Bars
FREELANCER'S
STARTUP KIT

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I wrote the original article when the pictured mobile phone was the latest technology. I have made some updates. Some elements may be slightly dated but the document is essentially valid today. No information I present is a substitute for advice available only from professionals in their area of expertise (i.e. accountants, insurance brokers, lawyers, etc.)

Are you are considering (or have just started) a freelance career and have questions? This should answer many of the questions you may have and address issues that concern you. The prospect of leaping into the abyss of the unknown is both exciting and frightening. You may have many questions about what you should do next. I hope to answer many questions based on my own experience and that of fellow freelancers. Whether you went freelance by your choice or not; if this is an interim "between jobs" job or long-term career move there are several issues you will need to deal with in the coming months.

Table of Contents

Where do I get work?
Do I have to file taxes quarterly?
What can I deduct?
How much should I charge?
What should I call my business?
Do I need a business license?
Do I need insurance?
How do I collect debts?
Do I need credentials?
What communication gadgets should I use?

Where do I get work?

Homeless
Go down to the job site and wait with other technicians until a crew-seeking producer drives up shouting, "I need a sound guy, camera guy, grip, and a PA! Get in the truck."

Sound silly? We are not much different from day-hire construction workers except you wait by the mobile phone.

By far the most superior method for getting work is "word of mouth." By working as much as you can and meeting many colleagues and clients word will get around that you are a skillful, reliable, dependable, flexible, friendly, and valuable member of any crew. This is a slow process and requires patience and fortitude.

Since you are already looking at this web site you have taken a good step to find some work. We have a large client base and depend on freelancers to supplement our projects. If you qualify please go here to let us know about you.

As much as we would like to, we can't get you work everyday. You have to go out and find more clients. Under what rock are they hiding? If you are leaving a full-time job be sure to grab the Rolodex on the way out. Try as you might but you can't steal clients without it backfiring on you. You did make many personal contacts in the course of your work. Touch base with the best ones and let them know you are working independently now.

Be prepared to make some cold-calls. It's not a pleasant experience but it might pay off. The pressure is less than trying to land a full-time job and be prepared for rejection. Make your call polite and brief, be prepared to follow up with a resume and demo tape/link.

Find the right person to call. Once you determine who hires crews call that person. It's that person's job to field your call. They may have something going on in their operation and can't talk to you at length. Find out when's a better time to call.

When do you call? When you are not desperate ... if you are, it'll show. Best time to call is late morning. Most feeds and other deadlines are in the late afternoon. The "proximity" law may apply and there is a small chance they'll book you right then and there if they have a situation just pop up.

Here are some weird situations that have happened to me:

I was pursuing this client for some time and was eager to get on one of their productions. They use freelancers often and must have been hounded by many. I figured this out because whenever I called they bruskly said, "no work today, bye." I can't remember if I ever worked for these folks. Guess I never called on a day they had work or on a day I had open. Don't pester people, they'll grow to resent you and never hire you. Just touch base once in a while. Let them know what you have been doing recently. Email is preferred by some because it's less disruptive.

We don't mind most messages. It's good to know who's still out there and available. However, this one person worked my third nerve when they called every week demanding work. "I've got Monday through Wednesday open, what do ya got for me?" was what they would ask thinking I would shovel work to them right away. Unfortunately, we can't control the flow of assignments any better that anyone else so you will be called when there is work.

A client of ours had an even worse story. This person was polite in making contact and briefing them on their capabilities. But several days later they called and said, "when do I start?" Must have thought they had the job in the bag.

Do I have to file taxes quarterly?

Yes. Well, maybe. This is by far the greatest fear of nearly everyone I speak to who has gone independent. Fear not. What this means is that since you no longer have an employer paying your tax-withholding you have to pay it every three months. The due dates for Federal payments are April 15, June 15, September 15, and January 15. States require quarterly payments too on roughly the same schedule.

You usually pay to the same place you send in your annual tax return. The Federal form is called Form 1040ES, you can find many forms here. Once you make your first payment they will setup an account and send more forms. If you don't do your own taxes please consult with your accountant now to see what you should do.

How much do I pay? Depends. You should pay 1/4th of of the total tax each quarter. If you just started you have to take a wild guess on how much you think you might earn this year. Do a dry run on a blank tax return from last year and determine what your tax will be. Remember, you now have to pay "self-employment" tax. That is all of the social security tax that your employer used to pay half for you.

How do I pay? With your own money. You never saw what your old employer used to pay unless you looked way down at the bottom of your pay stub. And they withheld every pay period. Now you have to come up with that money (and some). The best thing to do is set aside a thousand dollars or so (more if you're very busy) to make the payment. It's very tempting to spend that money when you get your hands on it. If you resist you won't have to dig in the seat cushions for change to make the payment. Some people setup a special account and deposit a client's check there every so often (i.e. every 4th check).

Of course you don't have to pay each quarter. You can wait until it's tax filing time and pay the full amount. You'll have to have the money then and now it's four times what you would pay each quarter. You will also have to pay an additional amount for interest and penalty because you under/didn't pay each quarter.

If you are working part-time somewhere you can ask your employer to change your W-4 to withhold more each period. This way you've met the tax obligation and don't have to pay each quarter. If you are filing with your spouse you might be able to have more withheld from their pay to cover your tax.

In late January you should receive a Form 1099 from everyone who's paid you more than $600 (including Alt Gobo) during the previous year (except if you are incorporated). This shows how much you earned from that client. You must report that income but I strongly urge you report income from those who didn't issue a 1099 (either under the threshold or simply forgot). Reason being is that you may have to show your past tax returns to someone in the future to prove you do make money, like a mortgage loan officer. The IRS may also want to know how you can afford such a nice car on such low income.

What can I deduct?

You can deduct from your gross revenue every legitimate business expense. You will be taxed based on what's leftover. The key here is documentation. Keep accurate records (and receipts whenever possible) of every transaction. If your business costs more than it makes than it may cause the IRS to think you have an expensive hobby after a few years.

Unless you have a large array of gear your largest expense will probably be transportation (mileage, tolls, parking, etc.). You can try to keep track of total operating costs and what percentage is for business if it's more. You can also have your company own the car and pay your company back for personal use, if any. It can get very complicated so consult your tax advisor for guidance.

If you have a home office you can deduct office expenses (even the space). Warning: the home office deduction (whether you rent or own) is a big complicated can of worms. I've been told to avoid this option by more than one tax advisor.

Here are some other expenses you can deduct: long distance calls (phone line if separate for business), mobile phone, business machines (computer, fax, etc.), office supplies, postage, tools, supplies, accessories, batteries, maps, etc.

How much should I charge?

One of the most difficult decision any business person faces is pricing. My recommendation is to find out what the "going rate" is and charge that much (plus or minus a small amount ... depending). Going rates change due to market conditions, client type, and position.

One method to set a price is the "wince factor." If you are talking to a potential client and you quote a price they think is too high you might detect a wince. If you get an "OK" you just hit or came under their limit. If they continue to wince as you keep lowering your price well below the going rate you don't want to work for these amateurs any ways.

Pricing is a delicate art. Price yourself too high and you may get some work but many clients who can send lots of work may never hire you. If you really think you are worth more than the going rate clients may hire you, but only if they're desperate. Pricey people should plan on having many days off, quiet phones, and low cash flow. Price yourself too low and you may get more work but perception of ability sometimes follows price. Clients may not give you the respect you deserve and think you are a loser who doesn't know which end of the camera to look through.

Ask your client what they would like to pay. If the job sounds interesting and can lead to more and better work price yourself to get the job. If the job is a pain-in-the-ass, price higher to account for the trouble.

What should I call my business?

You don't have to have any particular company name. Most clients will know you by your own name rather than any company name. Using a company name is convenient for establishing separate bank accounts.

A company name can be anything you can imagine but it should be unique and you should consider the marketing possibilities. Most names using film and TV jargon have been taken. Search the Internet, phone books, and professional directories to make sure nobody else has chosen your name. Companies don't have to be incorporated and you are considered a "sole-proprietor."

You may have to register your chosen company name with a local court as a "fictional" name. If you move to another city or county you don't have to reregister your name but you will need to change your license .

You may want to get an EIN (Employer Identification Number) from the IRS using Form SS-4. This is a Social Security Number for your business. Use your own SSN if you don't use an EIN.

Do I need a business license?

If you are staring business in Virginia the answer is yes. The license is another tax collecting tool. If you don't get a license most jurisdictions will catch up with you after you file your taxes and show business revenue on Federal Schedule C. Tax rates are based on the type of business you have and are calculated on your gross revenue. Unless you have a very good year you may only have to pay a minimum tax. When your revenues exceed a threshold the tax is calculated on your revenues. Income earned as part of a payroll (W-2) is not subject to the tax.

You'll also have to visit the zoning office to get a permit for your place of business (most likely it'll be your home). Most jurisdictions are familiar with home-based business requirements and the process if fairly simple. You can have a home-business in a residential area. Zoning is mostly concerned with parking, signs, customer traffic, commercial vehicles, material storage, etc.

Go to your city or county's office building and ask for a kit with the proper forms. You may have to visit several departments to complete the process starting with the court to register your company name.

Start here for the following jurisdictions:

Arlington County, VA
Fairfax County, VA
Washington, DC
Montgomery County, MD
Additional business startup from Small Business Administration

After you file your license you will get a "Tangible Property Tax" form. This is yet another hand stretched out from your local government. This is an honor-based tax return where you report the value of all the tools and equipment your business owns. The tax is depreciated on a fixed scale depending on when you bought the item. If you only have a few gadgets it won't be much. If you have a complete outfit it starts to hurt. Both Maryland and the District have a tax like this too.

Do I need insurance?

No. But this puts you at risk if something unfortunate happens. As an independent contractor you are responsible for everything you do. If someone gets hurt or if something is damaged or stolen that person or owner will make a claim against you seeking compensation for damages. Hopefully you will be determined to not be the party responsible so you won't have to pay. But if found responsible you will have to pay if you don't have insurance coverage.

There are three types of insurance you should seriously consider: general liability, workers compensation, equipment (rent or own). General liability covers you if someone has a loss and makes a claim against you. Workers Compensation covers you if you are injured while working. Many health plans do NOT cover injuries or illness arising out of "work for pay or profit." If you own gear you must have it protected from damage and theft. If you rent gear the rental house usually requires you provide adequate protection from damage and theft.

Contact your insurance agent to determine your coverage needs. If you don't have one try to get one that is familiar with our industry. My broker is Eva Lowery, elowery(a)cbiz.com
Alt Gobo requires that all independent contractors receiving work through us or renting our gear have this basic coverage.

Outside of this business coverage you should consider a health plan. The best coverage is to be on your spouse's plan. If not an option, there are many types of plans available including HMO, PPO, major medical, etc. The plan you shoose depends entirely on your personal and family situation. Alt Gob uses a Health Savings Account (HSA). It's similar to a major medical with a big deducible and is primarily for people without chronic health problems. The good part is that you contribute money -- before taxes -- to a tax-free, interest bearing checking account. You can use this account to pay for all medical expenses. Some expenses count towards the deductible.

How do I collect debts?

Most operations in this area are respectable and pay their bills on time. It is customary in our business to invoice for the work following completion of the job. Unfortunately, the client has already received your work and you hope they have the good mind to pay. Accepting work with unknown and out-of-town clients puts you at particular risk of not being paid.

One way to protect yourself is to ask for all or part of the money up-front. Not customary but many new and out-of-town clients are agreeable to these terms. This also ensures they won't cancel at the last minute without you getting some payment. If you are taping material you can hold the tapes until you are paid.

Talk to your colleagues: many of us have had the unfortunate experience of being stiffed. Our only recourse is to no longer accept work for these disreputable outfits. Alt Gobo does not accept work from clients who have a history of not paying, or taking a long time to pay, outstanding invoices. Check with us and others if your are suspicious of a prospective client.

If you have an outstanding bill simply call the client to check on its status. It may have honestly slipped through the cracks. They'll ask for another copy if they can't find it. Save the stern notices if they continue to dodge you.

If all else fails you may have to take them to Small Claims Court. I have never had to resort to this measure. If you do need to make a claim you must document every effort you've made to collect and file it to the court in the jurisdiction the CLIENT is located. Lawyers aren't necessary.

You can also hire a collection agency. They typically get 1/3rd of the collected balance for their efforts. It's better than nothing.

Do I need credentials?

Not really. Many government agencies require that members of the media have their credentials, or buildng passes, if they cover that agency frequently. If you don't have their credentials it may slow down the process of getting clearance to enter that agency. After the terrorist attacks on Sept. 11, 2001 many agencies and other office buildings require press IDs to enter. Always bring your driver's license on jobs.

The major agencies that have official credentials are: The US Senate Radio/TV Correspondent's Gallery (202-224-6421), The White House, The State Department, and the Department of Defense. The best one to have is the US House/Senate pass which costs $15 annually. Area police departments also issue their own credentials.

If you apply for credentials you'll need to supply one or more signed letters from accredited news organizations stating that they use your freelance services regularly to cover that agency. Sorry, since Alt Gobo hires you occasionally we can't provide these letters.

What communication gadgets should I use?

Mobile phone. This is required gear. The mobile phone is ubiquitous in our society and is critical for people who want to hire you to reach you. With our last-minute-world jobs are changing even after they've started. You need to be in touch with your clients. Visit this site at Washtech.com for some comparitive info.

E-mail. If you are viewing this on your computer I'm preaching to the choir. If this is a print-out a friend gave you then you must get a computer and an e-mail account. We use e-mail to make advance crew inquiries, communicate production details to our crews, and to get weekly availability reports. You can get a free, web-based account but to connect you may need to buy a monthly service. There are still some low-cost (less than $10/month) dial-up Internet Service Providors (ISPs) in the area.


And you thought running your own independent business was the best way to get away from the absurd procedures and mounds of stupid forms. You had to deal with these issues when working for somebody else but they had departments established to handle the details, now you do. But once you take care of these few matters you can run your business anyway you want.

Do you have more questions or better answers? Please contact me and I will add your concerns to this page.