4 Simple Ways to Protect Yourself as a Freelancer
As a freelancer, you don’t have the same coverage as an employee.
And in many situations, your vulnerability could lead you to be taken advantage of.
But with suitable systems in place, you can avoid these risks altogether.
4 Ways to Protect Yourself as a Freelancer
When you’re an employee at a company, you have many safeguards in place.
If you slip up and make a mistake, it’s usually the company that gets dinged.
And should someone come after you personally, the organisation has lawyers and processes that will come to your rescue.
As a freelancer, none of this exists.
Freelancers don’t have the luxury of layers of insulation.
If something goes sideways, it’s their livelihood that’s on the line.
Thankfully, there are ways to protect yourself from certain legal and financial risks.
By planning, you can stay protected and avoid complications. Here are a few suggestions:
1 – Form a Business Entity
By default, every freelancer is automatically considered a sole proprietorship.
From a legal and tax perspective, this means you and your business are the same.
The danger here is that there’s no separation between your business assets and your assets should someone sue your business.
A claimant could technically come after your house, car, or personal bank accounts.
Once you have a few clients under your belt and decide that you’re serious about growing your business, it makes sense to form a business entity to protect yourself as a freelancer.
Not only will it provide an extra layer of legal protection (by separating the business from you as an individual), but it can also offer distinct tax advantages.
An LLC is usually the easiest and best option for freelancers.
2 – Get Everything in Writing
Regardless of what state laws say about verbal agreements, it would be best if you always got agreements in writing.
A well-written contract at the start of a freelance project provides both financial and legal security.
It spells out what work is to be performed, expectations for both parties, how much payment will change hands, when it changes hands, and what will happen if the client refuses to pay.
The easiest thing to do is have a few basic contract templates on file.
Then, before starting any project, fill in the appropriate blanks with the details and send it over to the client.
3 – Use Electronic Signatures
Speaking of contracts, the easiest and most secure way to ratify a contract is with an electronic signature.
It’s fast, easy, and legally enforceable in all 50 states.
They are considered equal with handwritten signatures.
Because of the ease of obtaining an electronic signature, there’s no longer an excuse to operate without one.
This gives you a license to have clients and partners sign everything, including contracts, retainers, and confidentiality agreements.
4 – Stay Away From Problem Clients
- Benun, Ilise (Author)
- English (Publication Language)
- 240 Pages - 03/01/2011 (Publication Date) - HOW Books (Publisher)
In most cases, you can altogether avoid the issue of not getting paid on time if you’re aware of the problem signs.
This is something Ilise Benun, author of the book The Creative Professional’s Guide to Money, encourages freelancers always to be cognizant of.
“Before you even get to the contract and deposit stage, you need to know what the red flags are for the problem clients,” she explains.
According to Benun, there are five basic types of problem clients to be aware of:
- The chaotic client (the person who flakes, shows up late to meetings, cancels, and constantly seems frazzled)
- The clueless client (the client who wants to hire you but has no clue what they want, how much it should cost, or what a realistic timeline is)
- The jerk (the client who is rude, inconsiderate, and unrealistic in their requests)
- The cheapskate (the client who always wants a good deal and is obsessed with saving money and getting a lower rate – even when it means a severe drop in quality)
- The big bore (the client who has a very uninspiring value proposition and operates in a niche that you have zero interest in)
If you can avoid these five problem client archetypes, you’ll significantly reduce your risk and enjoy much smoother partnerships.
Look Out for Number One
Freelancers have no choice but to look out for themselves.
The good news is that you can deploy any number of options to protect yourself as a freelancer.
Whether it’s forming a business entity, writing better contracts and agreements, using electronic signatures, or figuring out a system that prevents you from getting tangled up with problematic clients, there are plenty of proactive steps you can take.
You just have to step up and take action!
Last update on 2021-09-20 / Affiliate links / Images from Amazon Product Advertising API