Sometimes a project can go wrong in a big way: a website can go down at the worst possible moment, a brochure can get printed with the wrong information, or you can otherwise end up with a very unhappy client. You can do everything you can to solve the problem, but at the end of the day, if your client isn’t happy, you can be facing some major trouble. Depending on the circumstances of the project and the problem, your client may be in a position to sue you or otherwise demand compensation for the problem – a financial burden that many freelancers just aren’t equipped for.

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Most freelancers automatically set up business as sole proprietors. In most countries, running a sole proprietorship is as simple as hanging out your shingle — the government only cares whether you pay your taxes on time. Just because operating as a sole proprietor — also known as a sole trader in some parts of the world — is the easiest option, however, doesn’t mean that it’s the best. For some freelancers, making the switch to a corporation or another business structure can offer some benefits.

If you just automatically moved into running your freelance business as a sole proprietor, there are a couple of questions worth asking yourself. Depending on the answers you may find that incorporation makes sense for your business.

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Photo by Ella's Dad.

Once you have left the land of COLA raises, paid sick days, and employer-matched 401Ks, not only do you need to be the writer/programmer/web designer for your business, you also need to be your own CFO.

Here are some absolutely necessary components for your business (and life) financial portfolio:

1. You need insurance. In addition to car and home insurance, you must also now fund life, health, and disability insurance. Without these critical coverages, not only could you be swamped with debt brought on by an unforeseen medical situation, but your business could lose its most important asset—you!

2. You need to pay your taxes. Religiously. As soon as income hits your mailbox or PayPal account, it is imperative that you take 30% off the top and tuck it securely away in a separate (interest-bearing) savings account. This money will then be ready to pay your monthly, quarterly, or annual IRS bill, in full and on time. Continue Reading

Photo by Podknox.

So you’re sick of the cubicle, middle management and 9-5 hours. You dream of quitting and freelancing full time but there’s one thing holding you back: the company health plan. This is by the far the most common reason I hear from Americans on why they won’t quit the full-time job.

However, there are options available. In this article, we’ll look at several solutions to keep yourself covered without the backing of a full-time employer. Continue Reading