Contracts.
Yes, these things can get complicated and tangled. First, you should always get any work agreements in writing. You don't have to call it a contract, but there should be a written document clearly outlining an agreement between yourself and the hiring party (the client). You should make sure that it covers what they require and expect of you, your fees, and what exactly those fees cover, as well as any clauses that may incur additional fees and the instances in which they would apply. It's best if you, the client, and a third party possess copies of this document in case any dispute should arise over the contracted work; it's even better if you've both signed said copies in front of a witness.
This can seem like a ridiculous amount of red tape to go through just so you can work for someone; odds are that it's not even necessary, but it's still a good idea. One, it shows your professionalism to your client; two, it's a safety measure that benefits both you and the client in the case that either of you fail to fulfill your contractual obligations and it becomes a legal issue; three, if there is confusion later as to what was or was not covered under the initial contracted fee, the document can stand as evidence of what was agreed upon.
Copyrights and Work For Hire.
When you create something for a client, the issue of ownership can be confusing. Since you made it, on your computer, using your skills, it's yours, right?
Not...exactly. Contract work is pretty much what's considered "work for hire"; what that means is that when your client buys your services, they buy ownership of the work that you created as well. It is, for the most part, theirs; you cannot resell the exact same work to another client, especially if it contains logos or other previously copyrighted images belonging exclusively to the client.
You do, however, retain the right to display the work as part of your portfolio, as it is your creation and as a result your intellectual property. All of this also applies to what's called "in-house" work, when you are an actual employee of a company rather than working as a contractor for a client; when you work for them, in their establishment, on equipment that they provide using software that they purchased licenses for, you retain only the intellectual copyright to the work, while the actual ownership of the content belongs to the company.
Dealing With the Government.
This is the part that scares a lot of us. It scares even me, frankly. What many starting freelancers forget is that although they're receiving payment in full upon completion of projects, there are no federal taxes being deducted. However, many clients will ask you to fill out a W-9 form, and will report the money paid to you to the IRS; even if they don't, it's your responsibility to keep track of all invoices and report that money yourself on your annual tax returns. Taxes are still owed on that income, and you will be required to pay them.
While the other points have only been cautionary commentary, this is where it gets ugly: the U.S. government self-employment tax is almost 15%, on top of any Medicare and Social Security taxes imposed. That's a hefty chunk of your income, and you need to be aware of that as you're saving over the year. There is the option to make quarterly advance payments in anticipation of the taxes owed on your annual income, and that can bring down your owed amount significantly, making that calculated number at tax time just a bit less jarring; if you've incurred expenses such as purchase of software licenses, equipment, and the maintenance of an internet connection for business purposes, you can also deduct those. But unless you have a significant amount of taxed income on the side, you might want to kiss those tax refund bonuses goodbye.
Insurance and Benefits.
On top of the heavy taxes imposed, there is also the burden of paying for your own private insurance, rather than having it covered by minimal deductions to fund an employer's company insurance policy. Depending on your health needs, this can get extremely expensive. Suddenly having to pay for all of your doctor visits, eyeglasses, contact lenses, medications, and medical emergencies out-of-pocket can hit where it hurts, and hit hard. It's best to look into local individual insurance providers, and find a plan that suits your needs with a monthly premium that fits your budget.As for benefits? There are no benefits, not really. You reap your benefits in the convenience of working from a home office, rather than in company-controlled options like paid holidays or 401K options. Paid holidays? Take your laptop to Bora Bora and get some work time in on the beach.
