How to Handle Your Finances as a Freelancer - CareerMetis.com

How to Handle Your Finances as a Freelancer If you’re a full-time freelancer, you can enjoy a great freedom which many others don’t have. With this, though, comes a big responsibility: you have got to pay great care and attention to your finances and cash flow.Freelancing’s popularity is at an all-time high, as more and more people want to ditch a 9 to 5 routine and earn their own money.evalThe freelancer market has seen a rapid growth which was unforeseeable just a few decades ago, thanks in part to the kids of the digital age growing up and seeking a flexible work schedule, which allows them to live the life they want.A freelance income can be unpredictable, so it is very important to properly manage your money, which is not as difficult as you might think it is.1) Create a Sensible BudgetevalTo some people, budgeting is a dirty word. Sure, if you’re earning a big pay check, budgeting probably isn’t at the front of your mind.Whilst freelancing can earn you a comfortable income, budgeting is still important, and it is not as daunting as you may think.There are lots of different budgeting methods, techniques and guidesavailable on the internetto help you out.Personally, I think that the 50/30/20 method is a great place to start your budgeting and get a basic one down on paper. This method puts 50% of your after-tax income Whilst an employer would be responsible for your taxes and it would all be done automatically through payroll, this is obviously not the case when you are your own employer.Each time a client pays you, work out exactly how much of that payment needs to go towards your taxes and set it aside in a separate account. That way, when you get your tax bill, you’ll have the exact amount set aside ready to pay to the government.3) Registering as a FreelancerBeing a freelancer isn’t all fun, games and freedom. In fact, some things are just plain boring; registering yourself as a freelancer orregistering a businessis no exception to this. It can be quite confusing and tedious, but it is something which you are legally obliged to do.evalThe way in which you are registered does matter, because there are entirely different legal and tax implications depending on whether you’re a registered business or a sole trader.a) Sole ProprietorshipThis is themost common way for freelancersto register their business interests. A sole proprietorship Corporations are owned by shareholders whose liability is limited to the value of their investment.4) How to Form a CompanyRegistering as a Limited Liability Company is definitely the way to go if you’re a freelancer looking to register your interests and is the best route to take.Although, for tax purposes, it is no different to being a sole proprietorship, you have the added legal protections of not being personally liable for business debts, which can become a real possibility as you scale your freelancing business.An LLC can choose to be treated as a corporation for tax purposes by the IRS by filing form 8832.Whether or not this is the right solution for you depends on your personal circumstances and the nature of your freelancing business You may be wondering how to form a company; it’s quite simple. There are plenty of resources on the internet which can help, and it is as easy as selecting a state to register in, choosing a name and Registered Agent and then filing your Articles of Organization.Although there is a bit of paperwork involved, registering as an LLC is the best option for freelancers, particularly if you are going full-time or have long-term ambitions.