Contracts, Taxes & Legal Basics
The unsexy stuff that protects your income and keeps you out of trouble. Read this before your next client engagement.
Your contract minimum viable product
At minimum, every engagement needs: scope of work, payment terms with a deposit, IP transfer clause (transfers upon full payment only), revision limits, kill fee, and governing jurisdiction. Use a tool like Bonsai, HelloSign, or HoneyBook to templatize this — a contract should take 10 minutes, not an hour.
The 50% deposit rule
Never start work without a deposit. 25–50% upfront is standard and expected. It filters unserious clients, covers your time if the project is cancelled, and shifts the risk dynamic in your favour. Clients who refuse a deposit are a red flag.
Freelancer taxes 101
In the US, set aside 30–35% of every payment for taxes (federal income + self-employment tax of 15.3%). Pay quarterly estimated taxes to avoid penalties. Deductible business expenses include: home office (if exclusive use), equipment, software subscriptions, professional development, health insurance premiums, and a portion of phone and internet.
Business structures
Most new freelancers operate as sole proprietors (no setup required). When you hit $50K+/year, consider an LLC for liability protection and a more professional appearance. At $80K+/year, talk to an accountant about an S-Corp election — the tax savings often exceed $5,000/year.
Getting paid: what to do when a client doesn't pay
Send a formal demand letter via email. State the amount owed, the original payment terms, and a 7-day deadline. If unpaid, send to a collections agency or file in small claims court (most jurisdictions allow claims up to $10,000–$25,000 with no lawyer required). Prevention is better: always use contracts and always get a deposit.