Five Legal Issues Every Freelancer Should Know

Running your own freelance business in Boulder, Kansas City, or beyond can be exciting and profitable, but it’s important not to ignore the legal aspects. Below are five key legal issues that every freelancer should understand to keep their business on track.

Obligations to Your Current or Former Employer

If you’re planning to go full-time as a freelancer, check whether agreements with your current or former employer could limit your ability to work independently. You might be subject to non-compete agreements, non-solicitation clauses, or non-disclosure agreements that restrict your freelance work.

If you’re freelancing part-time while still employed, review any policies on side work. If your freelance work is similar to your job duties, your employer may have a legal claim to it.

Should You Form an LLC?

Operating as a sole proprietor is an option, but forming a single-owner LLC can help limit your personal liability. It may also provide tax benefits if you elect S-Corp tax status.

An LLC allows you to open a business bank account, manage expenses, and appear more professional to potential clients. If you plan to grow your business, an LLC offers flexibility and legal protection.

Paying Taxes as a Freelancer

As a freelancer, you’re responsible for paying your own taxes, including federal, state, and local income taxes, as well as Social Security and Medicare.

A good rule of thumb is to set aside 20-30% of your net income for taxes. Paying estimated taxes quarterly can help avoid surprises at year-end. Working with an accountant ensures you’re meeting tax obligations and maximizing deductions.

Always Use Client Contracts

Contracts protect your business and define expectations. A strong freelance client agreement should cover:

• Payment terms
• Scope of services
• Ownership of intellectual property
• Confidentiality
• Termination rights
• Other important legal provisions

A well-drafted contract reduces misunderstandings and protects both you and your clients. If you need a template, check out my Client Agreement Toolkit here on this website.

Contracts with Subcontractors

If you hire subcontractors, you also need a written subcontractor agreement with them. These contracts are similar to client agreements but should be written from your perspective as the hiring party. Like above, if you need a freelance template, check out my Contractor Agreement Toolkit to help you.

Be especially careful with intellectual property terms. Your contract should state that you own the work product and related IP. Without this, the subcontractor may legally own their work, making it difficult for you to transfer ownership to your clients. Learn more about how to write IP contract provisions.

Final Thoughts

Understanding these legal issues will help protect your freelance business and set you up for long-term success. Whether forming an LLC, managing taxes, or using proper contracts, freelancers in Boulder, Kansas City, and beyond addressing these essentials early can prevent costly mistakes down the road.

*This article is general in nature and is not legal advice.