I read a lot of books, articles and blogs about freelancing.
It’s essential to my understanding of your needs and the issues you face.
Recently, I was doing some research for a new project for Legal Ed for Freelancers.
And I read something that made me slam on the brakes and change course.
Because what I read was so baffling and incorrect that I needed to communicate this to you as soon as possible.
So, I was reading a relatively new book on a specific type of freelancing.
This book has almost all five-star reviews on Amazon.
And, a lot of the advice in the book seems spot on.
But, in the middle of giving some excellent advice on the business side of freelancing, the author swerves into the legal advice area.
And his advice is not only incorrect, it’s dangerous.
Because it could hurt your business and your standing with your clients.
Now, this person is a successful freelancer.
And I’m not discounting the experience of successful freelancers who have been doing this for a while.
But, even though what he recommends may have worked for him, that doesn’t mean it will work for you.
He also may just have been lucky
Which is probably what happened, because he tells his readers that they don’t need to use contracts or form separate business entities.
And that’s just plain wrong.
THE BAD ADVICE
1. Don’t Worry About Contracts
You already know how I feel about contracts, so you’re probably not surprised that I thought my head was going to explode when I read that.
The author believes that contracts are too expensive to enforce. He also thinks you shouldn’t bother your clients with all of that paperwork.
I respectfully disagree.
Okay, sometimes it can be expensive to enforce a contract, but that’s why we have attorneys’ fees and costs provisions in them.
Also, the presence of a contract may deter a client from stiffing you. So, you won’t even have to worry about enforcing it.
You can also use a Replenishing Retainer provision in your contract so that you don’t have to worry about getting paid.
Or you can require a deposit up front.
But you already know all this, right?
If you’ve read all of the articles on Legal Ed for Freelancers, and my posts on other sites, you know all of the ways that contracts help you.
Like limiting the scope of work so you can avoid scope creep.
And that they are your friends and not something to be feared.
And that if you work without them, you’re asking for trouble.
Now, I haven’t written an article about how much contracts bother clients.
That’s because they don’t bother good clients.
Good clients know that contracts protect them just as much as they protect you.
And that they let each of you know exactly what is expected of you.
But if a client is bothered by a contract, that’s a client you don’t want to work with. And you should run.
2. Separate business entities aren’t necessary
Okay, so I haven’t written about business entities on Legal Ed for Freelancers yet.
But that was actually the subject of an article I was working on when this book made me stop in my tracks.
So it’s coming.
And, needless to say, I respectfully disagree again.
The author tells his readers that separate business entities are unnecessary because it’s not likely that freelancers in his industry will get sued.
He also tells his readers that setting up and maintaining a business organization can be a “pain in the ___.”
First, it doesn’t matter whether you’re likely to get sued.
You could get sued.
And you need that separate entity to keep all of your personal assets separate from your business assets.
That way, if you ever do get sued, and you’ve followed the requirements for the business entity (again, we’ll get to this in a future post), you won’t have to worry about a creditor of your business going after your personal assets.
And that will give you peace of mind.
Second, setting up a simple business entity isn’t complicated.
For most freelancers, a single member Limited Liability Company (”LLC”) is all they need.
The requirements may be different in your jurisdiction, but in Florida, setting up a single member LLC is easy and inexpensive.
And going forward, all you have to do to keep the entity active is follow the requirements for an LLC, file a simple annual report online, and pay the annual fee.
Moreover, in addition to the legal protections and peace of mind, running your freelance business through a separate business entity also gives you more credibility with your clients.
And this is a big deal especially if you are a new freelancer.
HOW TO KNOW WHEN YOU ARE GETTING BAD ADVICE
Okay, so we know that this was bad advice. But how can you spot it in the future?
Sometimes you’ll have no clue.
You’ll read a book or listen to a presentation or podcast and the bad advice will hit your eyes or ears, and you won’t see it for what it is.
And the reason for that is because the person has authority and is an influencer.
In other words, they’re the real deal.
They’ve done something amazing, produced some excellent content, or have grown their business to six or seven figures.
So you should listen to them.
But don’t listen if that person is giving legal or tax advice.
That is unless they have an accounting or law degree, and have experience helping freelancers and other small business owners.
Because many times, if not most of the time, it will probably be bad advice.
And because they aren’t a lawyer or accountant, you won’t know whether the advice is accurate or not.
They may swear by their advice because it worked for them.
But that doesn’t mean it will work for you.
And it can cause big problems for your business.
Like opening you up to personal liability because you didn’t form a business entity.
Or having scope creep cause your profits to decrease significantly.
So if you need legal or tax advice, talk to a lawyer or accountant.
And don’t listen to bad advice from non-lawyers.