Ask FreelanceSwitch: Client Communications and Incorporation
In this issue of Ask FreelanceSwitch, we look at client communication and incorporation. Ask FreelanceSwitch is a regular column here that allows us to help beginners get a grip on freelancing. If you have a question about freelancing that you want answered, send an email to firstname.lastname@example.org.
I’m a regular reader of FreelanceSwitch which has become very valuable to me since I became a full-time freelancer. I’m currently facing a problem with a client I’d like your insight about it.
I was asked by this client to create their website last year. Since this client is not at all tech-savy, decisions took quite long to make, but we managed to get the project going. Last time I saw them – in June – the website was nearly ready to publish, but they asked me for more revisions on this project, not really being polite about it. I did make the revisions and asked them if they were okay with it. I was told that they would look at it and get back to me the following week.
I never received an answer, despite emailing and calling. I ended up sending them a letter two weeks ago, asking them if the project was still on their agenda or if we should break the contract. I had no answer. However, I learned while talking to a shared acquaintance, that they don’t want a website for their business anymore.
I’m torn between two solutions:
Should I wait for them to contact me, risking that they’ll come and ask for their website completed for the next day or that I refund the deposit they made (I made the mistake of not specifying that it was not refundable in my contract)?
Or should I send them a termination notice for our contract, risking that they ask for a refund (or worse, since the owner of this business is moody and can be aggressive and litigious)?
This project was one of my first as a freelancer and I made a big mistake, being not specific enough in my contract. I’m kind of stuck, here, and like to have an external point of view.
What I would suggest doing depends on whether you’re still owed money on this project. I try to avoid ever leaving an unpaid invoice on my records, even if it means spending more time on collections than the invoice might actually be worth. If you’re still owed money, I’d contact the client via certified mail with an invoice for work completed. Be polite about the whole thing, but be firm. If the invoice remains unpaid, you can choose whether it’s worthwhile to take it to small claims court or to turn over to a collections agency.
Just how much you should worry about that deposit depends on the specifics of your contract, but most small claims courts would say that if you completed all work as specified, your client doesn’t have grounds to request a refund of the deposit.
If the deposit you received covers the cost of the time you put into this project, I’d leave it be. You’ve made every reasonable effort to contact the client and finish the project. They’re not interested.
Can you suggest an article that covers the best route to incorporate (LLC v. Corp, S-Corp, etc.) for tax purposes? I am an individual in California running my freelance business out of my home.
What is the most common corporation formed by freelancers?
Before I start tossing recommendations around, it’s worth noting that the majority of freelancers do not incorporate their businesses. I’m an odd duck in that I have an LLC. Part of that is because of the work it takes to create and maintain a corporation in most states: depending on just how much money you’re earning, it may be more expensive to set up a corporation, pay the yearly filing fees and hire an accountant to do your business’ taxes (I strongly recommend against doing your own taxes if you have a corporation— it will drive you crazy, even if you manage to do every step correctly).
Talk to a CPA in your state before making the leap. She’ll be able to tell you if a corporation is really going to save you money, as well as walk you through the options available in your state. Different corporate structures are available in different states, with their own special rules.
Personally, I’m fond of the LLC structure, but that’s after reading more than anyone should have to about corporate structures in the state of Maryland — not only am I not a CPA or a lawyer, but I don’t have enough experience with California business structures to offer even anecdotes about the best option.
Here are two posts that will at least get you started: Picking a Legal Form of Business and Incorporating as a Freelancer: The Questions You Need to Ask.