Does A Freelancer Need A Business License Online?

Have you found yourself wondering if a freelancer needs a business license online? Maybe you have started working freelance online and want to know if you need a business license online to operate? Or are you curious and want to know more? No matter what the reason is that brought you here, we have the answer for you! 

Working out if you need a business license as a freelancer can be tricky, especially if you are operating online only. The rules and regulations can seem murky, with pages of convoluted and conflicting guidance, you can quickly find yourself overwhelmed and frustrated, unsure where to turn or who to trust.

You start to wonder if you will ever know whether you need a business license as a freelancer or not. 

Well, no more! Today, we are here with the answers you need. Keep reading to find out if a freelancer needs a business license online and everything else you need to know! Get ready to become a business license expert today. 

What Is A Freelancer?

Before we dive into today’s article, let’s have a quick recap for those that need it. A freelancer is someone self-employed, earning money per task or job they complete. Freelancers make up a large part of the workforce and operate in most industries including finance, marketing, and creative industries like photographers and writers. 

A freelancer will seek out work or be contacted by a company or an individual. Freelancers don’t have any obligation to one company and can work with a variety of people completing tasks and jobs that align with their passions or beliefs.

Freelancers can also set their wage, and hours, and have far more control over their time than someone who works for a company. 

As a freelancer, you work for yourself, and although it might not sound like it, you become the business! As you build up a reputation in your field, people will seek out your expertise to help them with a photoshoot, seek legal advice, or have you design a website. No matter the industry you work in, there is an opportunity to become a freelancer. 

Now that we have briefly established what a freelancer is, let’s move on to see if a freelancer needs a business license online or not. 

Does A Freelancer Need A Business License Online?

Generally speaking, no, a freelancer does not need a business license to operate online. However, this can vary depending on the state or jurisdiction you live in, so it is always best to check directly with your local authority before you start working as a freelancer! 

Although you don’t need a business license to work as a freelancer online, there are some options you should explore. A business license provides you and your clients with a level of protection. Working as a freelance solicitor, for example, a business license offers you and your clients protection and in some states will be a legal requirement. 

But for other industries, there are few regulations for freelancers, and you could wind up not getting paid what you are owed! Having a license, or a similar business entity will ensure you are protected should something go wrong, and your client is. 

Let’s take a look at your options now to see what is the best option for you! 

Sole Proprietorship

A sole proprietorship for freelancers is a logical option, and the most basic. It essentially states that you run your own business and has no legal separation between you and your business. You don’t need to do anything to establish this either, once your freelance business is up and running, it is classed as a sole proprietorship. 

You can set up a DBA if you wish (Doing Business As) which allows you to use a different name for the business. This must be set up with your local government body and involves filling out some forms and paying a small fee.

Tax wise, you won’t need to file any additional returns and you get a lower tax rate than other business entities. But you will be liable for all debts of the business, so it’s worth considering other options if you need to take loans or are at risk of being sued. 

LLC

LLC, or Limited Liability Company, is the halfway point between a corporation and a sole proprietorship. This allows you to keep your assets separate from the business without being a corporation. You can set it up as a one-person business too, making it ideal for freelancers! 

You can still claim on individual taxes too, and you get some protection. If you are struggling, you don’t need to worry about your assets being seized. You need to take care though, as it can be tricky to define who can act on behalf of the company or not. 

Corporations

Finally, we have corporations. There are two different types, C Corporations and S Corporations. The letters refer to their tax code. A corporation runs separately from the individual and is owned by shareholders. When setting up a corporation, you need to decide who the shareholders are, how many shares you will offer, and how others can gain shares.

As corporations can be owned by others and sell stock, money can be raised easily. However, for smaller firms and freelancers, this does mean you aren’t the only one benefiting from the success of your hard work! You will also need to file your taxes twice, known as double taxation, which can impact your profits. 

Final Thoughts 

And there you have it! Freelancers don’t need a business license to operate online, but you should consider other business entities that can offer you some extra protection. These can keep your assets separate and ensure that should anything go wrong you won’t be left penniless! 

Frequently Asked Questions 

Before you leave be sure to check out our brief FAQ section to get your last-minute queries answered! 

Can I Go Freelance Without A Business License?

Yes, you can, but be mindful that should anything go wrong, you and your clients won’t be protected. 

How Do I Get A Business License?

You can get a business license online or in person, by registering the business with the local authorities in your jurisdiction or state. 

Do Freelancers Pay Taxes?

Yes, freelancers are legally obligated to pay taxes. They will need to pay a self-employment tax and file their taxes themselves or with the help of an accountant.