• Finance, Community

3 legal issues freelancers can't afford to ignore

When I first moved to California from Florida, without a job, I would tell people I was a “freelancer.” When they asked “in what?” I would tell them I freelanced in freelance. In other words, I would do anything someone would pay me for. It was only a slight exaggeration. I did some attorney work but also took on projects like managing social media for a board sports company (lots of fun!)

Even with my legal background, my focus during my time as a freelancer was on developing new work and getting that work done not evaluating the legal issues associated with freelancing. I’ve found this is pretty common among freelancers. For the freelancer without a legal background, the tendency to want to avoid “legal” considerations is even greater because it can be hard to understand the law and know what is important.

For these reasons, I want to share what I consider to be the top three legal issues that all freelancers need to be aware of and address:

1. Freelancing isn’t free

Business owners love freelancers, they provide as needed work without the necessity of paying taxes or overtime. The good news for freelancers is this means there is a demand for you and your work. The bad news is Uncle Sam always gets his money. Someone has to pay those taxes… and as a freelancer, that someone is you.

There are two approaches to paying your taxes as a freelancer: the best practice and what you are probably going to do. The best practice is to file quarterly estimated tax forms and payments. What you are more likely to do is wait until the end of the year and then pay all the taxes you owe at once.

But be warned: the wait and pay approach has a hefty price tag. You will owe a large sum (typically thousands of dollars) all at once. If you can’t pay it, you’ll be making payments with interest to tax entities through the next year. I’ve done the wait and see approach, I understand its temptation (why pay now when you can pay later?) but I strongly encourage you to engage in the best practice and file quarterly.

2. You Don’t Own Me (or do you?)

Freelance work is particularly common in what are often referred to as “creative professions” like graphic design, photography, and journalism. These types of freelancers (and many others) are producing creative works, works that are considered intellectual property and afford the owner of the property certain rights including the right to reproduce and profit from their work.

These rights can be bought and sold and freelancers absolutely, positively, unequivocally must know and understand what rights they are retaining and what rights they are giving up when they sell their services or work to a business. For example, a journalist who is hired to write an article should know whether they are selling the full copyright or just the right to reproduce the article one-time.

These rights should be spelled out in a written agreement. If you don’t have an agreement that you utilize or don’t understand an agreement you’ve been asked to sign, an attorney can help you draft or (often for a lower price) review and explain the agreement to you.

Quick shout out to the Freelancers Union, which allows its blog contributors to keep their rights to the work they created. Way to support the freelancing community!

3. Everybody loves a baller

Many a freelancer has started with little concern for legal liability because as a struggling freelancer what money could someone try to take? However, the freelancer economy is on the rise and it is not uncommon for hard hustling freelancers to make more money than they would as salaried employees.

As you grow, and you will, it is important to ensure that your personal assets are protected from the unscrupulous business or individual who might try to sue you for your money once you’ve reached baller status. The first step in this direction is to create a business entity (Corporation, LLC, Partnership, etc), rather than operating under your own name and bank account. My recommendation is to lay the groundwork NOW before you have legal issues or large assets and while you have the time. The price of forming a business entity, a bank account, and legal advice is relatively low especially when compared to what you could lose.

Larissa Bodniowycz Larissa Bodniowycz Esq. is a Florida and California licensed attorney who focuses on helping small business owners and freelancers grow and protect their businesses.

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