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Thinking of Becoming a Freelancer? Here's What You Need To Know.

First, who is a freelancer anyway?

A freelancer is someone who works for themselves and offers services to different people or companies. They're not employees, so they don't have a boss. Instead, they do projects for different clients.


Freelancers are often synonymous with self-employment, and in both cases, government authorities impose certain conditions for you to be considered a freelancer:

  • You supply your tools of trade or profession.

  • You have control over how, when, and where you work.

  • You can cover your own risks. Why? Because as a freelancer or a self-employed individual, you don't get paid if you get sick unless you have insurance. And you don't get paid if you don't work.


The rules on freelancing can be different depending on where you live. For purposes of legalities, I categorized countries depending on how they look at freelancing vis-a-vis business entities.


Category 1

There are countries that look at self-employment as a bigger category – with freelancing only as a subcategory of self-employed individuals.


For these countries, freelancers are not considered tradespeople with a business entity such as a sole proprietorship. (ex. Germany)


Category 2

There are countries that categorize Freelancing as equivalent to self-employment and categorize freelancers automatically as sole proprietors. (Ex. Sweden, UK)


Now, don’t get confused! I just mentioned this because when it comes to registration, the first thing you need to know is this: Can you register as a freelancer without registering a business entity (sole proprietorship, limited liability company or partnerhsip)

This is an important question because, if the answer is YES, you can start freelancing with very few requirements, sometimes none!

But if the answer is NO, then you need to register a business entity which can be quite tedious.


The most common requirement for freelancers is having to register with a tax agency. Of course! The government wants to make sure that you are going to pay taxes!


But again, rules differ, so before freelancing, check with your local authorities first.


One thing to remember:

Registration as a Freelancer is not automatically the same as registering your business entity (that is, registering a sole proprietorship, limited liability, or partnership).


For some countries, you do not need to register your business entity to be a freelancer (for example, in Germany, US, Switzerland).


But in some countries, registering as a freelancer requires you to choose and register a business entity (Ex. Sweden, UK, The Netherlands)


I compiled some requirements below. Most of the countries listed are in Europe, but I included the US and UK.

Skip to the country:

UNITED STATES

In the United States, freelancers do not need to register to get started, provided, they use their own names! Now, if you want to use another name and not your name, then registering a DBA or “Doing Business As” is required.

You need to pay taxes if your income reaches $400


If you are a freelancer, you are considered an unregistered sole proprietor.


If you want to register as a freelancer, then you need to operate under the name of a business (which can be your name) and register a business entity (either a sole proprietorship, limited liability company or partnership)


How to register?


First, Get an EIN Number.


The next steps will differ, so you need to check the state where you live in.


In New York, for example, click here for the steps. In general, here are the things you need to prepare when you register:

1. EIN Number

2. Business Mailing Address

3. Business name

4. Phone Number

5. Email Address



NORWAY



As a freelancer, you are considered an unregistered sole proprietor.

The rule is: there is no need to register as a sole proprietorship (a business entity) unless you have more than five employees, are reselling purchased goods, or you use goods as collateral.

Of course, if you prefer to incorporate a limited liability company, registration is required from the start.


Here are the links on how to register different business entities in Norway:




SWITZERLAND


Freelancers usually register as a self-employed individuals. Here is a guide for self-employed individuals.

As a rule, you must register as a self-employed individual as soon as you have at least three clients and earn a minimum of CHF 2300 per year – expenses already removed. This means that you can start freelancing without registering!

Where to register as a self-employed individual: AHV/AVS or the compensation office / Ausgleichkassen in the Canton where your company is domiciled.

Do you need to register as a sole proprietor if you are a freelancer?

No. You don't need to register as a sole proprietor (Einzelfirma, Ditta Individuale, Raison Individuell) unless you are earning more than CHF 100,000 per year, in which case, you also need to register for VAT. Below this threshold, it is only voluntary to register your sole proprietorship.

Where to register? Handelregisteramt / Registre du Commerce where your business is going to be located.



DENMARK


Freelancers must obtain a NEM ID and CPR number.


Are you a freelancer or a sole proprietor? Here is a guide:


How to Register Your Sole Proprietorship or Limited Liability Company, check out these links:





GERMANY


Freelancers (Freiberufler) are self-employed individuals who work simultaneously for multiple clients and employers.

Unlike tradespeople (Gewerbetreibende), they usually operate under their own name rather than a company name and do not have to register with the trade office or pay a trade tax.

How to register: Register as a freelancer with the tax office no later than four weeks after you start working. The responsible tax office is the one at your place of business, in most cases, probably at your place of residence.


You can inform them in an informal letter that you are taking up freelance work. The letter should contain your contact details, tax identification number, description of the activity, and the start date. What if you are, in fact, a tradesperson? Then register your sole proprietorship by filling up this form: Fill up Gewerbeanmeldung


If you are a Small Business not earning more than 22,000 Euros in the first year and 50,000 Euros in the second year, you can be considered a Kleingewerbe. As a Kleingewerbe, you don't need to be entered in the commercial register (Handelregisteramt). But you still need to be registered in the trade office (Gewerbeamt)



SWEDEN

As a freelancer, you are considered a sole trader / sole proprietor unless you opt to set up a limited liability company.

As a sole proprietor, you must register with the Swedish Tax Agency (Skatteverket). You can, but do not have to, register with the Swedish Companies Registration Office (Bolagsverket).

To register as a Sole proprietor, click here.


To register as a Limited Liability Company, click here.



NETHERLANDS


As a freelancer (zelfstandige zonder personeel, zzp'er), you need to register with the KVK and choose whether you will be a sole proprietor (Eenmanszaak), general partnership (Vennootschap onder firma) or Limited Liability (Besloten vennootschap (bv) or naamloze vennootschap (nv))


Click here for more details on how to register. When: You must register your company. Within one week before or after the start of your business activities.


UNITED KINGDOM


In the UK, a freelancer is automatically considered a sole trader or a sole proprietor.


To start freelancing, you need to register as a sole proprietor as soon as you earned at least £1,000 from self-employment in a given year (usually from April of the last year to April of the current year). Click here to see the rules that are applicable to sole traders.


Of course, you can set up a limited liability company instead. Click here.




AUSTRALIA

Freelancers must register and get an ABN or Australian Business Number. Click here to apply for one. This is important because if you fail to quote your ABN when invoicing Australian businesses, they can legally withhold up 47% of the payment. When you register for an ABN, you will be asked whether you are registering as a sole trader, sole proprietor, or some other business entity. This means you need to choose a business structure before starting your freelancing job.



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