What Is Freelancing And How Does It Works?

What is Freelancing?

Freelancing is a type of self-employment. Instead of being employed by a company, freelancers tend to work as self-employed, delivering their services on a contract or project basis.

Companies of all types and sizes can hire freelancers to complete a project or a task, but freelancers are responsible for paying their own taxes, health insurance, pension and other personal contributions.

There are many different types of freelancers, but they tend to be knowledge workers who possess a high-level of skills and knowledge in a certain area, such as designers, writers, programmers, translators, project managers and so on. There is, however, another group of self-employed professionals that often get classed as ‘gig workers’ or ‘contractors.’ Self-employed handymen, cleaners, construction workers and drivers would fall into this category.

How does freelancing work ?

Type of legal entity to work under. To start working as a freelancer (that is, officially), you’ll need to register your business with the local government. 

• Paying taxes (invoicing, expenses, tax returns, etc.). Once you register your business, you’ll be legally required to file tax returns and pay taxes. Putting a robust invoicing and expense-tracking system in place from day one can prevent you from plunging into complete chaos at the end of the financial year.
• Opening a business account. In many cases, freelancers are not legally required to open a bank account, but most do it anyway. Being able to separate personal and business finances makes it significantly easier to claim expenses and work out the business profit at the end of the financial year.
• Building a client list. Building a client list prior to going freelance is a great way of getting enough work even during the quiet times of the year. Plus, as many freelancers will testify, there’s no better way of advertising your services than getting a client referral.
• Drafting your own freelance contract. A freelance contract is a legal document you and your client should sign before starting any work on a new project. What may seem like a boring formality at first, is actually your best way of protecting yourself against non-payment, liability and potential legal troubles. There are many freelance contract templates available online that you can download for free and adapt to your business.