Look Before You Leap-Legal Issues Freelancers Need to Know About

Have you ever heard “The Mom Song,” a song about the round-the-clock demands that are made on moms sung at “Lone Ranger” speed to the William Tell Overture? Moms have a never-ending to-do list when it comes to just taking care of their families. So how does a mom fit career ambitions and contributing financially to her family into her to-do list? The answer for many moms is freelance work. Freelancing (hopefully) is a way for a mom to stay at home with her kids, contribute financially to her family, set her own hours and pace, and have the freedom to run errands and take care of the house while working. Sounds perfect, right? Before you jump on the freelance bandwagon, there are some important legal issues you need to consider.

Sole Proprietorship vs. Business Entity

Most freelancers operate as sole proprietors. No paperwork is required and you maintain complete control over your business. However, there is significant legal risk. If you are sued because of your business, your personal assets can be used to settle a judgment against you. A business entity such as a single-member limited liability company (LLC) can shield your personal assets from the liabilities associated with your business.

Taxes

As a freelancer you are responsible for self-employment taxes (how Social Security and Medicare payroll taxes are taken care off). Depending on how you are legally organized, you may also be responsible for completing business tax returns.

You should also check with your state’s department of revenue (in Texas it’s the Comptroller’s Office) to see if the fees you charge clients are subject to tax. If they are and you are not collecting and remitting such taxes, you could have a problem.

Ownership of Intellectual Property

If work product for a client (e.g., written work, artwork, photography, or a website), your written contract with the client should spell of the details of who owns the rights in the work product. If your client provides the written contract, read the intellectual property section very carefully. You don’t want to inadvertently sign away rights to intellectual property you intended to use for multiple clients (e.g., a standard form website design).

Client Agreements

You should have a written contract with each of your clients to protect both parties and to spell out all of the details of arrangement, including:

  • Scope of work—exactly what you will do and when you will have it completed by.
  • Payment—how much and when they are due.
  • Liability—how much liability you are accepting for your services. You may be asked to provide a representation that your services will not infringe on the intellectual property rights of any third party and to compensate the client for damages or losses if it does. You may want to limit this liability to a pre-determined amount, such as fees paid for the services.
  • Rights to work—see the discussion above regarding who owns intellectual property.

You should have your own standard form written contract (developed in consultation with an attorney). From time to time you may have a client who prefers to use their own standard form written contract. Reading contracts is tedious even for me (and that’s what I do for a living). But you need to read each contract carefully and in its entirety (and maybe even consult with an attorney if there is something you don’t understand) before you sign and begin work.

Difficulty with Getting Paid

When you are a full-time employee, paychecks come on a regular basis, every week or two. You don’t have to remind your manager every other Friday that it’s payday. Furthermore there are laws protecting your rights to a timely paycheck.

Not so for a freelancer. There are no civil or criminal penalties for deadbeat clients who stiff freelancers. If you don’t get paid, your only recourse is to sue your client for breach of contract. Lawsuits are costly and even if you win, you won’t be entitled to attorney’s fees and there is not guarantee you will be able to collect.

I hope I have not scared you from the idea of being a freelancer. While there are definitely issues you need to consider, there are also many benefits.  Having the ability to choose when and how much you will work allows many freelancing moms the ability to tend to their careers as well as their families.

Disclaimer: This website is made available for educational purposes only as well as to give general information and a general understanding of the law, not to provide specific legal advice. By using this website you understand that there is no attorney client relationship between you and the publisher. The website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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