With the economy on the mend but the labor market still hurting, many workers are shunning the corporate nine-to-five and turning to freelance work. These new freelancers must learn to fend for themselves in an unfamiliar and sometimes hostile business environment. Freelancers put effort and ability on the line for clients who have no compelling interest in the freelancer beyond the work that she produces. To protect her own best interests, the freelancer must be sure to formalize the terms of the working relationship with legal documents. Here is a guide to the common legal documents that freelancers use and when to use them.
Common Legal Documents for Freelancers and When to Use Them
A professional freelance relationship often begins with a proposal that details the work to be done, including design specifications, deadlines, fees, payment dates, and covered expenses. A freelancer will pitch this proposal to a potential client. In order that the potential client not use these ideas without hiring the freelancer, the freelancer will often use a Confidentiality Agreement.
Once the potential client expresses an interest in working with the freelancer, the two parties will draft a Consulting or Work-for-Hire Agreement. Contracts such as these protect the freelancer and the client, and are a professional way of doing business. Keep in mind that contracts are legally binding, so be sure to understand the terms of the agreement before signing. Common provisions of a Consulting Agreement include: scope of work; term or length of agreement; breach of contract clause; rate and terms of payment; covered expenses; assignment of copyrights; and indemnity from legal liability. It is in the interests of all parties for the contract to be as specific as possible. For clarification of any of these elements, contact a business law attorney.
Freelancers often build upon the work or likeness of others, for which the freelancer must obtain licenses and permissions. Common legal documents to ensure a freelancer respects the rights of others include License Agreements, Video Clearance and Release Forms, and Release for Use of Likeness documents. In addition to respecting the rights of others, a freelancer must assert rights over her own work, most often through the use of Copyright Notices.
Some freelancers outsource parts of a job to other freelancers. When this occurs, the hiring freelancer will draft a Subcontractor Agreement to specify the terms of the relationship between herself and the other freelancer(s). Note that some Consulting Agreements include language that bars a freelancer from subcontracting out parts of a project, so freelancers should check their original agreement before hiring a subcontractor.
Should I Incorporate My Freelance Business?
A key legal question many freelancers ask is, “Should I incorporate my freelance business?” Most freelancers don’t have a boss, don’t have any employees, and work from home. Why would they want to turn independent freelance work into a business entity? For two important reasons: reputation and legal liability. Sometimes, independent freelancers can be seen as unprofessional and unreliable; such a value perception could lead clients to abuse the freelancer’s talent, discredit her creative input, or even not pay for the work. Creating a business entity can help solidify a freelancer as a legitimate business in the mind of the hiring party. In regards to legal liability, if a freelancer operates as an individual and is sued for some reason, the freelancer’s personal assets are on the line. However, if the freelancer operates as an incorporation and is sued, only the assets of the company are in danger.
There are a number of different types of business entities that a freelancer can form. These include: Sole Proprietorship, Partnership, Corporation, C Corporation, S Corporation, and Limited Liability Company. For more about these business entities, read our help article on setting up a business structure. For more assistance determining which business entity to form contact an incorporation specialist or business law attorney.
According to Brian James Kirk at Technically Philly, at the very least, “all freelancers should have an incorporated entity, a client contract, a subcontractor agreement and a non-disclosure agreement.” Protecting yourself from legal liability need not be complicated or expensive. Rocket Lawyer offers easy and affordable legal documents to meet all of a freelancer’s legal needs.