way to get started as a small business owner.
You don't have to outfit your home workspace like the palatial corner office you never had, but you will need some things that you may not have considered. Working from a couch or your bed may be fine occasionally, but when it is time to take a video call from a client, or do some serious work, nestling up in your blankets and pillows may not be the place you want to be. You need a professional background, a decent desk, useful peripherals, and the right tools for your job. At Treehouse Society, our office is set up in a casually professional way so you can feel confident taking a call from your client here. Check our membership here.
Equipment and Tools Costs
As a freelancer, you are responsible for obtaining and maintaining the equipment that you need for performing your gig. Even if you currently own some of these items, you will need to replace them when they reach their lifetime, need upgrades, or become obsolete. Also, remember that you may need more powerful, professional resources to freelance than you probably have for personal use.
Here are some of the things you may need as a freelancer:
Advertising and Promotion Costs
As a freelancer, you may need some advertisements especially during the start of your career.
Some of the advertisement budget include:
Legal and Accounting Costs
As a freelancer, you may also have some legal or accounting costs. First of all, you will need to do your income taxes and freelancing tends to make your taxes more complex. As a freelancer, you can either choose a tax software or hire a bookkeeping or accountant, or both. You may also need an attorney to give you legal advice when the needs arise or in choosing the right business entity for your situation.
A common misconception is that starting and running a freelance business is free. Nothing could be further from the truth. While most freelances experience a lower startup costs than other types of businesses, nearly all freelancers will wind up having to pay some money to start and maintain their freelance business.