Turning My Freelance Copywriting Career Into a Business Entity

by Erik Neilson 1 replies
Hey all,

To make a long story short, I've been freelancing as a copywriter for about ten years now, and it has become clear that it's time for me to step things up. I've been landing a lot of private clients (re: not working through as many agencies contract-wise anymore) and have been told by mentors that it's time to stop being "erik" and start being a company.

I have a name, a general idea of where the business will go and an idea of how it will be taxed (llc taxed as s corp) AND i'm meeting with a new accountant tomorrow to discuss all of this. My question to you all is: what do I need to keep in mind as I move forward with this? I will still be a sole proprietor for all intents and purposes (i may contract out employees eventually).

Thanks!
#copywriting #business #career #copywriting #entity #freelance #turning
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  • Profile picture of the author Jason Kanigan
    I am not an accountant or an attorney and this is not "professional advice."

    I've run my biz through an s-corp since 2012 and it is a pass-through entity. Think of it as a pipe your revenue flows through so you can be taxed at a lower rate.

    Making this shift isn't as big a deal as you may be making it out to yourself. Operationally you will still be invoicing, hiring 1099s as needed, and doing the work. An employee is someone you require to do things "your way" and on "your schedule", so if you have people doing tasks on their own schedule (with a deadline, of course) and as they want to do it (you are allowed to provide guidelines) then you're OK with 1099s.

    You have an accountant which is good: companies require a 'real' accountant, so no more going to H&R Block ;-) It'll cost you a little more but on the other hand if you have a good accountant who understands home-based businesses you should be able to claim more deductions.

    You have probably already been doing this, but make sure you keep all your receipts. If you have a view to a profit by doing something, it's likely an expense. Buy a business book? That's an expense. Buy office supplies? Those are expenses. Get a new desk chair? Also an expense. These things add up over a year. Coaching and training you get--including courses you buy--are also expenses.

    The game you are in is to earn as much revenue as possible, then set as high a level of expenses as you can against it so that your taxable revenue is minimized. Naturally you want this to be completely legal, and your accountant should know what normal ranges there are for expenses. The IRS, I'm sure, has tolerances for expense categories. If "meals and entertainment" becomes an expense total that is 30% of your revenue, that's probably going to flag them for auditing. So make sure your accountant knows what ledger accounts to put different expenses in, and isn't doing huge lump sum categories.

    Contrast this with the employee game, which is to earn as much as possible and then pay taxes on it. But even as an employee (though most don't know or do this) you can apply some expenses against income to reduce taxable revenue.

    You are good up to $100K or so in revenue and then you will likely have to consider going to a c-corp. Don't get all hissy-fitty about details and balancing everything to the last half-penny. Your tax return tells the story of what happened over the year and isn't a microscopic record to be studied by future generations ;-)
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