In many ways, freelancing is similar to owning your own business. You get to set your own hours, pick and choose the types of projects you want to work on, and enjoy the flexibility of working wherever you’re most comfortable. However, there may come a time when you’re ready to take your freelance work to the next level — and delve into business ownership. As a small business owner (SBO), you can take on larger projects, hire a team of employees or independent contractors, and focus more of your time and energy on growing your actual business.
If you’re ready to move from freelancer to small business owner, be sure to complete these five steps to make the transition as seamless as possible!
Step 1: Make a Plan
As a freelancer with months or years of experience up your sleeve, you’re already one step ahead of an aspiring business owner with no prior history of self-employment. However, you still need a business plan when transitioning from freelancer to SBO — no matter how long you’ve been freelancing for. Your business plan should discuss your office location, mission statement, financing needs, and the types of products or services you’ll be offering.
Learn how to write a basic business plan (which you can do easily enough). Or, you can check out online resources like LivePlan, $100 Startup, Bizplan, Copyblogger, and Enloop to find templates, tips, and advice for entrepreneurs in the making.
Step 2: Name Your Business
Though you may have been freelancing under your legal name, starting a small business typically requires you to register a formal business name with federal, state, and local agencies. However, specific requirements vary depending on where you live and how you structure your business, so you’ll need to familiarize yourself with these rules before moving forward.
In an article from USA Today, Benjamin Pimentel shares the ins and outs of choosing a unique name for your new business and registering it with the appropriate agencies. If you need help choosing a name, however, free online name generators can help to get your creative juices flowing.
Step 3: Know Your Legal Requirements
If you’ve been freelancing as a sole proprietor, you’ll need to decide whether to upgrade to a corporation or limited liability company (LLC) when transitioning to small business ownership. Sole proprietorships offer no form of liability protection, but corporations and LLCs do. As such, these legal entities are much more common among small business owners.
When structuring your business as a sole proprietorship, corporation, or LLC, keep in mind that the legal entity you choose will affect your tax obligations as a business owner. Therefore, it’s important to seek financial and legal advice from a skilled accountant and/or attorney if you have any business formation questions that need to be addressed.
Step 4: Open a Business Bank Account
As you transition from freelancer to SBO, it’s also important to open a separate bank account for keeping track of your business-related expenses and earnings. You’ll need an Employer Identification Number (EIN) in order to do so, but applying for one is as simple as completing an online application and providing your legal name and Social Security Number (or Individual Taxpayer Identification Number).
To open a business bank account, you’ll also need:
- Any applicable business licenses and permits
- Business owners agreements, if applicable
- Formation documents, including the articles of organization ( LLCs) or incorporation (corporations)
Step 5: Get Paid
In addition to opening a business bank account, an online invoice maker can help you to keep track of outstanding balances, prepare, customize, and send invoices to clients, and get paid in less time. Receiving compensation for your hard work is incredibly important, and you’ll need to create a clear invoicing process before you start doing business.
A lot goes into starting a business, but the transition isn’t so scary when you’re already a seasoned freelancer. So, what are you waiting for? Get out there and make the switch from freelancer to small business owner!
And if you’re searching for a professional coworking space for your newly launched business, join the growing UNOVA Coworking community!
Questions or comments? Have any additional tips or stories to share? Reply below or reach out to Lance Cody-Valdez at free-lance-now.com.