Do Freelancers Need a Business License?

Updated 4/24/18

When a freelance writer is first starting out, he or she has to take charge. This means figuring out health care and insurance, tax information, and, often times, obtaining a business license.

Before jumping in and buying a license, a writer should do background research and find out if it’s necessary. The requirements for a business license depend upon where a freelancer lives. Dana Neuts, a Seattle-based freelance writer, said that, in her experience, the licenses can cost anywhere from $35 to $100 per year. However, in some places, like the state of Washington, small business owners only have to pay the fee one time.

To figure out if a business license is necessary in a certain area, a writer can call the local office that issues them. According to Nolo.com, “This might be the city or county clerk, planning or zoning department, city tax office, building and safety department, or department of public works. Your local chamber of commerce might be able to tell you who to call.”

As Michelle Goodman of The Anti 9 to 5 Guide points out, it’s also important to find out if local zoning regulations allow for businesses to be run out of a home. “If you live in a community with a particularly militant local government and you reside in a building zoned as ‘residential,’ you may have a problem working from home,” she said. Her advice is to hire a tax preparer and find out this information and answers to any other tax questions.

Liz Swain, a work-at-home writer in California, got hit with a $302 bill from her city of San Diego after years of being a freelancer and operating without a business license. “Apparently, the state of California gave the city my tax information, and San Diego billed me $34 per year plus hefty penalties for not filing for a license for those three years. There was also a processing charge,” Swain said.

Swain ended up paying most of the bill, and filing in her newest place of residency, La Mesa, California, for $85. “My advice is to avoid a large bill by checking with government agencies or the chamber of commerce to learn whether you need a business license,” she said.

Before a freelance writer even begins to embark upon getting a license, he or she needs to follow the steps provided by the U.S. Small Business Administration website. A business needs to be filed as a limited liability company, a partnership, or a sole proprietorship. The last option would be the one most commonly registered by freelancers. The business name also should be registered and a federal and state tax ID need to be obtained.

After those requirements are completed, to start the business license process, freelancers can log onto the U.S. Small Business Administration website, type in their area code, and see all the local and state regulations. The site recommends after receiving the license, to “keep track of those that need to be renewed on a regular basis and keep a calendar of renewal dates.”

For freelancer writers, who, many times, have an unsteady flow of income, paying for a business license straight away may be the best option. Swain’s is a cautionary tale that should not be taken lightly. To play it safe, a license should be acquired. Even if a writer is in a less than ideal financial situation, $35 to $100 per year is affordable, and will save money and stress down the line.

Want to get paid well to work on projects you care about? Click here to learn more about freelancing for Contently.