The Freelancer's Arsenal
Ultimate Toolkit for Freelancers

The most important need is the interest and dedication. Freelancing is its own domain of expertise, and succeeding requires a hard-earned education on the job. Aside from that, you'll need a computer, a dedicated Gmail address (free is fine), and a wi-fi connection.

Note that if you take on work without setting up an entity or incorporating, you'll automatically be operating as a sole proprietorship and be taxed for your income through your personal income taxes. This is the most simple set-up and usually does not require additional administrative steps.

Lastly, and most importantly, you need 1 client, just one to get started.

In most cases, this is a personal decision, ie only if you believe the benefits outweigh the costs and administration overhead.

There are some instances where you are required to operate as a specific legal entity such as in specific professions. For example, in some states, lawyers have to operate as a PLLC. In the latter scenario, you can find the information on which profession must set up as which entity at your state's secretary of state website.

If it is a personal decision, then what are the pros? The Pros of an LLC is that it provides a layer of protection for your personal assets. The LLC predominantly serves a legal purpose of separating your personal assets from any potential business liabilities such as lawsuits. This is potentially very important if you are: 1) working in a potentially litigious field, or 2) you have sufficient personal assets to protect.

What are the cons? The cost to create and the administrative overhead to keep the entity active and in good standing are the predominant costs. You can read more on formation costs on our Startup Costs pages.

This depends. Most freelancers providing services like marketing, virtual assistance, design, software engineering, or similar professions are not going to need to have business insurance or get licenses. The predominant factors for consideration are: 1) which profession you are in, and 2) what are the state and local municipalities' rules and regulations in your area.

For example, trucking owner-operators are required by FMCSA to have a minimum coverage of $750,000 in general liability. Some freight brokers will require trucking owner-operators to have $1,000,000 in general liability insurance. Dentists in Massachusetts are required to carry malpractice insurance of at least $100,000 per occurrence and $300,000 in total per policy period. Yet dentists in California are not subject to any malpractice insurance. These are not typical freelancing occupations, but can demonstrate the importance of understanding the profession and local laws.
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If you are operating as a sole proprietorship or LLC, you do not need an EIN unless you plan on employing individuals. For incorporated business entities, you'll most likely need an EIN to file taxes, hire employees, and open a bank account to name a few areas needing an EIN.

Finding clients is a core competency to doing well as a freelancing. For new freelancers, we highly recommend landing a recurring freelancing gig with an existing or former employer. Those are the simplest to convince of your value given pre-existing relationships. Then lean into your professional network through reconnecting with old colleagues and peers to ask for referrals and introductions.

We think about this often, and also write extensively on this topic. Read more on our blog on how to find clients: How to Get Clients as a Freelancer (Part 1) and How to Get Clients: 5 Effective Ways to Grow Your Business (Part 2).

Like finding clients, we find the topic of what freelancers should charge a critical one. Figuring out what to charge your clients can make the difference between succeeding and failing as a freelancer. Ask for too much and you won't be able to find enough clients. Ask for too little, and you'll be losing money working.

If you are moving from an annual salaried position into a hourly consulting gig, then we've developed this calculator that we ourselves use to set our rates.

If you don't have an annual salary to reference, you can also use a tool like Glassdoor or Pave for general compensation data. Then, convert that annual salary to an hourly rate. Avoid using 1) a straight conversion of annual salary to hourly (ie $ annual salary / # working hours per year), and 2) average rates on Upwork or Toptal. The former does not factor in the overhead and risks that freelancers take over from employers, which is many. The latter tends to skew lower because the marketplace hires from international markets where salaries are lower and excludes freelancers who have went on to turn their gig work into an agency or service firm, where higher fees can be charged.

There is more freedom in pricing as a freelancer as compared to salaried employee. One such freedom is the ability to move from hourly to project-based pricing. Read more on Hourly vs Project-Based Pricing.

Most larger clients will pay contractors via ACH from their preferred payment processing system. In this scenario, the main focus is on sending invoices to the client to the appropriate personnel for approval and payment. Ensure that the requested banking information is correct, which is best done by providing a voided check. Remember to provide a W9, so 1099s can be properly issued at the end of the year for your income tax filings.

Some of those clients may require you to be set-up on their system to receive compensation. Some common systems to be aware of include Bill.com and Airbase.com. These may require you to setup a vendor pages to receive payment.

Avoid contractor marketplaces that take a percentage or flat fee from the contractor in order to issue payments. This can be costly and eats into your margin. If your client insists on using one of those platforms, ask that they cover the fee on your behalf.

If your client is a small shop that don't have a dedicated accounts payable process or department, then opt for a platform like PayPal or Venmo. These two payment processing platforms popular for peer to peer transactions, also support business to business transactions. At year end, they will issue 1099s on behalf of your customers to you, reducing their administrative overhead.

If you're making good money freelancing, then what comes up the most is how to stay productive and engaged while flying solo. As a social species, even the most introverted of individuals still need other people to stay engaged. Stay engaged by connecting with people professionally as if they were your co-workers:
- Find someone to work with on a regular basis so that one-person shop starts to evolve into a semblance of a team.
- Find a community of other freelancers, this can be in-person or online.
- Reconnect with old colleagues on a periodic basis. Pick a cadence like monthly, quarterly, or annually to force yourself to reconnect.
- Attend networking events and bounce your business ideas off anyone who will listen for feedback.

By staying engaged in your professional network, you are also helping to grow your potential business pipeline and keeping up to date with new developments, while maintaining the social interactions that help to spur productivity.

We wrote a blog post on this! If you decide on a website, check out our take on building a website to acquire traffic.

Yes. Contracts are critical to protect yourself and your business. If you don't have the funds to hire a lawyer, then there are plenty of out of the box contracts. Although these may not offer the best protection, but they are a good starting point. Consultants can tap into example contracts from Rocket Lawyer and the Boutique Lawyer. For those who can afford it, they can hire a lawyer through marketplaces like Avvo.com or through local directories.

Lastly, you may be able to request that your client, if they are a larger firm, to provide the contract terms, which most big firms will require. Those firms will have standardized consulting agreements, saving you the trouble of creating your own. In those cases, be sure to read the terms carefully. Those are typically written to benefit the client's firm.

If you are operating out of your personal account, a simple spreadsheet would be sufficient. Most banks and credit cards have the export function to CSV. This allows contractors at year end to go through those data files to determine what expenses are associated to the business. To keep a closer eye on these costs, a monthly check-in can help stay on top of spend.

However, if you expect having a lot of expenses or to build up your business, having a separate bank account and credit card for your business will make expense tracking much more efficient. From there, you can choose an accounting solution like Quickbook Self-Employed or Solopreneur, Wave Accounting (by HR Block), or Freshbooks. All of these accounts will allow you to connect your banking and credit card, automating almost all facets of expense tracking.

Income taxes, franchise tax, sales tax, self-employment taxes, and possibly payroll taxes are some examples of taxes that may apply to your business.

For income taxes, depending on how you've structured your business and corresponding tax entity, you may be able to file your business' taxes through your personal income tax filing. If you elect to be taxed as a corporation, then a separate filing is required.

Franchise taxes may apply if you've set up a legal entity with your state's secretary of state. This usually applies to LLCs, LLPs, and/or corporations.

If you sell services across state lines, then you may be subject to sales taxes based on where your customers are based.

Each state has different rules for nexus for both income and sales taxes. Nexus is loosely when you are recognized as potentially needing to be recognized as a business in the state and need to file taxes and reporting.

Self-employment tax is the social security and medicare taxes levied on earnings that self-employed individuals make. This tax amounts to roughly 15.3% up to a wage limit. Similarly, there are payroll taxes for this called the FICA tax which apply if your business employs full-time employees.