How to Start a Freelance Business

by | Nov 9, 2022 | Career

While many industries were hit hard by the COVID-19 pandemic, the freelance market has flourished. 

According to a 2020 survey, over a third of the American workforce freelances, contributing approximately $1.2 trillion to the US economy. A study released by Fiverr confirms this shift towards freelancing, with 68 percent of surveyed workers saying they are more open to freelance work or a side hustle.

If you’re one of these people, figuring out how to start a freelance business can be a real challenge, so in this article, we’ll explore five steps you can take to set yourself up for freelancing success.

Set SMART goals

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Setting benchmarks for your business is crucial for long-term success. It will also help your confidence as a freelancer to see yourself consistently hit the milestones you’ve set for yourself.

When setting your goals, make sure that they’re SMART—specific, measurable, attainable, realistic, and time-based.

Set specific goals

You’re more likely to accomplish goals when they’re specific. For example, rather than setting a general goal like, “I want to learn how to play the piano,” a better, more specific goal would be, “I want to enroll in piano lessons and practice three days a week.”

Set measurable goals

Measurable goals have determined criteria for assessing progress. Without measuring criteria, you won’t be able to determine whether you’re on track to reach your goals.

When making measurable goals, ask yourself “how many” and “how much.” Here’s what adding measurability to the piano example looks like: “I want to enroll in piano lessons and practice three days a week. Every week, I will learn two new songs that I can play without sheet music.”

Set achievable and attainable goals

SMART goals must be achievable and attainable. Goals should be stretched enough to make you feel challenged without being impossible. When thinking about attainability, ask yourself if you have the resources and capabilities to achieve the goal.

Similarly, goals should also be realistic, meaning you can achieve them given your available time and resources. Is the goal feasible given your time and resources? Are you able to commit to achieving the goal?

Set finite goals

Finally, SMART goals must have start and end dates. Without a time constraint, there’s no sense of urgency and less motivation for you to achieve your goals. Be sure to set deadlines for yourself to keep your business on track.

Create a pricing strategy

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As you begin to determine pricing, consider how you plan on charging clients. Will you have an hourly rate or charge a flat fee? Will you use project quotes? It’s important to have a plan for how you’ll make your money before you start actually making it.

> Tech Side Hustles: 7 Different Ways to Make Extra Cash

Once you’ve decided what your pricing structure will look like, you’ll need to figure out how much your services cost. You can start by researching industry averages on sites like Glassdoor and Payscale

After you’ve done some basic market research, you can set your own rate based on your specific experience and desired earnings. A basic formula that many freelancers use for hourly rates looks like this: 

Hourly rate = Annual income / Hours worked in the year

But you can also use online calculators like Clockify, which take into account your industry, location, and experience level. 

Choose a business entity

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A business entity is the legal structure that your company falls under.

When you select what type of business entity you want to form, you’re determining everything about how you’ll organize your company. Whatever entity you choose greatly impacts how your business operates, including things like how you’re taxed and whether you’re held liable for your business’ debts.

Fortunately, there are a lot of options, and there isn’t really a wrong choice. Each type of entity has its own pros and cons that suit different business goals and personal needs. These are the four main types of business entities:

  • Sole Proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation

To help give a better idea of which type of business entity is best for you, let’s take a quick look at some of the advantages and disadvantages of each.

Sole proprietorship

A sole proprietorship is an unincorporated business that has just one owner who pays personal income tax on profits earned from the business. It’s the default business entity for freelancers, with over 80 percent of freelancers working as sole proprietors.

Sole proprietorships are cheap and easy to form and run, making it a great choice for people first getting started with a business. You can always form an LLC or corporation later, once your business becomes more established and you’re confident in your earnings.

Some of the advantages of a sole proprietorship include:

  • It’s cheap and easy to form, particularly for freelancers and solopreneurs
  • You have complete control over your business and can run it however you see fit
  • It doesn’t require registration with the government, and you don’t have to pay any fees to incorporate
  • You personally own your business and all of its assets—there’s no legal difference between personal and business finances
  • You receive all business profits
  • Unlimited liability means creditors are more likely to extend credit if needed
  • Taxes are simple—you don’t pay taxes or file tax returns separately from your business because you and your business are considered one entity for tax purposes

Disadvantages of sole proprietorships include:

  • Because you and your business are one, you are held personally responsible for all debts and liabilities
  • Banks are hesitant to give loans due to typically smaller assets and higher turnover rates
  • Difficult to raise capital on a long-term basis since the business relies on one person only


Partnerships are the default entity for a business with multiple owners. If you’re starting a business with multiple people, a sole proprietorship isn’t an option for you. Instead, a partnership is automatically created when two or more people start a business together. 

Advantages of a partnership include:

  • Two heads (or more!) are better than one
  • Easy to establish and low startup costs
  • More capital available for the business
  • You can make the most of income splitting, which helps with tax savings
  • Partners’ business affairs are private
  • Easy to change your legal structure later if business circumstances change
  • Limit on external regulation

Disadvantages of a partnership include:

  • Owners don’t have limited liability, which means that partners are personally liable for all the partnership’s debts and lawsuits
  • You’re personally liable for business debts that your partners incur (whether you know about them or not)
  • The risk of disagreements and friction among partners and management
  • If partners join or leave, you will have to value all the partnership assets, which can be expensive

Limited liability company (LLC)

A limited liability company, abbreviated to LLC, is a cross between a sole proprietorship or partnership and a corporation. Owners of LLCs are referred to as members. There can be a single member or multiple members.

LLCs are popular because they combine the flexibility, informality, and tax benefits of a sole proprietorship or partnership with the advantage of a corporation’s limited liability. 

A key characteristic of an LLC is that it has its own legal existence separate from the members. An LLC is even considered a person in the eyes of the law. This means an LLC can own property, borrow money, hire employees, sue and be sued, have bank accounts, and more.

Members don’t personally own the business assets of an LLC, such as the equipment, bank accounts, and receivables. Instead, the LLC owns these assets while members own an interest in the LLC.

Advantages of an LLC:

  • Members are protected from some (and sometimes all) liability if the business runs into legal issues or debts
  • If anyone files a lawsuit against the LLC, they won’t be able to access your personal assets—they can only collect against your company’s assets.
  • Forming an LLC is easier than forming a corporation
  • You can form an LLC with as little as one person, but you can also have an unlimited number of members
  • Flow-through income taxation helps keep things simple
  • Members can receive revenues that are larger than their individual ownership percentage

Disadvantages of an LLC:

  • LLCs are harder and more expensive to form than a sole proprietorship or partnership
  • As a member of an LLC, you cannot pay yourself wages
  • Depending on your state, high renewal fees or publication requirements can be expensive
  • Many states have a franchise or capital values tax on LLCs, ranging from a flat fee to an amount based on the business’ revenue
  • Investors are more likely to put their money into a corporation, making it more difficult to raise financial capital


A corporation is the most complex type of business entity to form and run. As such, this type of business entity isn’t very popular among freelancers and small business owners.

When people say “corporation,” they’re probably referring to a C corporation. But there are actually two different forms corporations can take:

  • C corporations. A sole proprietorship, partnership, or LLC with no limit on the number of shareholders. Subject to double taxation and must have a board of directors.
  • S corporations. A partnership or LLC that enjoys pass-through taxation. S corps can have 100 shareholders at most.

C corps are more popular than S corps, so we’ll stick to talking about them for the rest of this section.

Corporations vs. LLCs

Similar to an LLC, corporations provide limited liability protection and require you to file business formation documents with the state. A corporation is also its own legal entity entirely separate from its shareholders.

The main difference between an LLC and a corporation is that an LLC is owned by one or more individuals, whereas a corporation is owned by its shareholders. A shareholder’s ownership percentage reflects the number of shares of company stock they own. Corporations can authorize additional shares or transfer their shares to someone else easily.

Additionally, corporations generally have more standardized and rigid operating structures, requiring more reporting and recordkeeping than LLCs. As a result, LLC owners typically have more flexibility in how they run their businesses.

Pros and cons of corporations

Advantages of a corporation include:

  • Owners are separate from legal liability, meaning that they’re not entirely responsible when faced with debt or legal issues
  • An established structure with clearly defined roles, agendas, and accountabilities
  • You have the ability to sell stock, which raises the likelihood of gaining financial capital
  • Employees are able to buy stock at a fixed-in price and receive stock benefits

Disadvantages of a corporation:

  • Setting up a corporation is time consuming and expensive
  • Lots of regulations limit flexibility
  • Possibility of double taxation, where both the corporation’s profits and stockholder’s paid dividends are taxed

Market Yourself

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Freelancers need to embrace and prioritize digital marketing to draw in new clients. 

Building a professional social media presence is a great way to market yourself as a freelancer. Regardless of the type of work you do, your GitHub portfolio should appear across all social channels. Depending on the services you offer, different social platforms will be better suited to you.

For example, if you’re a developer, you’ll likely see more success on LinkedIn as opposed to, say, Instagram. Whatever platforms you use, be sure to post quality content consistently, using hashtags and geotags to attract potential clients.

Build your portfolio

Developing a coding portfolio is key to marketing your freelance business. Prospective clients will want to view your past work and skills, especially if you’re just getting started and don’t have referrals or testimonials yet.

Your online portfolio is crucial for gaining new business because this is the first place many of your potential clients will meet you. Make sure your coding portfolio is an accurate and diverse reflection of what you can bring to the table.

Start a blog

Blogging is another great way to promote your freelance business’ brand. It helps establish yourself as a thought leader in your industry, giving you the kind of credibility your business needs to stand out. Successful blogging requires some level of innate writing talent, regular posting, and a basic understanding of search engine optimization (SEO) best practices.

Once you’ve gained some traction and have a few clients under your belt, ask them to review your business and provide referrals. You can also do this with friends, colleagues, and other connections to boost the credibility of your freelance business. 

Find work

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In addition to creating a portfolio and building an online presence, you can find lots of opportunities yourself.

> How to Find (H)opportunities and Get Paid on Nerdly

There are a plethora of online platforms dedicated to connecting freelancers with clients to make collaborating easier. Popular freelance websites include:

  • Nerdly
  • Upwork
  • We Work Remotely
  • SimplyHired
  • Dribble
  • Fiverr
  • People Per Hour
  • Designhill
  • Toptal
  • Guru
  • Freelancer
  • AngelList Talent
  • DesignCrowd
  • Working Not Working

Most of these sites require setting up a profile, so it’s a good idea to have a short, strong bio on hand that you can use for your profiles on these platforms. In addition to connecting you to work, some platforms offer courses and webinars that can serve as useful resources. You can also network with other freelancers working in similar fields.

Stay persistent and reap the benefits

If you want to make it as a freelancer, you need to be prepared to stay the course and be patient. Success requires steady work, so don’t be discouraged if you don’t see results right away. 

Using the steps outlined in this blog can help you set your business up for success. With consistent effort and careful planning, you’re well on your way to freelancing full time!

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About Alexandra M
As the Lead Content Developer, Alexandra is responsible for improving website rankings on major search engines, as well as editing all company copy. Her hobbies include rock climbing and going to concerts.

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