How to Start a Freelance Business

In English | If you are new to freelancing or thinking of becoming a freelancer, you'll no doubt have lots of questions, especially about the legal and regulatory paperwork you need to obtain and manage throughout the business year.

Take steps to set up and maintain your freelance business legally. — Corbis

Freelancing, particularly if you are unincorporated, is one of the least paperwork-intensive forms of business ownership. Nevertheless, you are still a business and you need to be sure you have the right licenses or permits, make estimated tax payments on time, report your earnings each year and deal with client paperwork such as contracts, nondisclosure agreements and more.

To help you stay on top of your obligations, here's a breakdown of key legal and regulatory processes, plus important "business-ready" documentation you'll need when dealing with new clients.

Legal and Regulatory Must-Do's

Here's what you'll need to do to ensure that you set up and manage your freelance business legally:

1. Get the right licenses and permits – All businesses need some form of license or permit to operate in their state, county or city. In all likelihood, your freelance business is operated out of your home. So you may need a Home Occupancy Permit and a General Business License. You can get both from your local government website. Or simply use SBA's Permit Me online tool for information about the licenses or permits you may need based on your ZIP code and business type. Be sure to obtain these before you start doing any business.

2. Register your business name – If you want to name your business anything other than your given name, then you'll need to register a "Doing Business As" name with your local government. This guide explains how. If you use your own name, skip this step.

3. Pay estimated taxes – This one often comes as a surprise to freelancers, who may be used to having their taxes withheld by an employer. As a freelancer, it's your responsibility to pay Uncle Sam and your state revenue agency almost as soon as you earn income each quarter. If you expect to owe $1,000 or more when you file your annual return, then you must pay estimated taxes on income.

4. Complete a W-9 form when you get a new client – When you sign an agreement or start work with a new client, it's likely they will ask you to complete IRS Form W-9 (you may have to ask them for it). Filling out a W-9 is straightforward: Provide your name and Social Security number, or your "Doing Business As" name. The client holds this form and doesn't send it to the IRS; it's a formal certification by you that your tax ID (SSN) is correct. The form also asks if you are subject to backup withholding – most taxpayers are exempt.

Next page: Essential business documentation for freelancers. »