Are you starting a freelancing business? If so, you want to make sure that it’s legit.
Or maybe you already have clients and are making money but your significant other still sees this as your hobby for “pocket change,” and you want your business to be taken seriously.
Well, these are 3 things I recommend you do ASAP to set your business up and make it as legitimate as possible.
In order of complexity from least to greatest:
1. set up a separate email
2. apply for an EIN
3. open a separate bank account and PayPal account
Set up a separate email
The first and easiest thing to do is set up a separate email address. If you have a website, you can hook an email up to your domain. Sometimes that costs a little bit more money, but sometimes it can be folded into the cost of your web hosting.
But you don’t have to spend money to have a work email address. You can get a new Google address, which is what I recommend over Yahoo, Hotmail, iCloud, or any of the other free email services. Google is the most easily recognized and most likely to get through to peoples’ inboxes.
You can easily arrange your new Google email to either filter into your regular inbox or forward to whatever email you actually use. That way you can check it on your phone or whatever you want.
Make your email one that’s easy to remember and type in. You don’t want one that has a lot of double letters or funny spellings. You want it to be straightforward and professional, the kind of thing you might include on a resume as your contact email.
Apply for EIN online
The second thing I recommend is that you apply for an EIN. If you’re scratching your head asking, “EIN what??,” don’t worry, it’s not complicated.
An EIN is an Employer Identification Number that is issued by the IRS. You can go to the IRS website or you can Google it. An EIN is free to get, and doesn’t take very much time. Having an EIN designates your business as an entity, which is what you want if you’re a sole proprietor.
Being a sole proprietor means that you’re not incorporating, which is what most of us do when starting a freelancing business. Some people get an LLC, but I’d been in business for 10 years before I did an LLC. I was a sole proprietor before then. And I had and used my EIN the whole time.
Include your EIN on your invoices. You can use it when you’re registering for things. It’s a replacement for your social security number. You can keep all your business stuff tied to the EIN and all your personal stuff tied to your social security number. And so you don’t have to give out your social security number to clients if they need that to process their payments.
And it feels very official. You’ll have a digital letter from the IRS. It’s not that big of a deal, but it can be really helpful in terms of feeling like you are an entity, you’re a business.
Open a separate bank account and business PayPal account
Finally, your business money has to be kept apart from your personal funds when you’re starting a freelancing business. You should set up a separate bank account and a separate PayPal business account.
Having PayPal is a good option. It doesn’t cost any money to create, and it gives you the ability to generate invoices. Now, PayPal does take their fees out of invoicing. As of this writing, it’s 3% plus $.30 per transaction. But, payment processors are all basically the same. They all take around the same amount per transaction; it’s how they make their money as businesses.
So, PayPal isn’t the worst way to send invoices to your clients, especially if you want to get paid quickly and accept different payment options from your clients. You should use your work email address to get your business PayPal account set up, and have all of your work transactions run through your business PayPal account and/or your separate bank account.
You want to make sure that your work expenses and income aren’t going through your personal bank accounts. Have all of that money separate, and then you can transfer. You pay yourself a paycheck out of your business accounts, or you can transfer money from your PayPal account into your personal PayPal account or to your personal bank account.
You can give yourself the money, but you want all of your income and expenses that have to do with your business to be separate. They need to have all of their tracking separately.
You don’t want grocery bills, gas bills, and babysitting money coming in and out of your work account. Only work things. Any charges for software that have to do with your business, put them on a business credit or debit card or use your business PayPal account to checkout.
You don’t necessarily even have to open up a credit card; you can get one through PayPal, or through whatever checking account you decide to use for your business account.
When I was starting a freelancing business, I was a sole proprietor, and just used a free separate personal checking account that came with a debit card for my work expenses. I also opened another credit card that I only used for work stuff.
For more info about the business aspect of freelance writing, see my post Make Money Writing: Projecting Your Income.
If you need help getting great writing samples for your portfolio, I have a course called Clips Camp.
It’s a three-week course for new and advanced-new freelance writers who want to get started with high-paying client work. If you’re on Upwork or Fiverr and miserable, if you haven’t even done anything to get started and you don’t know what the first step is, then Clips Camp is for you.
I teach you how to put together a solid portfolio of writing samples that position you as the kind of awesome writer that awesome clients want to hire. If you want in on that, or just want more information, go to clipscamp.com.