Freelancing 101 for Graphic Designers

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INTRO TO

FREELANCING 101Laguna College of Art + Design

Professional Practices Fall 2014


FREELANCING 101

Pros & Cons


To Freelance or not to freelance?

Before you take the plunge, either in part or in full, make sure you know what you’re in for. Freelancing can be a hugely rewarding thing. But it isn’t all sunshine and rainbows. There is a tradeoff. You have to do everything.

FREELANCING 101 | Pros & Cons


Pros of Freelancing:


Freedom: You choose what projects you take on, what you charge, who you work with, when you work, and how much work you do.

Flexibility: You can work the hours you need to, and create a schedule that works around it. You don’t answer to a bosses schedule or office hours per say.


Pros of Freelancing:


Vision: You get to choose the direction you take your freelance company in. If you want to go after a new kind of client or pivot in the way you do business, you only have to make up your mind. There’s no one to check with, no higher-ups to convince. You control your destiny. projects you take on, what you charge, who you work with, when you work, and how much work you do.


Cons of Freelancing:


Accountability: Everything rests on you. If you miss a deadline, or mess up an invoice, or lose a client or botch a job, it’s all on you. There’s no one else to blame.


Cons of Freelancing:


The Burden: Everything depends on you. With great power comes great responsibility. You have to land the jobs, you have to make the contracts, you have to promote yourself, sell yourself, follow up on late payments, update your website, manage your social media. If you don’t no one will. So you better be ready for the challenge.


FREELANCING 101

The Many Hats


You will have to cover the following roles in some way or another:

FREELANCING 101 | The Many Hats


The CEO: !

You have to decide the direction of your company, looking ahead to foresee changes in the market, and pivoting your

approach to succeed. You have to keep up on your industry and devise ways to stay competitive and gain more market share. You have to evaluate your successes and failures to

better steer your company’s future actions.



The Designer: !

You have to execute the design work you get.



The CFO: !

You have to oversee all of the company’s finances, keeping your books up to date and gathering needed information

when tax deadlines come around.



The HR Manager: !

You have to oversee any subcontractors or employees you take on to grow your business.



The Salesman: !

You have to be the person who woos the client, lands the client, and then leads the client through the project so that they feel taken care of. If they have questions or concerns or second thoughts, you have to mediate and negotiate

that yourself. If they don’t like a proof, you have to persuade or concede.



The Administration Assistant: !

You have to deal with all of the emails, scheduling, organization and file management to keep your jobs and

company running smoothly.



The Marketing Manager: !

You have to promote your company and services in unique and effective ways. You have to manage your social media accounts, place ads as needed, create campaigns to grow

business, and more.



It may seem like a lot, and it is. But it’s not impossible. And to be honest, stupider people

than you have made it work.



Your Business Structure

FREELANCING 101


FREELANCING 101 | Your Business Structure

A Sole Proprietorship: !

“A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated

business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your

business’s debts, losses and liabilities.”

- Small Business Association www.SBA.gov

http://www.SBA.gov


YAY! It’s the easiest and cheapest business structure to establish.

The cost to start one is only as much as the price to obtain the few licenses and permits you’ll need. Tax preparation is

simple and tax rates are lower. As a sole proprietorship, your business is not taxed separately from you as an

individual. You only file once, not twice. The tax rates are also the lowest of the business structures.



Bummer. You are liable.

Because you are technically seen as one with your business, you are held personally liable for any debts owed by your business. This even applies to liabilities caused by

your employees’ actions. Your personal property can potentially be seized to pay for debts.




Corporation: !

The corporation is a business structure suggested for established, larger companies with multiple employees, so

this most likely wont be for you. They often have costly administrative fees and complex tax and legal

requirements. This structure might make more sense to your company once you get to a certain level of business.



TAXES !

With Sole Proprietorships, Partnerships and LLCs, all income taxes are filed and paid as though all income was your personal income (which in most cases, it is). In short: With any pass-through business structure, you’ll probably

find yourself getting hosed by the IRS



TAXES Cont. !

Since you’re not an employee of another company, you’re required to pay Self-Employment tax, which is the half of Social Security and Medicare taxes that are normally paid by an employer, plus the half that you normally pay. Of

course, this is in addition to the normal Federal and State income taxes that you have to shell out.



EMPLOYEES !

Will you be hiring employees in the future? With an SP or Partnership, you are able to hire as many employees as you want, but your liabilities will increase. It may be a good idea

to “upgrade” to an LLC to protect yourself and your business from those malevolent employees.


Becoming Legit

FREELANCING 101


1. Obtain Licenses and Permits

To find out what your area requires in the United States

1. Visit www.sba.gov/licenses-and-permits and use their permit and license search tool.

2. You can enter your zip code and

3. then select “General Licensing” in the drop down menu and the SBA will tell you what licenses and permits are required, as well as where to go to fulfill them.

FREELANCING 101 | Becoming Legit


Do I need an EIN/TIN?

Besides the above licenses and permits, you will also need a Tax Identification Number (TIN) associated with your business that you can use when filing taxes. This TIN will either be an Employer Identification Number you’ll need to apply for, or your Social Security Number.

IF you are a sole proprietor with no employees, you’ll use your Social Security number as you TIN.



According to the IRS, you need an EIN if any of the following apply:

• Your business has employees.

• You operate your business as a corporation or a partnership.

• You file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms.

• You withhold taxes on income, other than wages, paid to a non-resident alien.

• You have a Keogh plan (a tax deferred pension plan available to self-employed people or unincorporated businesses for retirement purposes).



2. Register Your Business Name (DBA)

If you want your business name to be anything other than your personal name or the legal name of your partnership or corporation, then you’ll have to register a “Doing Business

As” or DBA with your local government.



DBA Cont.

If you are just using your personal name, ignore this. Registering your DBA is done either with your county clerk’s office or with your state government, depending on where your business is located. There are a few states that do not require the registering of fictitious business names or DBAs.



According to the SBA, “A DBA is needed in the following scenarios:

Sole Proprietors or Partnerships: If you wish to start a business under anything other than your real name, you’ll need to register a DBA so that you can do business as another name.

Existing Corporations or LLCs: If your business is already set up and you want to do business under a name other than your existing corporation or LLC name, you will need to register a DBA.”




3. Get a Business Banking Account

If you are going to do any freelancing, do yourself a favor, and from the get go, use a separate bank account for all your

business expenses and payment deposits.


Why A Separate Business Account?

This will make doing your taxes at the end of the year so much easier.

You can usually get a free checking and savings account!



Use your biz account to pay for:

Your salary

Company car expenses (gas to drive to client meetings, etc)

Meals with clients

Meals while you’re working remote

InternetOffice furniture andsupplies



Use your biz account to pay for:

Software

Phone bill (for phone you use to call clients) and other utilities

Ongoing Education in Design

Word Related Subscriptions

Computer and computer equipment

Paying Subcontractors

Hosting and Domains



4. Get Accounting Software

You want to keep all business transactions separate from your personal, and you’ll also want to log expenses and

income as it comes in, so you don’t have to sort through it all when tax time comes, and attempt to remember when you paid for what and why. For most of you, Wave will do the

trick. And lucky for you, it’s free!

https://www.waveapps.com


https://www.waveapps.com


Wave

1. No more manual entry: Simply connect Wave securely to your bank account, PayPal or other sources of data. Transactions appear right in your accounting in no time flat.

2. Professional reports: Generate accurate reports like balance sheets, sales tax reports, A/R and A/P for yourself, your accountant or your investors.

3. Invoicing: Wave's tools were built to work together in perfect harmony. Use Wave's unlimited invoicing and your data is synchronized everywhere, instantly.



5. Create Template Contracts

Always. Have. A contract. Always. With clients, with business partners, with subcontractors. Even if they are friends.

Especially if they are friends!



Why Contracts?

You want everything clearly outlined and agreed to so no one gets hurt, feels taken advantage of, or stepped on. Without one, you could get royally screwed, and by the

people you least expect it from. We usually have a template we start from, then edit the scope and licensing and any

other things needed to suit the client and project.



Find Great Contract Templates here:

www.docracy.com Modify them to fit your needs.



What every contract should include so you are protected:



A. Project Scope and Price

Be as specific as possible about what the price of the is and what that includes.



• Deliverables

• How many concepts/pages/designs are included per proof

• How many proofs are included

• Rounds of revisions

• An hour cap of work if it is a flat rate job

• How many in-person meetings are allowed.

• Specify that anything needed beyond the outlined scope will be billed either at your hourly rate of $xx, or will be billed at a renegotiated flat fee.



B. Deposit

ALWAYS get a deposit. Usually for any job under $4000, we take half up front. If you are working with a smaller client, you can take a third up front. But always get something. It

proves they are investing, that they take the project seriously, and that they understand standard business

practices. Don’t begin any work until this is paid, and specify that this is the case in the contract. If they get weird, don’t

work with them. Period. This is not an unreasonable request.



C. Payment Schedule

Include specifically how much time a client has to pay their invoices, as well as a payment schedule if you have broken up a flat fee into multiple payments. Also, specify that final artwork will not be delivered until all outstanding payments are made. This is the motivation and leverage you have to get people to pay promptly. It has saved us from having to

chase down payments.



D. Kill/Cancellation Fee and Early Termination Clause

Outline in the contract how much you are owed if the project is killed/cancelled after a certain

milestone or phase. This is often times just the deposit, or the deposit plus a certain amount

depending on how far the project has progressed.



Kill/Cancellation Fee Cont.

We also specify in this clause that no artwork will be delivered if the project is cancelled in the middle before

completion. We can do this because in our copyright transfer clause, we specify that only the final artwork will be

transferred to the client, and only upon final payment of the full invoice. The client will not own any sketches or lead up

concepts that were not chosen, only the one final design, and providing it has been paid for in full.



Kill/Cancellation Fee Cont.

Be sure that either you or the client can terminate the contract. You don’t want to be stuck in something if the

relationship or project turns sour and becomes unworkable. Such a clause might read:

“Termination: Either party may terminate the contract at any time through written request. The Company shall upon termination pay

Consultant all unpaid amounts due for Services completed prior to notice of termination.”



E. Copyright and Licensing Details

Outline in the contract how much you are owed if the project is killed/cancelled after a certain milestone or phase. This is

often times just the deposit, or the deposit plus a certain amount depending on how far the project has progressed.



What is copyright?

Copyright is the exclusive right to control reproduction and commercial exploitation of your creative work. Copyright

protects any kind of artwork, including illustrations, photographs and graphic design.



In your contract, specify:

1. Is the work you’re doing going to have its copyrights fully transferred into the ownership of the client upon payment (buyout)

2. Or are you only leasing the rights to the client to use the design in a limited sense? Limited licensing just means that you are allowing a client to use a design you make for a limited period of time or for a limited application.



Example of when a buyout is necessary:

Identity work like logos, media kits, and website that have an ongoing, exclusive marketing presence for your client.

When you create a logo for someone, you will pad into the pricing the fact that the client is going to need to own the

work in full and all rights associated because they are going to use the mark in an unlimited capacity throughout the

course of their brand’s life.



Example of when a limited license applies:

You might create a hand lettered design for a client who wants to use it on a fall line of t-shirts. Being as they don’t

want/need a full buyout you can offer them a limited license to use the design for a run of up to 100,000 t-shirts, which they can print and sell across the next year in the US only.



Licensing usually best applies to this kind of design:

1. Lettering

2. Illustrations

3. Digital paintings



For limited license always define:

1. Geographic location: domestic? internationally? US only?

2. Time frame: 1 year? 2?

3. Surface: Is it for print only? Print and web? Wearables only? etc.

4. Price

5. Quantity Limitations if any: 10,000 tees? 20,000?



Portfolio Display Rights / Moral Rights:

Portfolio rights are simply the permission to display the work in your portfolio after it’s done. If you’re under a work-for-

hire contract, these rights are not automatically granted, so be sure to check that it is included if someone gives you a

contract of their own. You may need to ask them if you want to add screenshots of your work or reproductions to your own website. Moral rights include the right of attribution.

You always want to be sure you are credited for work.



6. Create your W9

A W-9 is the freelancer’s equivalent of the employee W-4 form. Send one of these to every client to make sure your

earnings are credited to the correct Social Security account and your check goes to the right address. Any client who

contracts you for $600 or more in services in a year is required by the IRS to send you a 1099 form at the end of the year stating what they paid you, and having the W9 will help them fill this out. The 1099 they will send you will help with

settling your year-end taxes as well.



7. Stay up to date on freelance design business news

Sign up for the e-newsletter from Graphic Design Blender. It discusses the business side of design. Some blogs are off the wall, but most are quality reads you rarely find in design writing on blogs.



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