Creative Freelancer Conference Blog

Guest Post: LLC? Incorporate?

Today's guest post comes from June Walker, tax and financial consultant to independent professionals since 1979 and, luckily for us, one of our speakers for the upcoming Creative Freelancer Conference this August in San Diego.

Every business conducts its affairs as a particular kind of business entity (or business structure). The organizational form that you choose determines which tax and legal regulations will apply. 
 
For tax purposes the IRS gives a choice of the following kinds of business structures:
· Sole proprietorship
· Partnership (several types)
· Corporation (two types)
 
If you’re a self-employed in business and you have done nothing about a business entity, your business is already structured. It is a sole proprietorship.
 
There is no need to complicate where simplicity will suffice. For all but a few newly-hatched solo ventures a sole proprietorship is the way to go. 
 
Wait. Wait. Wait.
If cousin Harry at the schvitz or Aunt Tillie during Thanksgiving dinner told you that you’re a big boy now and you’d better incorporate, hold on a minute. Don’t rush into anything. Get some information.
 
When you look at how to structure your indie business, trying to decide which entity is best for you, be sure to ask yourself the right question. (I know I’m always advising on how to ask a smart question. Well, you must, if you want a smart answer, that is.)
 
So, ignoring Harry and Tillie for the moment, are you looking to change your business entity for tax reasons or for liability purposes?
 
If it’s for tax reasons, as a sole proprietor are you taking full advantage of every tax law and reg available to you? Don’t go into the expense and hassle of incorporation if you can’t answer a firm yes to that question. 
 
The Feds say that nearly four out of five businesses in the United States are sole proprietorships. Yet just about every lawyer advises a budding indie to incorporate. In twenty-five years of experience I have found only one attorney who didn't answer “yes” when asked “should I incorporate?” And every new client that has come to me already set up as a corporation said he or she did it because “my attorney (or my accountant) told me to do it.” None of them had a clear idea of why incorporation was supposed to be an advantage.
 
The tax benefits of incorporation are pushed heavily by attorneys because that’s what they’re used to: working with corporations, not working with solos who design websites or computer programs. They don’t know the tax benefits available to indies!
 
Sometimes there are good reasons why a self-employed should incorporate, but, if advised that you must do it, find out why. Be sure the professional explains to your satisfaction – and also to the satisfaction of a savvy friend, colleague or relative -- what makes incorporation necessary. 
 
Facts -- to stifle some old husbands’ tales:
All business structures
· allow you to deduct business expenses
· allow some sort of deduction for medical insurance
· allow for contributions to pension plans
· allow you to hire employees or subcontractors
· allow the other guy to sue you
· do not allow you to hide income
· do not allow you to write off personal non-business expenses

To read more continue here…

Attend June’s seminar, Tax Solutions for Creatives, at CFC in August. Want to have June address your specific question? Email her at june@junewalkeronline.com and please note CFC in the subject.

Make the Most of Downtime

More of my conversation with freelance designer Steve Gordon, Jr., author of "100 Habits of Highly Successful Graphic Designers" (see the two previous posts here and here.)

I asked Steve about Habit #75: Enjoy the time off. Don’t freelancers sort of panic when they’re not working 24/7? (Um, see #80: Get a life.) You write about organizing your downtime like it’s work time. What kinds of things should freelancers be doing when they’re not doing paying work?

Steve replied with a laugh: Yes ... yes we do! But it’s how LONG we panic that tells you how well things are going. Look, we’ll all go bat-crap-crazy if we work perpetually without rest or recharge. Organizing the downtime gives importance to the things we do when not designing. That way your time isn’t sectioned off into the stark black and white titles of “working” and “slacking”. Also the downtime can be self-imposed and very necessary, as much as it can be you just waiting on more work to roll in.

So what can you do during downtime? That can vary, from organization to education to play. Marketing yourself as a freelancer takes a lot of thought and planning as it’s an animal all its own. Putting time into that is often hard if you've got work on the table. Downtime is great for think-tanking your own business. Working on your own website is a given. Maintaining a blog or some means of communication has become a big key in showing the world what you do and, more important, how you think.

Clean and organize the office space you’re using. Take a class in some other realm of creative life that you aren’t well-versed in. Oh, and PLAY! Play a whole helluva lot! Independent creatives do indeed have the ability to set their own schedules, so why fake it and bang out work on a constant 9-to-5 schedule if you really just need to get out and take a walk. Who’s stopping you? I personally do NOT agree with those who tell stories of constant 16 hour design days and long nights of toiling over work. That’s a stereotype and more about bragging up the hours you put in as some weird badge of honor than it is about design. Like it says in the book… Get a Life. Work smarter, not harder!

The hard thing is putting a time clock to the way a creative mind works. For instance, I was recently out and about enjoying a weekend trip to the mall when inspiration hit and I had to scramble to a bookstore to grab a pen and sketchbook so I didn’t lose the idea that hit me. No timesheet would give me credit for impromptu, accidental brainstorming while walking the mall. So if my mind is constantly in the on-deck circle for ideas and work, I deserve capitalize on, or even create, a little downtime.

Babe Ruth and Viral Marketing

Oh, admit it: you’ve thought about going viral with a crazy YouTube video or wacky publicity stunt. If it’s a “home run” and you get a zillion or so viewers, you (and your creative genius) will be known worldwide. You’ll command top dollar as prospects clamor for your services. Right?

Not so fast.

George Herman Ruth, Jr. (aka Babe Ruth) hit 714 home runs, but led the American League in strikeouts 1918, 1923, 1924, 1927 and 1928.

If you’re swinging for the fences, chances are you’re going to strike out too. Nothing wrong with that, but your rent still has to be paid.

How about swinging for singles instead?

• You’ve got limited amounts of time, energy and money. It’s easier to hit singles than home runs.
• Even if you swing your mightiest swing, hitting a home run is unlikely. Hitting singles is more likely.
• Folks who see your “single” are more likely to be the ones you’re interested in than the unqualified masses that view hugely successful viral videos.

Ready to swing for a viral single? Step into the on-deck circle and warm-up with these “pitch” examples:

• Design a totally unique and cool wallpaper, screen saver, or t-shirt. Retro, modern, whatever: let fly your inner artist! Or, add a message saying “Viral doesn’t work. Pass it on.” and let fly your inner snark!
• Host a pet fashion show, or a coolest hat contest. We hosted a root beer tasting in 2002, and enthusiasts still link to our results page.
• List 127 odd facts. Spice up your list with outrageous reasons to do business with you, including “Our clients get the secret recipe to Aunt Jen’s Sweet Southern Peach Cobbler,” or “It’ll finally get Oprah off the air.”
• Riff off popular culture or celebrities. Here in Long Beach, the Kreisler Media Group says “Branding Never Looked So Good.”

Back to the Babe: I admit he had no use for hitting singles.

He’d swing big, with everything he had. Sure, he struck out a lot, but he led the league in home runs in 1918, 1919, 1920, 1921, 1923, 1924, 1926, 1927, and 1928.

In the Babe’s own words, “If I’d just tried for them dinky singles I could’ve batted around .600.”
Imagine how many more runs he might have scored.

Back to you: be different, be provocative, be funny, be emotional. Incorporate your brand in a subtle (or over-the-top) way. Do it on the web, do it in print, or make a video.

However you do it, channel the Bambino’s spirit: never let the fear of striking out get in your way.

Batter up! 
 

Real Advice: The Art of Saying 'No'

I posted recently about my interview with freelancer Steve Gordon, who recently published "100 Habits of Highly Successful Freelance Designers" with Rockport. I asked him about one of the habits that I think a LOT of creative freelancers (writers, illustrators, etc.) have trouble with: #47—don’t cheapen yourself by grabbing at any paying project.

I asked Steve: Why is it so hard to say no to work you know isn’t a good fit, or to a client you know will drive you crazy? And how do you get past the fear of saying no?

He replied: Wow, that’s at the heart of a lot of ills for independent creatives. First, we all know that we have to do a few things here or there that we don’t necessarily want to do on the way to shaping our ideal careers. But doing the “money grab” is different. It’s hard to fight the knee-jerk reaction of “MONEY!” because freelancers live much closer to that paycheck-to-paycheck model than most. Money means you get to eat.

In my opinion, there's also still a lack of true collaboration between creatives that forces us to feel as if we can’t pass along a client to someone who can meet their needs properly. The truth is, not knowing when to pass on a project is harmful in the overall scope of what you want to be doing as you’re striving to become a successful freelancer.

If you take on all comers, a few things can happen. It’s a false assumption that you can do it  all. This isn’t a school project. If you take on work outside of your range of experience or level of expertise, there are no do-overs. You potentially damage a relationship with a client, kick dirt on your own name in your market and put a dent in 'creative services’ being seen as a viable industry.

And there's another remnant of not being able to say 'no': low-balling your price. Clients will sometimes put the pinch on and play you against another creative (or even against the nephew-who-took-a-summer–art-class-in-’88). Clients have the bargaining chip because there’s always someone who will say 'yes.' This is where we cheapen ourselves and the creative industry as a whole.

Experience seems to be the only way to fight the fear saying no to certain clients or projects. I say this because with experience comes a certain amount of discernment, allowing you to make the call on whether a client would be a good fit and having the wisdom and honesty to say a project is outside of the range of your particular service offerings. Additionally, experience allows you to forge trusted industry relationships that allow for collaboration, so you can help a client find the best fit and help a fellow collaborator find a bit of new work. The good you do comes back. I’m hopeful of this.

Advice From a Freelancer

FOH (that's Friend of HOW) Steve Gordon, Jr. has been a professional graphic designer for a decade, and he hangs out his own shingle in Omaha, NE. (The story of how Steve became a FOH is a good one; I'll save that for another post.)

Steve recently published a book with Rockport Publishers, 100 Habits of Highly Successful Freelance Designers (his advice applies equally to all creative solopreneurs). It's divided into chapters about making the leap to freelancing, working with vendors, dealing with downtime and the like — but the issue of money makes frequent appearances throughout the book.

In an e-mail interview, I asked Steve about the fact that much of the advice in the book has to do with money — not just about pricing your services, but also about talking money with your client and about ensuring your own financial success. (One of my favorite points was #55: Put yourself on the payroll.)

Then I asked him: Is money one of the things you personally wrestle with as a freelance designer? How did you learn how to deal with the money part of your business?

He said: Money is such a hang-up, even if you’re good with it. It’s a constant struggle because there are several ways to deal with it. The kid in me wants to cash a check and go shopping! But keeping an eye on operating expenses, write-offs, taxes and business income inevitably overlap with the purely personal side of things. As a true freelancer, or as I like to say—”independent creative”—you're an individual acting as a business. You're often collecting payments and cashing checks under your own name, and it’s a total act of  discipline to be able to set aside dollars for both your business and personal necessities. Putting myself on a sort of an allowance gives me some structure. I also reward myself to pacify the urge to spend like I know more is coming, as is the case with a 9-to-5, paid-every-two-weeks gig.

The compensation conversation is a tricky one, because it’s just that—a conversation. You could be great talking about money, but the party you’re talking to might not be. Clients that freelancers work with are often easily spooked at the subject of money. They're operating very similarly to the freelancers themselves, watching dollars, being creative with expenses and trying to keep production costs low. If your tone is wrong, the pressure too high or the volume too loud, they shut off and the conversation is over. Learning how to approach each individual client is the key. The subject gets no easier but, knowing how to communicate with the client opens doors to talk about what is often the last thing in the creative services conversation. It should be moved to the front, candidly, but carefully.

Honestly, I learned to deal with money and the financial conversation during my time in the marketing department of the credit-card processing arm of a bank. Just knowing how to handle conversations about appropriated funds, budget meetings, equipment upgrade costs and even convincing my old bosses to send me to the HOW Conference has paid off big in seeing money as a part of the whole equation, versus it being a separate, uncomfortable afterthought.

I'll have more of my conversation with Steve in upcoming posts.

Start Linking

More advice on the social media/online networking front, just in case you're still hesitant or don't see the value. (I was in that position just 6 months ago; now I'm a social media convert.)

Kristen Fischer, the prolific freelance writer and blogger who's super involved in the freelance community (and occasional writer for HOW), has a great piece on why you should be actively involved on LinkedIn.

She writes in a post on FreelanceSwitch:

Sometimes freelancers don’t use career tools because they think that these resources are only geared for job-hunters and corporate ladder-climbers. But some career tools are just too good to pass up, and I think LinkedIn Recommendations is one of them.

Fischer writes about REALLY using LinkedIn, going beyond setting up a profile and making a couple of connections. The site is great for building your professional reputation by answering questions that pertain to your specialty, capturing testimonials from people you've worked with and also giving recommendations for others.

If you're new to LinkedIn, I'd suggest you start with our very own Creative Freelancer Group, where you'll find lots of folks like you who are interested in learning and sharing from each other. I look forward to Linking with you!

The Vendor Client Relationship

Several people sent me the link to this funny video about how clients are pushing back on their vendors lately. I guess it's resonating with a lot of creatives.

Are you getting this too? If so, how are you handling it?