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(Art Credit: Andrea Hernandez) Securing funding and prioritizing retirement should be parts of every freelancer’s business and life plans. But most of the time, they aren’t. Freelancers struggle to pull in enough to pay the bills AND save. They’re funding everything out of their own pockets, which can be incredibly overwhelming. But what if you could relieve some pressure financially and start on a path to early retirement? We’re happy to tell you that you can. With a bit of creativity and a spotlight on good financial habits, a thriving business and retirement are within reach. Here’s your new freelancer’s guide to funding and retirement. Explore All Funding OptionsAs stated above, freelancing is tough because most of us use our own money to keep our businesses afloat. It’s such a relief when you can get additional funding from other places to grow your operation. You can also use extra financial help for living expenses. If you can get a traditional small business loan from a bank, do it. Work with your banker on suitable loan terms and the lowest interest rate you can get. When you receive your loan funds, use them wisely. It might be a good idea to draft a plan for the loan funds, whether you plan to use them to hire an employee or scale your marketing strategy. If you have trouble landing a traditional business loan, consider creative alternatives. Personal loans and lines of credit are available to freelancers. So are alternative lenders like private online companies offering personal finance solutions. You could even get the funds you need for your business through crowdfunding or grants geared toward freelancers. Ample research is the first step to getting any of these funding options. In addition, keep all your financial and other business documents organized and easily accessible should you need to provide information for one of these opportunities. Be sure that every application you put in fulfills every requirement. Finally, follow up until you get a final answer on each option you pursue. When you get funding and start making money as a freelancer, it’s important to have a designated account for your retirement funds to stay on track. Open an Individual Retirement AccountStart your retirement savings with a simple contribution each month to an individual retirement account (IRA). The most appropriate IRA for you depends on:
Whether you set up a Roth IRA, Traditional IRA, Solo 401(k), or SEP IRA, budget for the max contribution. Understand the tax benefits available to you with these accounts and how to take advantage of them. Be sure you’re aware of any penalties associated with early withdrawals. And dig into the rest of the details about your chosen account until you thoroughly understand everything about it. When your retirement account is open, getting in the habit of saving is crucial. Get in the Habit of SavingWhen you find funding, you have to use the money responsibly. Also, you have to be diligent about saving for retirement once you get your accounts set up. Getting into the habit of saving and sticking to a budget will help. Create a budget for your freelance business. Note all your income and add up all your fixed and variable expenses. Don’t forget to account for your salary. See what’s left over after all expenses and salary are paid. Allocate leftover money to your business savings accounts and investments. Repeat the budget process for your personal finances with the salary you pay yourself. You should have a line in your budget for money allocated to your retirement savings account. You should also get in the habit of setting aside money for healthcare expenses and emergency funds. Being consistent with your budget and savings are key. Use a budgeting tool if you have to, but just stick with it. If you aren’t totally comfortable with finances, look to a financial advisor for help. Enlist the Help of a Financial AdvisorIt’s a smart move to work with a financial advisor. Financial advisors can help you set up your retirement accounts correctly and maintain them. In addition, they can ensure you fully understand your benefits. They’re also great people to have on your side to help you put your freelance income to work for you. Furthermore, financial advisors are great resources to tap into to learn about changes to IRS rules for retirement that affect freelancers. Determine if you have money in your budget for a financial advisor. If you do, research potential fits in your area specializing in working with freelancers. Set up consultations with your top choices and go from there. ConclusionNavigating funding and retirement as a freelancer doesn’t have to be overwhelming. Having everything in your hands can be just as beautiful as it is scary. Use these tips to help you take charge of finding funding for your freelance business and achieve the retirement life you envision. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/30/a-new-freelancers-guide-to-funding-retirement-2/
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(Art Credit: Andrea Hernandez) If a work is made for hire, an employer is considered the author even if an employee actually created the work. The employer can be a firm, an organization, or an individual. The concept of “work made for hire” can be complicated. Let’s break it down and you’ll be better equipped with important knowledge to protect yourself and your work. Fundamental Concept of Copyright The Copyright Office has created guides on various topics: Their guide on “Works Made for Hire” is a helpful starting point. It sums up the fundamental concept of copyright nicely: Copyright law protects a work from the time it is created in a fixed form. From the moment it is set in a print or electronic manuscript, a sound recording, a computer software program, or other such concrete medium, the copyright becomes the property of the author who created it. Only the author or those deriving rights from the author can rightfully claim copyright. As stated in the Copyright Office’s “Copyright Basics (Circular 1),” as a copyright owner, you have the right to reproduce the work, create derivative works, distribute copies of the work, perform the work publicly, and display the work publicly. You also have the right to transfer copyright ownership in whole or in part, license other people to use the work, and sue for infringement. Works Made for Hire Under the Copyright Act The person who creates a copyrightable work is the author of that work and, therefore, the copyright owner. The one exception to this rule is any “work made for hire.” Section 101 of the Copyright Act provides definitions of the key terms in copyright law. It defines a “work made for hire” as: 1. a work prepared by an employee within the scope of his or her employment or 2. a work specially ordered or commissioned for use:
if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. Even though the parties may call it a work for hire, this does not mean the employer or hiring party is the author. Employees For employees, other factors like the relationship of the parties and the true scope of the employment are considered. Employee or Independent Contractor? Courts are carefully scrutinizing arrangements to determine if individuals are employees or independent contractors. As addressed in Community for Creative Non-Violence v. Reid, 490 U.S. 730, 109 S. Ct. 2166, (1989), some factors to consider include:
Independent Contractors For independent contractors, if the work is specially ordered or commissioned for one of the nine specific uses and the parties expressly agree in a signed writing that it is a work made for hire, the hiring party will be considered the author and, therefore, the copyright owner. Establishing the relationship may include determining whose “instance and expense” the work was created, as discussed in Marvel Worldwide, Inc. v. Kirby, 777 F. Supp. 2d 720 (S.D.N.Y. 2011). If the work does not fit in the exception, the artist is the author and, therefore, the copyright owner. Best Practice Approach Parties may agree in writing that the artist owns the copyright in a work made for hire or the hiring party owns the copyright in a work that is not (or may not be) considered a work made for hire under the Copyright Act. However, because it isn’t always clear, it is best practice for the parties to sign an agreement which (1) states whether it is a work made for hire, (2) clearly states who owns the copyright, and (3) assigns the independent contractor’s rights to the work to the hiring party (if appropriate) if the work is not considered a work for hire under the Copyright Act. Moral Rights The Visual Artists Rights Act of 1990 (VARA), found in section 106(A) of the Copyright Act, gives authors of visual art the rights of “attribution and integrity” of a given work. Under the act, the author has the following rights (with some conditions):
VARA does not protect works made for hire. But because a work may later be determined to be outside the work for hire construct, the author should decide whether they want to waive their “moral rights” to the work—and such a declaration should be included in an agreement. Termination Rights If a work is not a work for hire, the author can still assign the copyright but will keep the right to cancel the assignment after 35–40 years (note: the notice of termination must be served before the time elapses). The Copyright Office has more information about the Termination of Transfers and Licenses. Disclaimer The information in this guide is not legal advice and is not intended to be relied upon as legal advice. The guide highlights some essential concepts; it does not cover all the related rules, exceptions to the rules discussed, or the many different ways courts interpret them. Contracts law is very fact-specific. If you have a legal issue, you should not rely on this information and instead speak to an attorney. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/26/works-made-for-hire-and-copyright/
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(Art Credit: Pedro Gomes) As a freelance writer, you're probably juggling a lot of balls - writing articles, pitching new clients, attending networking events, and more. In the middle of all of that, it's easy to let your finances fall by the wayside. Plus, many freelance writers don't have the luxury of a regular paycheck, which can make it difficult to budget and save for the future. You never know when a client will suddenly decide to cancel a project or when you'll have a dry spell in terms of new work. Most of the time, you're probably just used to living paycheck-to-paycheck. But for those very reasons, it's even more critical for you to take control of your finances. If you want to succeed in this business, you need to be proactive about money management. If you're not sure where to start, read on for 10 essential money management tips to put into practice starting today. 1. Keep Track of Your Income and ExpensesThis may seem like a no-brainer, but it's essential to keep tabs on your finances on a regular basis. Set aside time each week (or at least each month) to update your records and review your bank statements and credit card bills. Track how much money you're bringing in from clients and any other sources of income. Then, list out your expenses - both business-related and personal. Include things like website hosting, rent, groceries, and any other bills you have to pay regularly. This will help you better know where your money is going each month. You could even set up a simple spreadsheet to help you keep everything organized. Once you have a clear picture of your income and expenses, you can start working on a budget (more on that later). 2. Set a Budget and Stick To ItA budget is a crucial part of any financial plan, and it's especially important for freelance writers. Without a budget in place, it's easy to overspend or undersave - which can put you in a difficult financial situation down the road. In contrast, having a budget can help you make ends meet, save money, and reach your financial goals. The best way to do this is to be as specific as possible when setting your budget. Include all of your income and expenses from the previous tip, then break down how much you need to spend in each category. But creating a budget is only half the battle - you also have to stick to it. This may require some lifestyle changes, but it'll be worth it. Also, make a point to review your budget regularly and make adjustments as necessary. And if you find yourself overspending in one area, don't be afraid to cut back in other areas to make up for it. 3. Build an Emergency FundWhen you're self-employed, it's always a good idea to have some money set aside in case of an emergency. This could be anything from a last-minute client project to a medical bill or car repair. Ideally, you should aim to have at least 3-6 months' worth of living expenses saved up. This may seem like a lot, but it's worth striving for. If you can't swing that much, start with $1,000 and increase your savings goal as you go. That way, if you ever find yourself in a pinch, you won't have to rely on credit cards or loans to get by. 4. Open a Separate Bank Account For Your BusinessOne of the best ways to manage your finances as a freelance writer is to keep your business and personal expenses separate. The last thing you want is to mix up your spending and end up with a jumbled mess. The easiest way to do this is to open a separate bank account for your business. That way, you can deposit your client payments into one account and use another account for your personal spending. You could also get a business credit card to keep things even more organized. Just make sure you're diligent about only using the business account (and credit card) for business expenses. Otherwise, you'll defeat the purpose of having a separate account in the first place. 5. Hire an AccountantIf managing your finances sounds like more trouble than it's worth, you can always hire an accountant to do it for you. This is a great option if you're not confident in your money management skills or simply don't have the time to keep track of everything. An accountant can handle all aspects of your finances, from bookkeeping to tax preparation. They can also offer valuable advice on saving money and making smart financial decisions for your business. Of course, hiring an accountant does come at a cost. But if it means peace of mind and improved financial health for your business, it could be worth the investment. 6. Get Everything in WritingWhen you're working with clients, it's important to get everything in writing. This includes the scope of work, deadlines, payment terms, and anything relevant to the project. Having a written agreement in place will help prevent misunderstandings and miscommunication down the road. It’ll also protect you if a client tries to back out of the agreement or doesn't pay you for your work. So before you start any project, make sure you have a solid contract in place. And if you're ever unsure about something, don't hesitate to ask your client for clarification. When you do the work upfront and get everything in writing, it'll save you a lot of headache (and money) in the long run. 7. Send Invoices at a Set Time Each MonthSending invoices can be one of the most tedious aspects of being a freelance writer. But it's also an important part of running your business and getting paid for your work. One way to make the invoicing process easier is to set up a system whereby you send invoices at the same time each month. For example, you could send all of your invoices on the first Monday of the month. Or you could send them out on the last day of the month. Whatever system you choose, just make sure you're consistent with it. That way, your clients will know when to expect your invoice, and they can budget accordingly. 8. Follow Up on Past-Due InvoicesEven if you have a system in place for sending invoices, there will be times when clients don't pay on time. When this happens, it's important to follow up and make sure they received the invoice. If they have indeed received the invoice but haven't paid yet, gently remind them of the payment terms and ask when you can expect to receive payment. If they claim they never received the invoice, send them another copy (either by email or regular mail) and give them a specific date by which you need to receive payment. Most clients are honest and will pay their invoices as soon as possible. But there are always a few bad apples out there who will try to take advantage of you. By being proactive and following up on past-due invoices, you can minimize the chances of this happening. 9. Don't Forget to Pay Your TaxesWhen you're self-employed, it's your responsibility to pay your own taxes. This includes both federal and state income taxes, as well as self-employment taxes. If you're not used to paying taxes, it can be easy to forget about this important task. But if you don't pay your taxes on time, you could be subject to late fees and interest charges. Even worse, you could end up being audited by the IRS. To avoid any problems, make sure you set aside money each month to cover your tax bill. That way, you'll always have the money on hand when it's time to pay your taxes. And if you're ever unsure about how to file your taxes as a freelance writer, again consider hiring an accountant to help you out, but don't risk doing them yourself and getting into trouble. 10. Leverage SoftwareThere are plenty of different software programs that can help you manage your business. From invoicing to time tracking to project management, there's a tool out there to help with just about everything, so it can be helpful to leverage a few of them to stay organized and save time. For example, if you find yourself sending a lot of invoices, you might want to use a tool like FreshBooks or QuickBooks to automate the process. By using software to automate some of the more tedious aspects of your business, you can free up time to focus on other things, like writing and marketing your services. You've Got This!As a freelance writer, you'll need to wear a lot of hats. In addition to writing, you'll also need to handle your own finances, marketing, and administrative tasks. With so many balls in the air, it can be easy to lose track of things. But if you're organized and have a system in place for tracking your income and expenses, it'll make your life a lot easier. By following these money management tips, you can avoid financial problems and keep your freelance writing business on track. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/25/10-money-management-tips-for-freelance-writers/
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(Art Credit: Andrea Hernandez) Spring is finally here, and with it comes that age-old desire to refresh things. Cleaning up something that may be a little dusty, letting things go that no longer serve you, refreshing things that might be slightly stale — all of this applies to your business the same way it does to your body or house. Here are four ways to spring clean your business to get a fresh start. 1. Purge Your InboxOur inboxes own us. Everyone I know has a different strategy for managing the never-ending stream of emails — the “never delete anything” approach, the “zero inbox” method, or the “barely keep your head above water” technique. No matter how you tame your emails, taking some time annually to rethink that strategy or just clean out old items can be helpful. For instance, I have a ton of folders where I keep messages that I may need to reference later. Every once in a while, I like to go through these folders, archive things I may want to reference later, and delete items don’t need anymore. I also go through the bottom of my inbox and delete or archive things that I am just keeping there because I am unsure what else to do with them. If you’re ready to revamp how you manage your inbox, here are a few strategies for that. 2. Refresh Your SpaceThe physical work space looks different for everyone — for some people it is an office at home, some might have a coworking space, and some might have a van down by the river. No matter what your space is, taking the time to clean it up can be a big change for your mental health and motivation.
3. Update Your Business ModelIn reality, many of us get trapped doing what we’ve always done, how we’ve always done it, even if it is no longer giving us what we need financially or emotionally. One reason for this is that solopreneurs are so used to the feast/famine mentality when it comes to revenue that, when we find something that works, we keep doing it, even if we don’t actually like it anymore. On the flip side, something might not be working anymore, yet we keep doing it because we’re not sure how to make a change. When you work for yourself, by yourself, you can reinvent what you do whenever you want. Whether you need more money, more time, or more interesting work, here are four ways to reboot your business model and bring back the passion that made you go out on your own in the first place. 4. Go Through Your BacklogA backlog is a common project management strategy where you keep a list of things (products, business ideas, blog posts, etc.) that you can’t do yet but want to tackle at some point in the future. Other common strategies like this are the “pickle jar” from productivity guru David Allen or a “parking lot,” a meeting facilitation strategy where you “park” questions or ideas that are important but can’t be addressed at the moment. Whatever you call it, having a place to keep your great ideas that aren’t yet possible, is a strategy that I use with all of my project management and coaching clients. It is a great way to prioritize things that need action now without losing great ideas for the future. When you spring clean your business, go back through your backlog of great ideas and think about which ones should be dusted off and incorporated into actionable plans for the now. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/23/four-ways-to-spring-clean-your-business/
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(Art Credit: Sisi Recht) Let's cut to the chase, you are interested in forming a Not-For-Profit organization in New York State and you're not sure where to begin. Here is your basic checklist with additional resources.
Additional Resources: Disclaimer The information in this guide is not legal advice and is not intended to be relied upon as legal advice. The guide highlights some essential steps; it does not cover all the related laws and regulations. The guide was last updated on May 5, 2022, and some of the information may have since changed. If you have a legal issue, you should not rely on this information and instead speak to an attorney. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/19/untitled-2/
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(Art Credit: Karen Fischer) This post was provided by Dinghy. Freelancers Union partners with Dinghy and NSM Insurance Group to help freelance writers say hello to peace of mind with liability insurance crafted exclusively to meet their needs. Get a free quote in minutes here. Whether you’ve been at it as a freelance writer for some time or recently made the switch, protecting your business is vital for building and maintaining your success. Unlike a traditional 9-to-5 job where churning out killer content is priority numero uno, you’re wearing many hats — which means dealing with additional responsibilities like finding work, managing contracts and taking care of cybersecurity (just to name a few). It can be daunting, no doubt, but there are some easy measures that can help you effectively safeguard your business without turning your to-do list upside down.
Operating as a sole proprietor is the simplest way to get your freelance hustle on, but it can come with serious risk given that there is no distinction between you and your business. If you incorporate — either as a limited liability company (LLC) or an S Corporation — your personal assets are separated from your business assets and are better protected should your business encounter any legal issues, like being sued. Incorporating also lends professional credibility and may offer tax benefits. 2. Always use a reputable marketplace for sourcing assignments online It can be difficult to build your client base, especially when you’re launching your business. Freelance marketplace platforms can open the door to new work (and much-needed income!) but beware of websites that seem too good to be true — they may be fraudulent. Be sure to do your due diligence and only source work from established, recognized marketplaces. 3. Take the proper online security measures Hackers are out there and getting more and more clever by the day. Invest in antivirus software to shield your business from viruses, spyware, malware, phishing attacks and other online security threats. Don’t default to your childhood dog’s name for your password (no matter how cute Shadow is.). Instead, use complex passwords; if you are worried about remembering them all, you can use password managers to create and store unique passwords for each login. You should also set reminders on your calendar to change them regularly. Most experts recommend changing them quarterly but bonus points if you do this every month. 4. Make sure indemnity protection is included in all contracts Reviewing contracts can make your head spin. Before you sign on the dotted line, there are a few non-negotiables you should ensure every contract includes, like indemnity protection. When it comes to media outlets, many contracts use default language stating you will indemnify the publication when it should be the reverse. They should agree to indemnify you, meaning they would pay your legal bills and support you under their liability insurance, should anyone come after you for something you wrote for their outlet. Similarly, if your client is another organization, make sure indemnity protections are baked into your contract to ensure you’re held harmless for claims arising from content that was crafted, reviewed and approved under their purview. If your client refuses to provide indemnification to you, then the second-best option is to remove the indemnification clauses altogether so that neither of you are indemnifying each other. 4. Get freelance writer insurance Libel, slander, defamation, copyright infringement, and errors and omissions are some of the biggest professional liability risks freelance writers face. You can be sued for these types of claims, regardless of if you’re at fault — and a legal dispute could lead to tens of thousands of dollars in legal fees plus any compensation you may have to pay. Enter freelance writer insurance, which can defend you and provide coverage for those crushing costs. Getting covered is now easier than ever with Dinghy, the world’s first insurance provider exclusively for freelancers. For less than one dollar a day, you can buy $100,000 of coverage, providing peace of mind and allowing you to focus on what you love to do. You’re working hard to build your freelance writing business and you can minimize many of the risks you face with just a few easy steps. Trust us — putting up a few safety nets will be time well spent. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/16/5-surprisingly-easy-ways-to-protect-your-freelance-writing-business/
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A new survey conducted by Freelancers Union in partnership with the Authors Guild, Graphic Artist Guild, American Society of Media Photographers, National Press Photographers Association, American Photographic Artists and National Writers Union found that sixty-two percent of freelance workers based in New York had lost wages at least once in their career from their employer’s refusal to pay them. Fifty-three percent reported losing as much as $10,000 to nonpayment from completed work. The three advocacy organizations conducted the survey as part of their efforts to persuade the New York State Assembly to pass the Freelance Isn’t Free Act (FIFA) (S8369/A9368) this session. FIFA was introduced by Senator Andrew Gounardes of the 22nd State Senate District and Assemblymember Harry Bronson of Assembly District 138, with an additional twelve co-sponsors in the Senate and fifteen in the Assembly. If the bill passes, New York will become the first state in the nation to provide legal protections to freelance workers who live and work in New York state and out-of-state freelancers who work for New York-based companies. Freelancers currently account for approximately 35 percent of the U.S. labor force and yet have none of the protections that employees have long had – even when doing the exact same job as an employee. “In the five years since we helped secure the passage of New York City’s version of Freelance Isn’t Free, the law has helped freelancers recover $2,144,198 in owed compensation for their work. But freelancers don’t only work in New York City. From Buffalo to Albany, Montauk to Plattsburgh, companies use freelance workers for everything from manufacturing, construction and warehouse work to website developers, writers and graphic designers and they deserve the same legal protections as their NYC colleagues,”said Rafael Espinal, Executive Director of the Freelancers Union. Additionally, the survey found that : 91% of survey respondents reported experiencing late or overdue wages at least once in their career with 54% reporting experiencing delays of 3 months or longer. 79% of respondents attempted to recoup lost wages through their own demands (i.e emails or phone calls). A majority of respondents claimed they had to communicate their demand to a client on multiple occasions (three times or more) with 76% of respondents reporting that they spent 1-2 hours a week trying to recoup payment. Less than one percent of respondents used through the legal system. 39% of respondents said non or overdue payment affected their ability to pay bills or rent. “Freelance journalism was hit especially hard during the pandemic. Loss of freelance journalism jobs was consistently cited as the first or second main reason for the decline in income by respondents to the Authors Guild’s Covid19 surveys,” said Mary Rasenberger, CEO of the Authors Guild. “Forcing freelance writers to spend weeks or months chasing down earned wages further cuts into their wages because it takes time way from other paying work, and often forces them to accrue debt. It pushes people that are already struggling to earn a sustainable living to the brink, and is deeply unfair. Publications who refuse to make payments on time should be held to account. And thanks to FIFA they will.” Among the protections that the New York State law would provide are mandatory written contracts for work valued at $250 or more; payment within 30 days of completion of the work, unless otherwise agreed in the contract; and the ability to collect double the amount owed, as well as attorney fees for violations. The law will be enforced by the New York state Department of Labor, and repeat violators could face penalties of up to $25,000. “Freelance journalists and business writers rarely make enough money to afford a lawyer, so it didn’t surprise me to see that less than one percent of respondents sought a legal remedy, “ said Larry Goldbetter, President of the National Writers Union. “This reinforces FIFA’s need. Very few freelancers know what legal remedies are available or understand how small claims court works. If FIFA passes, the state will assume some responsibility for helping to make sure the freelancer gets paid or can fine repeat offenders until they get the message.” About the Survey Sponsors The Authors Guild is the nation’s oldest and largest non-profit professional organization for published writers. With more than 12,000 members, it advocates for working writers to protect free speech, freedom of expression and authors’ copyrights; fights for fair contracts and authors’ ability to earn a livable wage; and provides free educational programming about the business of writing for authors and translators of fiction, nonfiction, poetry, and journalism. Freelancers Union is the largest and fastest-growing organization representing the 57 million independent workers across the country. It gives its 500,000 members a voice through policy advocacy, benefits, online resources, and educational and community-building events in nearly two dozen cities. The National Writers Union is the only labor union that represents freelance writers working in all genres, formats, and mediums. With the combined strength of more than 1,300 members in 12 local chapters, the NWU works to advance the economic status and working conditions of writers. The Graphic Artists Guild is a membership organization of creative professionals working in the graphic arts fields. The American Society of Media Photographers (ASMP) is a professional association of imaging professionals, including photojournalists, architectural, underwater, food/culinary and advertising photographers as well as video/film makers and other specialists. American Photographic Artists (APA) is a not-for-profit association for professional photographers. The National Press Photographers Association is an American professional association made up of still photographers, television videographers, editors, and students in the journalism field. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/12/over-60-of-ny-freelancers-report-not-being-paid-for-work-performed/
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(Art Credit: Andrea Hernandez) This article is posted with permission from our partner Lili and originally appeared on the Lili blog at: https://lili.co/blog/how-to-turn-your-hobby-into-a-business Get the digital bank account designed for freelancers with Lili and manage your business expenses, estimate your taxes, and save for a rainy day all with zero account fees. Start a Lili account today. The era of the freelancer is here, and you can literally make money doing anything — so why not do something you really love? Whether you’re looking for a new side hustle or are hoping to take your hobby full-time, here’s what you need to know to get started. Make It OfficialThe most important thing to do when you decide to start a business is keep it above board. Look into state laws and start by registering a DBA to give your business some legitimacy. If it becomes more serious later on, you may consider an LLC. Start familiarizing yourself with the concept of self-employment taxes now to get your accounting in order. Get PaidHave your invoicing and payment processes streamlined before those first customers start rolling in! You’re going to need a place to send payments and a way to ask for them. Luckily for you, Lili’s got you covered on both counts! Decide how you want to price your products or services by doing some market research. How much do your competitors charge? How much do you need to make for your needs? Since you’re a new business, start your prices out a little bit lower than your competition until you’ve established a bit of a reputation. AdvertiseOnce the legal stuff is taken care of and you have your product or service ready, it’s time to get the word out! The easiest place to start is with social media. You don’t need to spend money on ad space in order to successfully promote your hobby-turned-business. Research the best ways to promote in your niche, whether that be flyers in local stores, selling at art shows or markets, or leveraging different social media platforms. When promoting on Instagram, use local, niche, and thematic hashtags and tag your location to reach people in your area. On Facebook, check out different Groups in your niche or where your target market might be hanging out (but be sure to follow any rules the group has about self-promotion). Collect testimonials and reviews from your first several customers, and even from family or friends who have benefitted from your hobby in the past. If you’re selling a product and want to reach beyond your local area, you can start out by setting up a seller account on Etsy, or you can open your own storefront with Shopify. 7 Hobbies You Can Make Money FromBefore you get into all the nitty-gritty of running a business, make sure you really love your chosen hobby. Turning it into a business means mixing work and pleasure, which can be a good thing so long as the pleasure is enough to make it all worth it. Need some inspiration? Here are some popular hobbies you can turn into a business with ease: Antiquing or ThriftingLove finding hidden treasures and giving them a refresh? Resell your best-thrifted finds and vintage antiques on Etsy, Ebay, or even Facebook Marketplace. For reselling clothes, try Poshmark or Depop. ReadingYes, you read that right — you can get paid to read! Online Book Club will pay you for book reviews, which can be a great way to start out as you build up an audience on Booktok or with your own blog. WritingPrefer to make your own words rather than reading someone else’s? Start by posting your writing on Medium, and look for opportunities to write for local or digital publications. GardeningTake your hobby beyond your own yard and start offering landscaping services locally, or start a gardening coaching service to teach others how to create beautiful gardens like yours. CleaningCleaning might not be everyone’s cup of tea, but you love it! Start a business as a housekeeper or even a home organizer to embrace the Cleantok fanatic within you. Handy or Taskrabbit are great places to start promoting your services. BakingStart sharing mouth-watering photos of your baked goods on social media, and offer catering for weddings, birthdays, or other local events. You can also sell at your local Farmer’s Market or festival. Dogs and Other PetsAre you a pet lover? You and 70% of the United States! There are always people looking for dog walkers or pet sitters, and you can easily start your own business in this niche with Rover. Ready to Start Making Money?If you really love your hobby and want to get paid to do it, then it may be time to monetize it. Start a blog sharing all about it, turn it into a product or service you can sell, or teach a course on how to do it. The possibilities are endless! via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/12/how-to-turn-your-hobby-into-a-business/
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(Art credit: Kathryn Sheldon) Given the focus in May on National Small Business Week, (May 1 to 7) and the end of the tax filing season, if you find yourself transitioning from regular wage-earning employment income (reported on a W-2) to self-employment (tracked by those who pay you on a 1099), or a combination of both income streams, you need to understand how to handle your income tax and other taxes to avoid problems later. If you are not a full-time freelancer, and you have a side job such as consulting, writing, or selling ecommerce or other products, you will have to handle your taxes differently and separately for both your W-2 and your 1099 income. How do you do this if you have been an employee of a company at some point this year? First, you should do a quick check to make sure your tax withholding is correct. The same goes for freelancers who pay quarterly taxes. Now is the perfect time, right after tax season, to look at making any changes to your tax payments to make sure they are in line with your actual obligations. The basics of tax obligations for self-employed vs. employed workers. As a self-employed individual you are responsible for paying income tax on all revenue that you generate from your freelance business. If you have at some point during the tax year derived W-2 income, then you must report that as well. Your employer will provide a W-2 ahead of tax time and they will (by law) have withheld taxes on your behalf based on the withholding amounts you selected during the employment process. If you made accurate withholding elections through your employer, you should be relatively even when it comes to the need to pay tax on those wages. However, if you have also received freelance income, regardless of whether you receive a 1099 form from your clients or not, you must set aside money to pay income tax on that revenue. Keep up on expenses, estimated tax payments and withholding thresholds. It is likely that your W-2 withholdings are not enough to cover the income tax on your Form 1099 income, which means you will need to make estimated tax payments each quarter to the IRS using a Form 1040-ES, Estimated Tax for Individuals to make sure you are paying enough tax. Before you cut that estimated tax check, you will want to make sure that you have taken all possible self-employment deductions including:
The list above is a guide to the deductions you may be able to take on your 1099 income. Remember that the business expenses deducted must be “ordinary and necessary” in the eyes of the IRS. Your income tax is paid on your profit so the more qualified expenses you have, the lower your tax bill will be. It is vitally important to keep track of these expenses and make sure you have a receipt, (either digital or in hard copy) in case you become the focus of an audit. You should keep these records for at least three years. Payment on self-employment income is made to the IRS and your state taxation department (and, potentially, your municipal tax department) on a quarterly basis. These are commonly known as “estimated taxes” and it is imperative that you make these payments each quarter (usually January 15, April 15, June 15, and September 15) to avoid fines and penalties. As noted above, for your freelance earnings, you do not receive a W-2 form at tax time like an employed person would. Instead, you will receive a 1099-MISC or 1099-NEC from your clients and a 1099-K from any online platforms (such as Etsy, Shopify, etc.) on which you made more than $600. Regardless of the proportion of income that you derive from self-employment versus your W-2 job, you will need to report both streams of revenue on your next tax return via Schedule C on Form 1040 if you have a limited liability company or on Form 1065 if your business entity is a partnership and Form 1120 or 11-20S if your entity type for taxation is a C-corporation or S-corporation. Freelance FICA rules are critical to understand for W-2 vs. 1099 income. In addition to income tax, as a freelancer, you also need to pay the employee and employer portions of the self-employment tax, under the Federal Insurance Contributions Act, or FICA. For freelancers, here are the FICA rules in a nutshell. When you earn any form of taxable income, the IRS is owed 15.3% of it under the Federal Insurance Contributions Act, or FICA. This represents the 12.4% Social Security tax and the 2.9% Medicare tax. For any self-employment income, you are responsible for paying all this tax (as both the employee and the employer). On W-2 wages, your employer pays half, and the remainder is deducted from your paycheck. There are also some key FICA thresholds to take note of:
Remember to check your local tax obligations, too. It is important to remember that you may have to pay income tax and business or other taxes on a local level to the county and/or city where you live. For example, New York City has an unincorporated business tax, while New York State has the Metropolitan commuter transportation mobility tax which applies to New York City and the surrounding counties. Both taxes apply to self-employed individuals. Use proper tracking and regular payments to help you maintain control. While being in transition between full-time or part-time W-2 work and full-time freelance (or a new side hustle) can be stressful, it is not insurmountable from a tax perspective. The most important thing is to be clear on how you are classified as a worker (independent contractor versus employee) and keep close tabs on all your income, tax obligations, and related expenses while also making regular tax payments. Doing so should make balancing your employment income and cash flow much easier and help you keep a sense of control as you navigate your new normal. via Freelancers Union Blog https://blog.freelancersunion.org/2022/05/11/suddenly-self-employed-key-tips-for-combining-w-2-1099-income/ |
AuthorI have 5+ years experience working as a medical transcriptionist. When I am not working, I enjoy sports like playing basketball or judo. I love making friends and connections. Archives
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