Have you contemplated starting a freelance business but you don’t know where to start? Do you wish you had a side hustle to earn extra income but the start-up process is confusing?
In this article, I will take you step-by-step through the process of starting a freelance business in the United States so you will be set up for success.
Starting a freelance business is one of the best ways to live the digital nomad lifestyle, make sustainable long-term income remotely, and pay for your travels.
You become your own boss. You can harness your creativity in all aspects of your business. You can set your own rates and determine the direction of your company. You can be strategic about the jobs you take on in order to maximize your travels, reimbursement or payment for your travel, and tax deductions for your travel expenses.
But starting a freelance business also comes with challenges.
The steps to begin a freelance business are fairly simple but not always easy. Setting up your business the right way from the very beginning will help you rise above any challenges. Just remember, there is no guaranteed process for success. At least, in the beginning, it will take a lot of research, planning, hustle, creativity, and perseverance.
Disclaimer: I am not a lawyer or an accountant. This article is provided for general information purposes only and is not intended to constitute legal, tax, or other professional advice. You should obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. Deskless Nomad makes no representations, warranties, or guarantees, whether express or implied, that the content in the publication is accurate, complete, or up to date. Please see the full Deskless Nomad Disclaimer.
What is a freelancer?
First, let’s make sure we are all on the same page.
A freelancer works for a number of different clients rather than one specific company. They work for themselves and contract out their skills.
A freelancer is self-employed and therefore must arrange for payment of their own estimated business taxes as well as personal taxes. Luckily freelance businesses can take advantage of self-employment tax deductions that aren’t always available to workers employed with companies.
Should you become a freelancer?
Freelance work is one of the BEST WAYS to live the digital nomad lifestyle. To learn more about why you should become a freelancer to live as a digital nomad or spend more time traveling check out my article for further information.
But freelance work is not the only way to live the digital nomad lifestyle.
You can easily find remote jobs that give you more freedom to travel. You can also ask your boss to go remote. If you are just starting out as a digital nomad it may be easier to start with an employed remote job so you have a steady, reliable income. You can then work on slowly building up your side hustle freelance business in the meantime.
What type of freelance business should you start?
Your skills, education, and past work experience will be the primary determinants of the freelance services you are best equipped to offer.
Additionally, you will need to figure out what companies or clients need but have to outsource. Companies may have short-term projects or goals they need to accomplish but either can’t find the talent or can’t afford to take on a full-time employee.
If you are interested in starting a freelance writing business, you can improve your chances of success and make more money by having a specific writing niche. Check out my article on how to choose a freelance writing niche.
Before you start your freelance business you will need to do some research. It is important to know if there is a demand for freelancers in that line of work. You’ll also want to have some idea of what kind of money freelancers make for that service.
One good place to start looking for your freelance service is job boards. Look at what roles companies are looking to fill and think about what short-term projects could be accomplished in a freelance role.
If you are a digital nomad or plan to work remotely while traveling you’ll want to keep in mind how differences in time zones may impact your working hours and your availability to clients. These restrictions may dictate what type of freelance business best suits your lifestyle.
What are the different types of freelance businesses?
If you haven’t decided on a freelance service type yet you are in luck. In the post-pandemic economy, the options are limitless as long as you think creatively.
Some of the more common freelance businesses include the following:
- App developer
- Digital Marketer
- ESL tutor
- Financial consultant
- Graphic designer
- Interior design
- Life coach
- Industry-specific consultant (medical, tech, engineering, law, etc)
- Medical biller
- Medical scribe
- Property management
- Quality Assurance
- Social media manager
- Talent agent
- Talent recruiter
- Video Editor
- Virtual Assistant
- Web developer
Even jobs that you would normally think of as employed positions can be marketed as a freelance service. Areas like project management, quality assurance, human resources, and essentially anything you can think of can also be the basis of a freelance business.
How much do freelancers get paid?
Being a freelancer means you can set your own rates. Some industries require more training and education and will therefore command higher pay.
Your services and area of expertise will play a large role in how much you can charge.
It is also important to keep in mind the current market rates. If you set your rates too high you may not get much business. If you set your rates too low you may not make enough to cover your living expenses.
A good place to start your research into typical freelance rates for your services is freelancer.com. You can see what rates other freelancers are proposing for services. Make sure to adjust your rates accordingly as your business and skills develop.
If you are a digital nomad it is important to consider your budget for the digital nomad lifestyle when setting your rates. Once you know how much you need for your monthly travel expenses you can calculate how many hours you need to work and your hourly rate.
How much does it cost to start a freelance business?
If you are a digital nomad and doing your freelance work from a laptop your start-up costs can be limited to the initial steps involved in setting up an online business. You can do many of the start-up tasks yourself and save money. As you develop your business it will make more sense to invest in your business and get professional help with these tasks.
While your start-up costs will vary slightly depending on your location and whether or not you outsource them, you’ll want to keep the following costs in mind:
- Business license and registration
- LLC filing
- EIN (free if you apply yourself)
- Business cards
- Accountant and/or accounting software
- Invoice software
- Setting up a business website (web hosting, domain name)
- Domain-based email
- Business bank account fees
- Business credit card fees
- Setting up a legal contract template
- Attending conferences or business events for networking
- Laptop upgrade
- Internet access, VPN, cell phone service, and anything else you need to work remotely
- Coworking space fees
- Self employment taxes (read our tax guide for digital nomads to plan ahead)
STEP BY STEP GUIDE TO SETTING UP A FREELANCE BUSINESS
1. Start by writing down your business plan
Before you start a freelance business the very first thing you should do is write a business plan.
Think of a business plan as a creative brainstorming process to make you articulate your business and income goals and how your business will function and make money.
You don’t have to get super detailed or fancy in the beginning. You can add to this as you go along.
Things to include in your business plan:
This is your elevator pitch. Imagine you are at a dinner party and someone asks what you do? Describe what your business is about in 1 to 2 sentences.
An easy way to think about this is to answer the following:
- Who you are and what you do
- Who you serve and how you serve them
If you are a freelance writer, check out my article on how to choose a freelance writing niche to help you with your executive summary. Here is an example freelance writing niche from that article that works as an executive summary:
“I am a freelance writer who writes blog posts and landing pages to help climbing gyms attract new customers and increase membership sales.”
Are you going to operate and register your business under your personal name (first and last name) or a branded name? In the section down below I will discuss in further detail how to choose and register your business name.
What address are you going to use for your business location? If you are a digital nomad you may consider using a virtual mailbox service that can scan and turn your mail into PDFs that you can access online from anywhere in the world.
Products and Services
What product or service will you be offering?
Who is your target client? Who do you ideally want to work for? Now think out of the box about what other types of potential clients would benefit from your services.
What will you charge for your services? Will you charge by the hour, project, or offer both options?Will you offer service packages with different rates?
How many projects or clients will you need to meet your monthly income goals?
What is your business strategy and how do you plan to make money? Will you have more than one income stream?
- “I will market my service packages to small businesses in the industry and charge for short-term projects that can be completed within 1-2 weeks.”
- “I will charge a monthly retainer to complete 1-2 services per month on an ongoing basis.”
What is your income goal?
- “I will make $dollars per month within 6 months and $dollars within 12 months..”
What other business goals do you have?
- “I will complete my business website in 1 month.”
- “I will send 5-10 marketing and cold pitch emails each week.”
- “I will attend X conference this year to network and meet more clients.”
- “I will complete X certification to offer more advanced services.”
- “I will scale my business in 6 months and hire a virtual assistant.”
Industry and Competition Research
Who is your main competition? What has worked well for them?
- “My biggest competition is other freelancers in the industry. Finding a specific industry niche helps them get higher-paying jobs from quality clients.”
Identify your strengths as well as areas of your business or skills that need more development or research. Make a plan to address these.
- “My business would benefit from more knowledge about SEO writing to boost traffic to my website. I will take an online course in SEO writing.”
- “My business would benefit from expanding my digital marketing and learning more about web development.”
How will you market to potential clients? Will you find them advertise, find them through research, or on freelance job boards?
- “I will google small businesses in my city in the industry and contact the business owners to pitch my services.”
- “I will market my services on Pinterest, Facebook, and TikTok while developing my website and blog using search engine optimization.”
How will you persuade clients to hire you?
- “I will create a media kit detailing my services and highlight past brand and company partnerships.”
- “I will develop a project portfolio to share on my website, LinkedIn, and freelance websites.”
How will you develop customer loyalty and get more referrals?
- “I will create an onboarding packet to share when clients hire me. This will detail how to reach me, my work hours, how to track project progress, where the project documents are located, and when to expect project delivery.”
- “I will offer discounts on future services for client referrals that result in a new contract.”
2. Choose your business name
If you plan to use a branded name other than your personal name you will want to do a little research first. Keep the following guidelines in mind:
- Make sure you choose a name that makes clients trust and respect you
- Check to make sure the domain name or a variation of it is available for your website
- Check social media handles for your business name (search Facebook, Twitter, Youtube, Pinterest, and any others you plan to use to market your services)
- Make sure your business name is easy to spell and remember
- Make sure your business name does not already have a trademark
3. Choose your business structure and form your business entity (i.e. register your LLC with your state)
If you are a digital nomad and forming your freelance business alone you will most likely choose to have either a sole proprietorship or an LLC.
Sole proprietorships are the easiest to form and allow you to start work immediately. Beware that with a sole proprietorship there is no distinction between the business owner and the business. This means that if someone sues your business your personal assets are fair game for the taking.
Most freelancers start off as sole proprietors and grow into an LLC.
An LLC (limited liability company) provides legal protection so that if your business is sued or incurs debt, your personal bank account, investments, properties, and other assets are protected. An LLC business structure can also qualify for pass-through taxation, meaning the profits earned can be passed through to your personal income without facing corporate taxes.
You can be your own registered agent and file your own LLC or you can use an LLC filing service and have them do it for you. I recommend checking out the Forbes review of the best LLC filing services.
If you are a digital nomad traveling abroad you may consider registering your LLC in a state like Wyoming or Nevada where there is no corporate or individual income tax. You should consult your attorney and/or tax professional about the best choices for your situation.
4. Apply for an EIN from the IRS (or not)
An EIN is a United States tax ID for your business.
Some LLC filing services will apply for an EIN for your business for an additional fee.
You can also apply for an EIN yourself for free on the IRS website.
You will need to wait until your LLC filing has been completed before applying for your EIN. Keep in mind it can take several weeks for your state to approve your LLC before you can apply for your EIN.
Here is why you may NOT want an EIN:
According to the IRS, a sole proprietor does not need an EIN, even if you are operating your business under a name other than your legal name.
If you form an LLC for your freelance business and you are the only member of the LLC you also do not necessarily need an EIN. This Nolo article provides a good explanation of whether are not a single-member LLC needs an EIN and what that means for your business taxes.
Here is why you may NEED an EIN:
Some clients may require an EIN to send payments for freelance services to an LLC.
If you want to open a bank account in the name of your business, you will need an EIN.
Keeping your personal and business accounts separate is generally a good idea. Not only does it help you keep track of your income and expenses, but it also helps provide separation of assets in the event of a lawsuit or debt collection.
5. Register your business name locally
If you operate your business under any name other than your legal name then you may need to register your business name locally as a DBA (doing business as).
Depending on where you live you may need to register your business name with your city, county, and/or state. Your local Secretary of State’s website can guide you. The Small Business Association website also provides information on registering your business.
Keep in mind that filing a DBA (doing business as) is not a business structure and provides no protection of your personal assets. It just means you are using a name for your business other than your personal name.
6. Get a business license or permit required in your city/state to operate a freelance business
Your city and/or state may require a business permit or license to operate a freelance business. Some cities have strict rules about running a business from a residence and others require a home-occupation license. Unfortunately, they sometimes don’t make a distinction between an online business and a business run from a residence. This means if you are a digital nomad and do not have an office address they presume you are running it from a “residence” even if you aren’t living in one place.
You’ll also want to make sure you don’t need a sales tax permit.
The easiest way to figure out whether you need a business license and where to apply for one is to ask your accountant.
If you don’t have an accountant you can find information on your local Secretary of State’s website. The Small Business Association website also provides information on business licenses.
7. Open a business checking account and credit card
In order to open a business checking account in the United States, you will need an EIN and a business license.
A business account is an important part of keeping your business income and expenses separate from your personal income and expenses.
Business credit cards also have advantages. You can easily download your business expenses from the card to assist in tax preparation and help you avoid missing eligible tax deductions. Choose a business credit card with travel rewards and a sign-on bonus and you can earn free travel.
8. Start tracking your income and expenses
You will do yourself a huge favor if from the very first day you track your income and expenses with a software program.
An organized system for invoicing, income, and expenses is the key to making sure you get paid for your work and don’t miss out on valuable tax deductions. Make sure to learn about taxes for digital nomads to help in your planning.
If you have no idea what features or services you will want or need in an accounting program, you can start with a free one like Wave. With Wave, you can track your income and expenses and send out invoices for free. For a small fee, you can also accept credit cards and direct debit payments.
Once you have used a free accounting software program for a few months you will have a better idea of what you will need for your business. You can then compare Wave with other services like Quickbooks, Freshbooks, MYOB, and Xero.
When you are first starting out you can also choose to keep it super simple by creating a spreadsheet in excel or google sheets and creating a fillable pdf invoice.
Here are some important expenses you will want to keep track of:
- Startup expenses (business license and registration, etc.)
- Office supplies and services
- Advertisements and marketing
- Business insurance
- Bank fees
- Depreciation of equipment (laptop)
- Legal and professional fees
- Travel business expenses
- Coworking space fees
- Retirement contributions
- Utilities, phone, internet, VPN
- Tax payments
9. Choose how you will receive payments for your work
Some accounting software like Xero, Wave, and Freshbooks allow clients to pay you by bank transfer or credit card.
You may also want to consider other payment services like PayPal, Wise, Revolut, WePay, or Stripe especially if you plan to work with companies around the globe. Make sure to update your business account settings with your business name, logo, and email address to look professional.
10. Set up your project management tracking system
In addition to having a system for tracking income and expenses, and creating and sending out invoices, you may also want to track your projects, contracts, and invoices in more detail. Airtable, Trello, Wrike, and Paymo are all great options for a small freelance business.
Information to track in your project management software may include:
- Client name
- Project description
- Proposal sent
- Proposal contract signed
- Welcome packet sent
- Due date
- Revision due date
- Date Invoice sent
- Invoice Amount
- Hours spent (or billed)
- Date paid
- Payment method (PayPal, credit card)
- Follow up thank you email sent
- Referrals received
- Thank you email sent for the referral
11. Determine your fees for services and create a media kit
In your business plan you listed the services you plan to offer. Now is the time to think about what to charge for your services. Will you charge by the hour, by the project, by the service package, or by the week/month for ongoing services?
You may have no idea what you want or should charge until you have completed your first few projects and that is ok. Just make sure to adjust as you go.
In the beginning, you may have more success gaining clients if you price your work by the individual project rather than an hourly rate. You will need to estimate how long it will take you to complete the project. With a total project cost, your clients won’t perceive that you are taking longer just to get more money.
Consider creating a digital media kit (pdf file with logo and branding) that outlines your services and prices.
If you prepare your media kit ahead of time, you will be ready to immediately send it to prospective clients. A media kit outlining your services will also help you to prepare project proposals faster.
12. Create a legal contract template to provide to clients
Once your client has accepted your proposal you should consider signing a contract. While you can always agree to do work without a contract if the client decides not to pay you on time (or at all) or tries to expand the scope of work with increasing payment you will have little recourse to argue.
Digital nomads who plan to apply for digital nomad visas will need signed client contracts for any digital nomad visa application.
A legal contract protects both you and your client. Important components may include:
- An outline of the scope of work
- Timeline for completing work
- Revisions or alterations included
- Rates for your services
- Payment method and date
- Late fees for untimely payments
- Any intellectual property rights to your work and whether or not your work can be reproduced or copied
- Confidentiality provisions
You can download a FREE freelance contract prepared by a business lawyer at ASelfGuru.com.
Wise also has a FREE downloadable independent contractor agreement you can use.
13. Create an Onboarding Packet
Once your proposal has been accepted and the contract has been signed you can send your new client an onboarding packet that you created ahead of time. This is different from your media packet outlining your services and rates. The onboarding packet should contain the pertinent information related to working with you:
- Intro (how excited you are to work with them)
- How you work and communicate (Slack, Honeybook, email)
- How to reach you (email, phone, WhatsApp)
- When to reach you (i.e. office hours and response time)
- How to schedule a call
- Project Timeline
- List of resources you need from the client
- Where the project and corresponding documents live (including copies of the proposal and contract)
- How to request revisions or submit feedback
14. Set up your business website or hire a freelancer to set one up for you
A professional website will get you more clients, boost your credibility, and provide constant advertising.
If setting up a website sounds overwhelming then just go to Fiverr or UpWork and pay someone to do this part for you. Your website can be as simple as an “about me” type site that details who you are, what services you offer, and how to contact you. You can also include a portfolio, past clients, and client testimonials as you get more work.
Or you can get fancier and include a blog on your website to bring more organic search traffic (and clients) through regular content (blog posts) and on-page SEO (search engine optimization) tactics.
15. Get a domain-based email address or google address
Once you have set up your website, get a domain-based email address. Alternatively, you can create a google email address with your business name. Consider creating a professional email signature that includes your website address, contact info, and any social media icons for your business, if applicable.
That’s it! You’ve set up your freelance business to get one step closer to living the digital nomad lifestyle. Now it’s time to market your freelance services, find freelance jobs, and generate income!