Freelancing 101 for Graphic Designers

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INTRO TO
FREELANCING 101
Laguna College of Art + Design
Professional Practices
Fall 2014

FREELANCING 101
Pros & Cons

To Freelance or not to freelance?
Before you take the plunge, either in part or in full, make
sure you know what you’re in for. Freelancing can be a
hugely rewarding thing. But it isn’t all sunshine and
rainbows. There is a tradeoff. You have to do everything.
FREELANCING 101 | Pros & Cons

Pros of Freelancing:
Freedom: You choose what projects you take on,
what you charge, who you work with, when you work,
and how much work you do.
Flexibility: You can work the hours you need to, and
create a schedule that works around it. You don’t
answer to a bosses schedule or office hours per say.

Pros of Freelancing:
Vision: You get to choose the direction you take your
freelance company in. If you want to go after a new kind
of client or pivot in the way you do business, you only
have to make up your mind. There’s no one to check
with, no higher-ups to convince. You control your
destiny. projects you take on, what you charge, who you
work with, when you work, and how much work you do.

Cons of Freelancing:
Accountability: Everything rests on you. If you miss a
deadline, or mess up an invoice, or lose a client or botch
a job, it’s all on you. There’s no one else to blame.

Cons of Freelancing:
The Burden: Everything depends on you. With great
power comes great responsibility. You have to land the
jobs, you have to make the contracts, you have to
promote yourself, sell yourself, follow up on late
payments, update your website, manage your social
media. If you don’t no one will. So you better be ready
for the challenge.

FREELANCING 101
The Many Hats

You will have to cover the following
roles in some way or another:
FREELANCING 101 | The Many Hats

The CEO:
!
You have to decide the direction of your company, looking
ahead to foresee changes in the market, and pivoting your
approach to succeed. You have to keep up on your industry
and devise ways to stay competitive and gain more market
share. You have to evaluate your successes and failures to
better steer your company’s future actions.

The Designer:
!
You have to execute the design work you get.

The CFO:
!
You have to oversee all of the company’s finances, keeping
your books up to date and gathering needed information
when tax deadlines come around.

The HR Manager:
!
You have to oversee any subcontractors or employees you
take on to grow your business.

The Salesman:
!
You have to be the person who woos the client, lands the
client, and then leads the client through the project so that
they feel taken care of. If they have questions or concerns
or second thoughts, you have to mediate and negotiate
that yourself. If they don’t like a proof, you have to
persuade or concede.

The Administration Assistant:
!
You have to deal with all of the emails, scheduling,
organization and file management to keep your jobs and
company running smoothly.

The Marketing Manager:
!
You have to promote your company and services in unique
and effective ways. You have to manage your social media
accounts, place ads as needed, create campaigns to grow
business, and more.

It may seem like a lot, and it is. But it’s not
impossible. And to be honest, stupider people
than you have made it work.

Your Business Structure
FREELANCING 101

FREELANCING 101 | Your Business Structure
A Sole Proprietorship:
!
“A sole proprietorship is the simplest and most common
structure chosen to start a business. It is an unincorporated
business owned and run by one individual with no
distinction between the business and you, the owner. You
are entitled to all profits and are responsible for all your
business’s debts, losses and liabilities.”
- Small Business Association www.SBA.gov

YAY! It’s the easiest and cheapest business
structure to establish.
The cost to start one is only as much as the price to obtain
the few licenses and permits you’ll need. Tax preparation is
simple and tax rates are lower. As a sole proprietorship,
your business is not taxed separately from you as an
individual. You only file once, not twice. The tax rates are
also the lowest of the business structures.

Bummer. You are liable.
Because you are technically seen as one with your
business, you are held personally liable for any debts owed
by your business. This even applies to liabilities caused by
your employees’ actions. Your personal property can
potentially be seized to pay for debts.

Corporation:
!
The corporation is a business structure suggested for
established, larger companies with multiple employees, so
this most likely wont be for you. They often have costly
administrative fees and complex tax and legal
requirements. This structure might make more sense to
your company once you get to a certain level of business.

TAXES
!
With Sole Proprietorships, Partnerships and LLCs, all
income taxes are filed and paid as though all income was
your personal income (which in most cases, it is). In short:
With any pass-through business structure, you’ll probably
find yourself getting hosed by the IRS

TAXES Cont.
!
Since you’re not an employee of another company, you’re
required to pay Self-Employment tax, which is the half of
Social Security and Medicare taxes that are normally paid
by an employer, plus the half that you normally pay. Of
course, this is in addition to the normal Federal and State
income taxes that you have to shell out.

EMPLOYEES
!
Will you be hiring employees in the future? With an SP or
Partnership, you are able to hire as many employees as you
want, but your liabilities will increase. It may be a good idea
to “upgrade” to an LLC to protect yourself and your
business from those malevolent employees.

Becoming Legit
FREELANCING 101

FREELANCING 101 | Becoming Legit
1. Obtain Licenses and Permits
To find out what your area requires in the United States
1. Visit www.sba.gov/licenses-and-permits and use their
permit and license search tool.
2. You can enter your zip code and
3. then select “General Licensing” in the drop down menu and
the SBA will tell you what licenses and permits are required,
as well as where to go to fulfill them.

Do I need an EIN/TIN?
Besides the above licenses and permits, you will also need a
Tax Identification Number (TIN) associated with your
business that you can use when filing taxes. This TIN will
either be an Employer Identification Number you’ll need to
apply for, or your Social Security Number.
IF you are a sole proprietor with no employees, you’ll use
your Social Security number as you TIN.

According to the IRS, you need an EIN if any of the
following apply:
• Your business has employees.
• You operate your business as a corporation or a partnership.
• You file any of these tax returns: Employment, Excise, or Alcohol,
Tobacco and Firearms.
• You withhold taxes on income, other than wages, paid to a non-resident
alien.
• You have a Keogh plan (a tax deferred pension plan available to self-employed
people or unincorporated businesses for retirement purposes).

2. Register Your Business Name (DBA)
If you want your business name to be anything other than
your personal name or the legal name of your partnership or
corporation, then you’ll have to register a “Doing Business
As” or DBA with your local government.

DBA Cont.
If you are just using your personal name, ignore this.
Registering your DBA is done either with your county clerk’s
office or with your state government, depending on where
your business is located. There are a few states that do not
require the registering of fictitious business names or DBAs.

According to the SBA, “A DBA is needed in the
following scenarios:
Sole Proprietors or Partnerships: If you wish to start a
business under anything other than your real name, you’ll
need to register a DBA so that you can do business as
another name.
Existing Corporations or LLCs: If your business is already set
up and you want to do business under a name other than
your existing corporation or LLC name, you will need to
register a DBA.”

3. Get a Business Banking Account
If you are going to do any freelancing, do yourself a favor, and
from the get go, use a separate bank account for all your
business expenses and payment deposits.

Why A Separate Business Account?
This will make doing your taxes at the end of the year
so much easier.
You can usually get a free checking and savings
account!

Use your biz account to pay for:
Your salary
Company car expenses
(gas to drive to client
meetings, etc)
Meals with
clients
Meals while you’re
working remote
Internet
Office furniture and
supplies

Use your biz account to pay for:
Software
Phone bill (for phone
you use to call clients)
and other utilities
Ongoing Education
in Design
Word Related
Subscriptions
Computer and
computer equipment
Paying Subcontractors
Hosting and Domains

4. Get Accounting Software
You want to keep all business transactions separate from
your personal, and you’ll also want to log expenses and
income as it comes in, so you don’t have to sort through it all
when tax time comes, and attempt to remember when you
paid for what and why. For most of you, Wave will do the
trick. And lucky for you, it’s free!
https://www.waveapps.com

Wave
1. No more manual entry: Simply connect Wave securely to
your bank account, PayPal or other sources of data.
Transactions appear right in your accounting in no time flat.
2. Professional reports: Generate accurate reports like balance
sheets, sales tax reports, A/R and A/P for yourself, your
accountant or your investors.
3. Invoicing: Wave's tools were built to work together in
perfect harmony. Use Wave's unlimited invoicing and your
data is synchronized everywhere, instantly.

5. Create Template Contracts
Always. Have. A contract. Always. With clients, with business
partners, with subcontractors. Even if they are friends.
Especially if they are friends!

Why Contracts?
You want everything clearly outlined and agreed to so no
one gets hurt, feels taken advantage of, or stepped on.
Without one, you could get royally screwed, and by the
people you least expect it from. We usually have a template
we start from, then edit the scope and licensing and any
other things needed to suit the client and project.

Find Great Contract Templates here:
www.docracy.com
Modify them to fit your needs.

What every contract should include so
you are protected:

A. Project Scope and Price
Be as specific as possible about what the price
of the is and what that includes.

• Deliverables
• How many concepts/pages/designs are included per proof
• How many proofs are included
• Rounds of revisions
• An hour cap of work if it is a flat rate job
• How many in-person meetings are allowed.
• Specify that anything needed beyond the outlined scope
will be billed either at your hourly rate of $xx, or will be
billed at a renegotiated flat fee.

B. Deposit
ALWAYS get a deposit. Usually for any job under $4000, we
take half up front. If you are working with a smaller client,
you can take a third up front. But always get something. It
proves they are investing, that they take the project
seriously, and that they understand standard business
practices. Don’t begin any work until this is paid, and specify
that this is the case in the contract. If they get weird, don’t
work with them. Period. This is not an unreasonable request.

C. Payment Schedule
Include specifically how much time a client has to pay their
invoices, as well as a payment schedule if you have broken
up a flat fee into multiple payments. Also, specify that final
artwork will not be delivered until all outstanding payments
are made. This is the motivation and leverage you have to
get people to pay promptly. It has saved us from having to
chase down payments.

D. Kill/Cancellation Fee and Early
Termination Clause
Outline in the contract how much you are owed if
the project is killed/cancelled after a certain
milestone or phase. This is often times just the
deposit, or the deposit plus a certain amount
depending on how far the project has progressed.

Kill/Cancellation Fee Cont.
We also specify in this clause that no artwork will be
delivered if the project is cancelled in the middle before
completion. We can do this because in our copyright transfer
clause, we specify that only the final artwork will be
transferred to the client, and only upon final payment of the
full invoice. The client will not own any sketches or lead up
concepts that were not chosen, only the one final design, and
providing it has been paid for in full.

Kill/Cancellation Fee Cont.
Be sure that either you or the client can terminate the
contract. You don’t want to be stuck in something if the
relationship or project turns sour and becomes unworkable.
Such a clause might read:
“Termination: Either party may terminate the contract at any time
through written request. The Company shall upon termination pay
Consultant all unpaid amounts due for Services completed prior to notice of
termination.”

E. Copyright and Licensing Details
Outline in the contract how much you are owed if the project
is killed/cancelled after a certain milestone or phase. This is
often times just the deposit, or the deposit plus a certain
amount depending on how far the project has progressed.

What is copyright?
Copyright is the exclusive right to control reproduction and
commercial exploitation of your creative work. Copyright
protects any kind of artwork, including illustrations,
photographs and graphic design.

In your contract, specify:
1. Is the work you’re doing going to have its copyrights fully
transferred into the ownership of the client upon payment
(buyout)
2. Or are you only leasing the rights to the client to use the
design in a limited sense? Limited licensing just means that
you are allowing a client to use a design you make for a
limited period of time or for a limited application.

Example of when a buyout is necessary:
Identity work like logos, media kits, and website that have an
ongoing, exclusive marketing presence for your client.
When you create a logo for someone, you will pad into the
pricing the fact that the client is going to need to own the
work in full and all rights associated because they are going
to use the mark in an unlimited capacity throughout the
course of their brand’s life.

Example of when a limited license applies:
You might create a hand lettered design for a client who
wants to use it on a fall line of t-shirts. Being as they don’t
want/need a full buyout you can offer them a limited license
to use the design for a run of up to 100,000 t-shirts, which
they can print and sell across the next year in the US only.

Licensing usually best applies to this
kind of design:
1. Lettering
2. Illustrations
3. Digital paintings

For limited license always define:
1. Geographic location: domestic? internationally? US only?
2. Time frame: 1 year? 2?
3. Surface: Is it for print only? Print and web? Wearables
only? etc.
4. Price
5. Quantity Limitations if any: 10,000 tees? 20,000?

Portfolio Display Rights / Moral Rights:
Portfolio rights are simply the permission to display the work
in your portfolio after it’s done. If you’re under a work-for-hire
contract, these rights are not automatically granted, so
be sure to check that it is included if someone gives you a
contract of their own. You may need to ask them if you want
to add screenshots of your work or reproductions to your
own website. Moral rights include the right of attribution.
You always want to be sure you are credited for work.

6. Create your W9
A W-9 is the freelancer’s equivalent of the employee W-4
form. Send one of these to every client to make sure your
earnings are credited to the correct Social Security account
and your check goes to the right address. Any client who
contracts you for $600 or more in services in a year is
required by the IRS to send you a 1099 form at the end of the
year stating what they paid you, and having the W9 will help
them fill this out. The 1099 they will send you will help with
settling your year-end taxes as well.

7. Stay up to date on freelance design
business news
Sign up for the e-newsletter from Graphic Design
Blender. It discusses the business side of design.
Some blogs are off the wall, but most are quality
reads you rarely find in design writing on blogs.

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Freelancing 101 for Graphic Designers

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