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Freelancer moving into my own small business

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Jonathan AlexanderFreelancer moving into my own small business
by on Feb 1, 2006 at 6:28:29 pm

I am a freelance motion graphics artist, but recently have had the opportunity to take on a corporate video and produce it all myself. I have been advised to start a business checking account. Now, when I say that I am a freelance graphic artist, I mean that I don't know much about small business and what steps I should take to make sure that I do this video right under my small business and do my best to make the most out of it and pay the least in taxes on it. Does anyone have simple guidlines or steps in the right direction as far as how I go about making myself more of a small business? Thanks for any advice, it will be greatly appreciated as I don't have much of an idea at the moment.


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Nick GriffinRe: Freelancer moving into my own small business
by on Feb 2, 2006 at 3:38:34 pm

Jonathan -

Congratulations on thinking that getting advice is a good idea.

First, get an accountant to help you set things up. If you're in the US this isn't the best time of year to find one, but it will only get worse as April 15th (this year 17th) approaches. Do you have any friends or family members with a small business? Ask them who they use and why.

Maybe you need to incorporate or form an LLC - limited liability corporation. Maybe not. The accountant will know.

The key to minimizing taxes is to very clearly document each and every expense. That can also be an eye-opening experience when you see on paper the direct relationship between what you put out versus what you get to keep. All too often start-ups realize that they're doing a great job of supporting their crew and vendors and a lousy job of supporting themselves.

You may or may not need a lawyer. But even if you do, start by clearly defining IN WRITING everything between you and your client. What will the final product be in length, look like, timetables, milestone events,etc., etc. Also include who owns what at the end of the project. Do they get a show or all of the elements used to create the show. Do they have unlimited usage rights including the ability to re-purpose your work? In the beginning it's probably simplest to just give them all ownership rights to everything -- ONCE IT'S BEEN PAID FOR, but that's up to you to decide.

ABOVE ALL, make sure your written agreement says when you get paid. If you read through other posts here you'll see that 1/3rd up front, 1/3rd at some agreed upon milestone and 1/3rd at the end is fairly standard. But like so many things in this business, there's no one right answer.

I'm sure others here will have more suggestions.

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Jonathan AlexanderRe: Freelancer moving into my own small business
by on Feb 2, 2006 at 5:06:37 pm

Wow, thanks for the suggestions. I think that getting an accountant is going to be one of my first steps. Now, is it easy to open up a business account, say at wells fargo, or wherever I already have a personal account? And should I do that? Thanks again!


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Seth BloombaumRe: Freelancer moving into my own small business
by on Feb 2, 2006 at 6:15:11 pm

Someone (on this forum?) mentioned the book "Inc. Yourself". If you have any trouble falling asleep at night... no really, it explains the tax implications of incorporating and LLC. If you get from the library make sure you get the latest edition, as those tax laws keep on changing. It will prepare you to have a good discussion with your accountant.

Easy to open that business checking account at WF or wherever. It's not a neccessity immediately when you start out, but very convenient. If you don't incorporate or LLC immediately, all expenses and revenue are in your name and Tax ID number. You sure have to keep track of every penny in and out, charge cards, parking, mileage, all of it or you'll be paying more taxes than you should. Be sure to ask your accountant about Quicken Home & Business and Quickbooks. Helps a lot to get it set up right the first time, then you just work your accounting system.

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Seth BloombaumRe: Freelancer moving into my own small business
by on Feb 2, 2006 at 6:17:35 pm

I'm not sure I said it strongly enough above:
Getting receipts and keeping records is key.

Even if you can't add 2+2 your accountant can rescue you IF you have records.

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Jonathan AlexanderRe: Freelancer moving into my own small business
by on Feb 3, 2006 at 1:33:51 am

Thank you for stressing that, keeping track of that stuff is something I have been trying to be better about , especially since last year I had quite the time when taxes came around. Thank you for your advice, I will see if I can pick that book up somewhere and I already have an accountant that I just need to give a call. Thanks again, I really really appreciate your help as I am quite scared and clueless at the moment.


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Joey GroahRe: Freelancer moving into my own small business
by on Feb 4, 2006 at 11:46:01 pm

I heartily second and third setting up your accounting system ahead of time. There are two of us who make purchases regularly and multiple gas and shipping receipts.

We have a simple process: different folders in the filing cabinent. Throughout the month the different receipts are plugged in to the right QuickBooks account by one person.

And there is a business account for us (we're an LLC) and even if I was solo and "Joey Video Inc" I'd have a seperate account. There were two of us when the company started and a different account was the way to go.

You may want to check out/join your local chamber of commerce as they often have workshops on basic buisness accounting and the like. And some of our local universities have workshops or sections devoted to business Additionally, S.C.O.R.E. may be a good resource; free counsuling from retired buisness folks for small businesses.

Good luck with everything!

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