Join Petrula Vrontikis for an in-depth discussion in this video Definition of a freelancer, part of Running a Design Business: Freelancing.
A freelancer is essentially a one-person business. A person who primarily works on a particular part or phase of a larger project. They often maintain anonymity as they provide a necessary component, such as a series of spot illustrations or an extra hand in production. For the purposes of this course, I will use the term agency to mean design studios, Ad agencies and in-house design teams. Often you work through them, not directly with the client. Agencies hire freelancers as sub- contractors, and I will use the term freelancer.
But freelancer is not a term the Internal Revenue Service uses. They use self-employed and independent contractor. More specifically, the IRS defines workers in one of two categories either as employees or independent contractors. These categories determine how a workers' income tax will be calculated. An employee is someone who is hired. They can be full-time which is defined as 40 hours a week or part time, less than 40 hours a week.
The employer withholds the employees' federal and state income tax from each pay check. A freelancer is responsible for paying their own state and federal income tax. No taxes are withheld by the employer. In the United States, income tax laws enable freelancers to keep more of the money they earn because they can deduct business expenses from their total income. It places them in a lower tax bracket, which lowers the percentage of tax they pay. This all sounds terrific, but there is a great responsibility a freelancer takes on to keep track of these expenses; to file forms properly and to do it on schedule.
For some designers, switching from creative mode to accounting mode is just not possible. Beware, if you can't balance your checkbook as an employee, you're going to have a tough time as a freelancer. You have to be an entrepreneur with a head for both design and record keeping.
- What is a freelancer?
- Tracking expenses
- Paying taxes
- Understanding business licenses
- Creating contracts and invoices
- Preparing, transferring, and storing files
- Tracking billing and payments
- Managing your work-life balance