In the last
two posts Pros and Cons of Hiring Independent Contractors and The Legal Aspects of Independent Contractors we have looked at the pros and cons and the legal
aspects of hiring freelancers. This post will address the issues that face
individuals working as independent contractors.
The number
of freelancers in the United States is rapidly rising. With the economy still
shaky and layoffs still a concern for many, the idea of being an independent
contractor is extremely appealing. While there are benefits, there are also
drawbacks. It is important to explore all facets of being an independent worker
before taking the plunge into self-employment.
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Instability
is another major concern for independent contractors. Working on a
project-by-project basis can be extremely stressful. It is helpful to have a
network of contacts, as well as an understanding of the importance of self-promoting. In order to
maintain a constant workload, freelancers often have to work hard to find
clients. The money also comes in much more sporadically, and it can be
difficult for someone who does not save and budget. There is also the issue
with not getting paid at all.
The nature
of the client/independent contractor relationship is inherently different than
the employee/employer relationship. There is much less supervision and
training, and if there is no work, there is no payment. There is also no
recourse for discrimination in the workplace, since an independent contractor
is a business, not an employee. Freelancers must also pay their own
professional fees and keep up any licensures with no help from an employer.
Having a
good attorney and a good accountant are important for any independent contractor.
The attorney can assist in creating contracts, as well as provide guidance for
intellectual property issues. They can also assist in recouping any outstanding
debts owed from clients. They will provide guidance in determining the
structure of your business. It is possible that being an LLC, or PLLC, is a
good idea. The accountant is vital in helping to understand the taxes and
paperwork involved in being an independent contractor. They will help to
determine what can and cannot be used as deductions, and hopefully help to
avoid an audit.
Most
freelancers will admit they work much harder than they ever did as an employee.
However, for many the benefits outweigh the risks. Having more control over
scheduling and projects, as well as being your own boss, is the perfect
solution for many. It is important to do research to determine if it is the
right move. Carefully weigh the costs, benefits, and your own motivation. With
a good accountant and lawyer helping guide the way, working as a freelancer can
be very satisfying and profitable.
Beesley, Caron. Starting a Freelance Business—How to Take
Care of Legal, Tax and Contractual Paperwork.(July 18, 2012). SBA.GOV. Retrieved March 31, 2013 from http://www.sba.gov/community/blogs/starting-freelance-business-%E2%80%93-how-take-care-legal-tax-and-contractual-paperwork
Branch, Allan. (January 18, 2012) 6 Tips to Avoid IRS Audits
for Freelancers. Freelance Switch. Retrieved on March 31, 2013 from http://freelanceswitch.com/the-business-of-freelancing/avoid-irs-audits/
Independent Contractor (Self Employed) or Employee? (January
10, 2013) IRS. Retrieved on March 31, 2013 from http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F
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