July 2006

Freelancers and Taxes: An LLC’s Perspective

When I was laid off from my last “secure” paying job I mentioned to my wife that I wanted to go into business for myself. With two small children at home, a mortgage to pay, and enough other expenses hanging over our heads, this option seemed somewhat crazy. Fortunately, a severance package and unemployment helped to ease my transition to freelance work and I managed to have some additional work lined up to get me started.

One of the first things I did was to set up my business as an LLC: a limited liability company. I used the services of LegalZoom to organize my company, saving myself some money over the services of a tax attorney. The advantages of running an LLC include: legal protection from suitors in the event I am sued for work that I have done. They can go after my business assets, but not my personal assets. In addition, the whole way of paying myself has changed: I don’t receive a paycheck, but I do make disbursements. These disbursements are not subject to social security taxes, but they are taxed on the federal and state level. Still, with tons of deductions every year [I pay our family's medical bills for starters], our disbursements are fairly low. Livable, but low. Plus, I take advantage of IRA contributions for my wife and me. We are a one income family, something we decided to do even before children arrived on the scene.

The disadvantages of an LLC are few. Start up costs are more and you have to register with the state to keep everything in order. Still, the little extra legwork is worth it and marketing myself as an LLC has been useful especially when I tell employers that I have officially set up myself as a business. Employers seem to appreciate that I made a little extra effort to formally organize myself. In addition, some are happy not to have to furnish 1099 forms for work that I do for them.

Is an LLC right for you? That depends on what you want from one. Contact a tax accountant to gain more information. After nearly four years of business, I have grown to appreciate what an LLC offers and my customers seem to recognize that advantage as well.

Assume Nothing…Spell It Out

37 years ago today, America landed the Apollo 11 lunar module upon Earth’s moon. For those of us old enough to remember this event we have that day permanently etched in our memories. On that date I was an almost 11 year old kid taking a summer clarinet class — we interrupted our squeakings and honkings to watch the events unfold on a black and white television as they happened.

So, why am I saying all of this? Am I attempting to mark the occasion for some reason? Well, yes and no. Truly, in the course of human history man’s landing on the moon was a big event. Talk about going where no man had gone before! Yet, I also realize that the vast number of people alive today have no recollection of the event. Figure that anyone under the age of 42 or 43 remembers nothing about the first moon landing. Subsequent landings perhaps, but maybe not the first one in 1969. Furthermore, we haven’t been back to the moon in over 30 years. How many people alive today only know about these events via the history books?

Okay, I am no longer young but I haven’t quite hit the jurassic era either. Still, when writing about events of long ago there is one thing that I must remind myself of regularly: don’t assume that people know what you are talking about. This is true for whatever types of writings you do: spell out acronyms, expound your thoughts, and make it crystal clear to your readers what you are conveying. Your readership may be a lot younger, much less informed, or simply unable to grasp what you are trying to say. Give them background information even when it seems as if they should know what you are writing about.

You Get What You Paid For!

I fully understand what many employers are going through when they hire a freelance writer. They are looking for talent: someone who can write well, with persuasion, and keep readers interested in what is being conveyed. The real art is taking a topic that may not be of much interest to the masses, let’s say pocket bikes, and creating an article that informs and tells a story.

Recently, a customer who has used me in the past contacted me about my current availability. I mentioned that I had the time for him and was awaiting to take on his latest project. Well, it turns out the project or projects had already been assigned to two other writers who, presumably, were working on the writings but not delivering the finished work in a timely fashion. I mentioned to my customer that he should consider me for the job as I do this work full time. For the record, the series of articles to be written are very basic so I cut the employer some slack when it comes to price. Still, I imagine my price is a bit higher than some of these “authors” who may or may not be doing the work for him.

Anyway, I still haven’t gotten a final answer from this employer, but I do know two things about the writing industry: hire expertise and hire someone who does this full time for a living. Those of us who work full time at freelance writing are putting our livelihood on the lines every day. Can the same be said of someone seeking some part time income? I sincerely doubt that!

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