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How to Protect Yourself Financially and Legally as a Freelancer

How to Protect Yourself Financially and Legally as a Freelancer

In this digital age, working for yourself is easier than ever before. Whether it's as a writer, videographer, designer, or other professional service providers, freelancing can be rewarding and lucrative. It can also be frustrating and expensive because you're on your own to protect yourself financially and legally. Knowing how to protect yourself both financially and legally as a freelancer is imperative to avoiding costly business pitfalls.

How to Protect Yourself

1. Know the Law –What is Your Responsibility as a Freelancer and What Are Clients' Responsibilities?

Before you decide to take on a client, do your homework first. The U.S. Small Business Administration offers a list of ten questions to ask yourself before you start freelancing. Among those questions are: Can I do what I do in an ethical, professional manner? Who will be my clients—individuals or organizations? Can I provide a service that someone would be willing to pay for? What types of services and products can I offer the public?

The answers you give to these questions should inform your decisions going forward. As a freelancer, you have a responsibility to provide a service that someone would be willing to pay for, but your client has an equal responsibility to provide payment on time and as agreed upon.

2. Set Up a Formal Contract with All of Your Clients, Detailing Payment Terms, Deadlines, and Any Other Relevant Information

Contracts are the key to avoiding misunderstandings with your clients. A contract should include the following:

a) Proof of ownership of any images, logos, or other materials created by you

b) Client signature acknowledging receipt of final product and proof of ownership

c) Payment schedule—when is payment due? How will it be made?

d) Any additional information about project scope, deadlines, etc.

3. Create an Invoice for Each Client that Includes Their Name, Address, Date of Service or Product Delivery, Description of Services Rendered or Products Delivered (including quantity), Price Per Unit (total), and Total Amount Due

Invoices are one of the most powerful tools you can use as a freelancer. They provide proof of agreement, as well as an invoice for payment. To be effective, invoices should contain the following:

a) Client name and contact information

b) Date of service or product delivery

c) Description of services rendered or products delivered (including quantity)

d) Price per unit (total)

e) The total amount due

f) Payment terms—when is the invoice due, and what are the penalties for late payment?

4. Keep Good Records – Save Copies of Invoices in a Designated Folder on Your Computer So You Can Easily Refer to Them Later If There Is Confusion or Disagreement Regarding Payment

Although you can keep copies of invoices, receipts, and other records in a three-ring binder, the most efficient way to do so is to save them electronically. This will allow you to easily access your records on your computer or mobile device if necessary.

Other ways in which you can protect yourself include:

There are other ways in which you can protect yourself as a freelancer. Some of these ways include:

a. Know Your Rights as a Freelancer – The SBA has a guide on small business rights and compliance. These rights and privileges will help you understand your legal and financial responsibilities.

b. Protect Your Finances by Setting Up a Business Checking Account and Getting a Credit Card with Cash Back Rewards – Because most freelancers work on an independent contract basis, they successfully avoid paying high fees associated with traditional bank accounts and credit cards that come with them. But, this is not something to be taken lightly. You need to set up a business checking account in order to protect your finances, but you also want to make sure that you are getting the most value for your money in exchange for these services. That's where reward credit cards come into play. With cashback credit cards, you can earn points every time you make a purchase. These points can then be redeemed for cash back, gift cards, and more.

c. Get Health Insurance to Protect Yourself in Case Something Happens While You're Working – If you become seriously ill or suffer an injury while working as a freelancer and cannot provide services to your clients, it could severely damage their businesses. That's why you need health insurance that provides coverage throughout your entire career as a freelancer.

d. Make Sure You Have the Right Paperwork for Tax Purposes, Including W-9s and 1099s – If you're just starting out as a freelancer, paperwork can seem overwhelming. But it doesn't have to be. The first step is to set up an employer identification number (EIN). Then, you will need W-9s for any client that's paying you $600 or more per year, as well as 1099s if you've received $20K or more during the tax year.

e. Know When to Ask for Help if It's Not Going Well - This Can Be Another Freelancer or an Attorney Specializing in Freelance Work – Some freelancers make the mistake of trying to go it alone, but this is not always the wisest choice. If you need help, whether it's with billing or another aspect of your business, consider contacting someone who specializes in freelance work.


Freelancing offers many benefits to those who wish to self-employ. However, it can also be a challenge in terms of financial and legal matters that freelancers need to address. Fortunately, all this information has been included in this article, so if you are considering making the jump into independent contracting, you should find yourself well equipped with the knowledge you need.

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