Once you get a taste for the freedom and flexibility of the freelancing lifestyle, it's hard to imagine going back to a traditional employer/employee work arrangement.

But for many freelancers, there comes a time when some of this flexibility must be sacrificed to give way to a more structured business arrangement.

Freelancers (more than 54 million currently) often struggle with the realities of unpredictable paychecks, the isolation of working alone and even potential legal issues related to not having a formalized business structure.

When these issues begin to creep in and take the joy out of freelancing, it may be time to convert your freelancing into an official business. This post will highlight 4 things you need to consider when making the change.

1. Choose a business structure

When you're converting from freelancer to business owner, you need to take into account what type of business structure you'll use. While there are other types of structures not listed here (corporation being one), there are two structures you'll most likely want to consider: sole proprietorship and limited liability corporation (LLC).

If you're planning to keep things small (and not hire on any additional help), you may want to continue on as a sole proprietor. This is the default business structure, meaning you won't need to fill out any paperwork or pay a fee.

Pros: No additional paperwork or compliance apart from personal income tax filing and any necessary licences and permits.

Cons: You're personally responsible for your company's liabilities, meaning your personal assets can be seized in the case of legal action.

If you're looking to grow your business and want to take on a more formal structure, you'll likely want to consider an LLC. An LLC provides you with the protection of a corporation while allowing you to include your income in your personal income taxes - meaning you don't have to file taxes separately for your business.

Pros: Offers the same protection of a corporation at a much lower cost and with fewer regulations.

Cons: More paperwork and regulations than sole proprietorship, including articles of organization and regulations regarding your responsibility to employees.

To figure out which structure is best suited to your business, check out this guide from the U.S. Small Business Administration.

2. Define your brand

As a freelancer, you likely haven't had to worry too much about branding and positioning. However, as a business owner, branding is essential for defining who you are and how you stack up to competing businesses.

And contrary to what you think, creating an awesome logo and company website are just the start. Some of the most important elements you'll need to consider are:

  • What is your company's mission?
  • How will you differentiate yourself from your competitors?
  • What are your strengths as a service provider?
  • Who are your target customers or clients, and how will you reach them?
  • What will your company's "voice" be?

3. Consider raising your rates

Converting from freelancing to an official business can be expensive. Setting up a new business structure, maintaining compliance with federal and state regulations and paying employee taxes and benefits are just a few of the additional costs.

Most clients will understand that this change in structure will necessitate higher fees; and many will be willing to pay to keep the work flowing. But the reality is that you will likely lose a portion of your client base. I had to go through something similar at my companies Launch Leads and Outro, when we changed our pricing to retainer or subscription vs performance based. But it all works out in the end, promise.

Growth isn't always easy, and there will be casualties. But if you're serious about growing your business, consider this change a necessary growing pain.

4. Get some policies and procedures in place

As your business grows, you'll need to formalize some of your policies and procedures to ensure consistency. This is particularly important as you bring on employees or contractors.

Some of the policies and tasks you should formalize include:

  • Employee policies: Hiring/firing, time off, sick days, paid vacation, etc. You will have to know the code you will have to follow in each of these areas, for whichever state you are in.
  • Invoicing and payment procedures: How will you track time spent on client work? How will you invoice? What will happen if a client doesn't pay? Find the best invoicing tool to help formalize these processes.
  • Return/refund policies: What happens if a client isn't satisfied?
  • Content marketing policies: Writers and social media managers will be the voice of your company online. A manual will provide guidance to these key employees to ensure consistency across all channels.
  • Have the right online strategy before you start. Here are a few online marketing guides that help.


Taking the leap into business ownership can be scary, but it also opens up an exciting new world of possibilities. In spite of the extra paperwork, responsibilities and costs, the move from freelancer to business owner can be a necessary and rewarding one.

Are you considering the move from freelancer to business owner? If so, why?