Freelancer

HERE’S WHAT YOU NEED TO KNOW ABOUT THE LAW FOR FREELANCERS IN THE U.S.
Freelancer

If you are freelancer (aka independent contractor), you are essentially your own small business (a sole proprietorship unless you set up a formal structure such as an LLC or corporation), and generally the law treats you as a business, not as an employee. So in general the employment laws don’t apply to you (unless your “client” is missclassifying you as an independent contractor – see below). But business laws usually do apply.

Here we present the laws that apply across the country. See below for a note on local laws.

I’m not sure if I am a freelancer/independent contractor. How do I know? 

Determining whether you are an independent contractor (aka freelancer) is sometimes complex, and you may want to get an employment lawyer if you are unsure. Many employers misclassify (whether intentionally or not) employees as independent contractors to avoid paying certain taxes and other benefits. The category you fit into has implications as to the laws that apply, as you will see below.

You may be an independent contractor if1Restatement (Second) of Agency §220 (1958).  S. G. Borello & Sons, Inc. v Department of Indus. Relations (1989) 48 C3d 341, 256 CR 543:

a. You are retained for a specific period of time rather than indefinitely;
b. You have the freedom to set your own hours/schedule;
c. You use your own tools to do the job rather than using the company’s tools;
d. If the work you are performing is NOT part of the client’s regular business.

IRS classification may vary from other laws

In certain occupations, corporate officers and service providers are considered “employees” even if they qualify as independent contractors under other law.2IRC Sec. 3121(d)(1)

KEY LAWS TO KNOW FOR FREELANCERS

In general

  • Wage and Hour laws generally do NOT apply to you.3The National Labor Relations Act (29 USC Secs. 151–169) and the Fair Labor Standards Act (29 USC Secs. 201–219) do not apply.

Taxes & filings

When do I pay tax as a freelancer?

As a freelancer or small business, you actually must pay taxes 4-5 times per year, not just once!

Tax pig with money dollars

If you do NOT have a corporation or LLC (you are a “sole proprietor”), or if you are the sole owner of an LLC: you are generally required to file your tax return (and make payment) by mid April, and then make “estimated” quarterly payments without filing a return by mid June, mid September, and mid January.

If you have an LLC with multiple owners, or you have a corporation: you are generally required to file your LLC/corporate tax return (and make payment) by mid March, then your individual tax return (and make payment) by mid April, and then make “estimated” quarterly payments without filing a return by mid June, mid September, and mid January.

Do my clients need to send me any tax forms at all?

A business client which paid you $600 or more within a calendar year is required to send you a Form 1099-MISC (“1099”) by the following Jan 31 (but even if they don’t, you still must report the income on your taxes), and the business must file the 1099 with the IRS by Feb 28.

To help them fill out the 1099, your business clients may ask you to fill out a W-9 form, which asks for your basic information, including social security number.

However, if you as the freelancer are incorporated (not including LLCs), the business does not need to do the 1099.7

The 1099 requirement only applies to clients who have used your services for their business, not for their personal use.

Do I need to send any tax forms for freelancers/subcontractors I hire?

Same as above, but you are the business client, and they are the freelancer. Note: If you have “employees” (see who are employees vs independent contractors), you would generally withhold taxes from each paycheck, and send a W-2 the following year by Jan 31.

Intellectual property

What are my intellectual property rights as a freelancer?

If you are creating any intellectual property (writing, art, design, etc.) for a client and you have not signed a contract stating that the copyright belongs to the client (“work for hire”), then the copyright by default belongs to you, NOT the client (see Copyright for explanation).

ADDITIONAL LAWS IN YOUR STATE/CITY

There may be other laws specific to your state, city or county.

For example, New York City recently passed the first protections for freelancers, requiring companies hiring freelancers to use a written contract and increasing penalties for violating the contract.4Freelance Isn’t Free Act

Check out our California laws for freelancers.

RECOMMENDATIONS

  • To protect your rights as a freelancer, you should get a good contract drafted by a lawyer to spell out exactly what the terms are when a client hires you.
  • It may also be a good idea to form an LLC or corporation to protect your assets and possibly save on taxes.
  • Talk to a lawyer for more info.

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