Freelance Web Design

legal stuff , taxes, etc.

[geoapa]

Hey guys,
I just landed my first freelance web design job and I was wondering how I go about the whole process legally. Now I know that there are different rules/regulations from country to country so let me start off by saying that I'm from the U.S.

Do I have to fill out some paper work from City Hall?
Do I charge my client tax?
Do I claim this money come income tax returns?
My client does not have a host yet. Should I order the host under my name or his?

I downloaded a generic Web Design contract, so that's a start I guess! :-) I'm just looking for guidance, any help would be appreciated.
Thanks.

[shmekkyl]

Do I have to fill out some paper work from City Hall?

If you want to set up a legal entity, then yes. Go to city hall, file a DBA for a sole-proprietorship (Should cost about $30). This will allow you to set up a business bank account and merchant accoutn if you wish. If you want to do everything personally, through your personal bank account, you can also without filing.

Do I charge my client tax?

Nope. Sales tax is only on goods, not services.

Do I claim this money come income tax returns?

You can claim it as additional income on your regular return, or if you file as a legal business, you will have to file a return for that also I believe. You may be able to do it all from your personal return I believe. I'm not sure, I have my accountant handle all of this for me.

My client does not have a host yet. Should I order the host under my name or his?

Depends on if you want to deal with the liability. If you order under your name, you can bill the client whatever you want for it. However, if the host goes down, its all on you. If you have the client sign up with the host directly, you don't make any money, but any problems with the host, the host is responsible.

downloaded a generic Web Design contract, so that's a start I guess!

Keep your contract VERY simple. I keep mine as a detailed invoice of exactly what my client will be getting and what their responsibilities are and sign it. It will limit your liability in the future.

Good luck with the new venture.

[martinibuster]

Great answers shmekkyl.

I'd just like to add:
One of the first things to do when setting up a business is getting recommendations for a good accountant. A good accountant may charge you for the interview, but that's okay because they will give you answers for knowing what's deductible and what's not- tips on things to avoid so as not to raise red flags at the IRS.

A good accountant provides a solid foundation for your business.

[shmekkyl]

I would definitely recommend going to an accountant first. I made the mistake of not doing it with a few ventures I launched this year. I now find myself in late July with atrocious bookkeeping and its going to cost me a few thousand now to get myself organized.

Had I went to an accountant from the beginning and met with him once and awhile to go over some things, all these problems could have cost me only a few hundred.

As martinibuster said, you want to avoid all IRS red flags. Freelancers get audited more than normal employees, so you want to be covered all around just in case.

[bunltd]

Hmm, sales tax:

It depends on where you are - where I am, the state says that web design and development services are taxable - so I have a sales tax permit and must remit to the state periodically - check with your local state tax office - or their web site - they'll be able to tell you.

As far as hosting: do you want to get into reselling or managing your own server or not? You can do pretty well on recurring income as a reseller of hosting services, but there are many different programs with different requirements - some cost to set-up... If you plan on offering hosting services to your future clients, you might look further into the options.

LisaB

[madcat]

Make sure you know exactly what you're getting yourself into before you make that trip to city hall. Read up on what legal structure may suit you best on your journey. A sole-proprietorship [quickmba.com] may be the greatest risk:

The control of a sole proprietorship belongs entirely to the owner, who also assumes the full risk of the business.

Just be aware and good luck!