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This is a show for burnt-out fashion designers (and TDs, PDs, patternmakers and beyond) who want more flexibility while still doing work they love. As a freelance fashion designer, you can build your fashion career on your own terms. Freelancing in fashion is the only way to get freedom in your day (instead of being tied to a desk). Whether you want to earn extra money on the side, fund your fashion brand, or replace your salary, the FDGP podcast will help you get there. Listen in for actionable tips and strategies to kickstart or grow your career as a freelance fashion designer, build your confidence, and create the life you want. Hosted by $100k+ fashion freelancer Sew Heidi, the show features interviews and strategy sessions with successful freelance fashion designers from around the world who've ditched toxic fashion jobs and taken control of their own destinies. This is the only place to get REAL insights from REAL freelancers who have built REAL careers on their own terms. (Formerly the Successful Fashion Freelancer podcast.)
Heidi [00:00:00]:
Did you know that the type of business entity you set up for your freelance career can have a big impact on how much or how little taxes you pay, which is then going to impact how much money you bring home and how much money actually goes into your pocket. So I wanna talk about some of the different business entities that you can set up as a freelancer Paid whether or not you need to be an LLC to freelance in fashion. First, a quick disclaimer that I am not a trained or certified legal professional or an accountant, and none of this is to be deemed legal or financial advice of any kind. These are my opinions and my experience based on what I know having worked and run my own businesses as a freelancer as well as in other capacities for well over 15 years. The other thing that I will say is that this advice is specific to the United States. I am not familiar with how any of these business entities work internationally. So perhaps some of this crosses over to you, perhaps not. So the the TLDR version here is that depending on what state you live in, an LLC is usually your quickest and easiest option to set yourself up as a business and create a little bit of legal protection.
Heidi [00:01:07]:
Depending on what state you live in, you can just do some quick Googling, and you can likely set this up in an afternoon for a small fee anywhere from 10 to a $100. However, you also have the option of setting up what is called an s corp. And an s corp will provide you with much more tax benefit than an LLC will. However, there's a lot more paperwork Paid logistics that go behind setting up an s corp, and so it may not be worth it to go that route. The initial and ongoing fees will not be justified based off of how much you're earning. But once you Heidi about 40 or $50,000 a year in your freelance business, forming an s corp will save you enough money on taxes that it can offset any Get and management costs. If you decide to set up an s corp, I do advise getting professional help. Back in 2012 as well as in 2016, when I set up 2 different s corps of mine, I hired a CPA and a lawyer to help me out.
Heidi [00:02:01]:
Now nowadays, there's a lot of online services and one stop shops that will file it and take care of all the paperwork for a much lower fee than outsourcing it to individual professionals. I'm not an affiliate for any services like this, but if you Google Get up an s corp for a freelancer, you'll likely find some great services and you can do your research. Now let's sort out a little bit more on this, and we're gonna go into more of the details of, LLCs versus sole proprietorship versus, EINs and and all these different things. So your first option is to just operate as a sole proprietor. That means that you are operating as yourself in your business. There's no separation between a personal and a professional asset, and all the finances run through your personal tax return. This is as opposed to being operating as a business entity, something like an LLC, which stands for a limited liability company, or an s corp. And this when you set up as a business entity, this creates some distance between you as as an individual human being and your freelance work.
Heidi [00:03:00]:
And for tax purposes, setting up a business can make a lot of sense. Now I'm gonna tell you something that might freak you out, but when you operate as a sole proprietor, technically speaking, when you're operating just as your own individual self, you're running everything through your Sew Security number. This essentially can open you up to some level of liability. Let's say that a client decides they wanna sue you. Now I've never heard of someone getting sued as freelancer, but it could happen for sure. A client wants to sue you, and when you are operating as a sole proprietorship, when they sue you, they can technically come after you as an individual Paid any of your assets. This could mean your personal bank accounts. This could mean your home if you own your own home.
Heidi [00:03:44]:
This could mean your car. Any assets that you own as a human as a as a person. This is the alternative to operating as a business entity, and when you operate as a business entity, whether that's an LLC or an Sew corp or any other variety of entities, you are operating through a business. And when that client tries to sue you, they can sue you and your they can sue your business, but they cannot sue you as a person. And so they can't go after your house or your car, something like that. They can just go after the assets that the business Sew. And so that might be the amount of money that you have in the business checking account and any other assets that the business owns. So that is, like, high level.
Heidi [00:04:23]:
If you're going to set up a business for any reason, that would be the number one reason to do it. Again, chances of you getting sued by a client are so so so so Sew. But for me, just having that level of protection between me and my business and any liabilities feels like a really smart idea to do. So let's talk a little bit about, some of these different options. Right? Your first option, as we mentioned, is the sole proprietor. This is simple. You run everything through your your, Social Security number. You can get started right away.
Heidi [00:04:53]:
You don't have to do any formal paperwork. But remember, this also means being personally liable for all business debts. Sew it's really easy. Tax taxes are simpler, but you're you are gonna pay more. It's gonna be higher taxes, and you are gonna incur more liability. So the next option we look at, like I mentioned earlier, is the limited liability company, LLC. And an LLC separates your personal assets from your professional ones. It's also fairly easy, like I mentioned, in most states to set up and file paperwork for an LLC.
Heidi [00:05:25]:
A lot of times this is done through the Secretary of State for your specific state. A quick Google will give you the answers on how to set this up. Quick disclaimer, I currently live in Colorado. I used to live in New York. And the difference between setting up an LLC in Colorado versus New York is actually pretty big. In New York, it's actually easier to set up an s corp. This was as of 2,000, 13, 14 ish and 2 current day. I'm gonna get I'm messing up my years here.
Heidi [00:05:54]:
But as far as I know, different states do have differences, and so you do wanna look this up. It might be easier to set up an s corp or a corp a c corp versus an LLC. So LLCs, like I said, give you a little bit of legal protection. They're gonna give you some tax flexibility. There's a little bit of paperwork involved. It's typically not much, and the fees and costs are typically pretty, pretty low. We're gonna contrast this to an s corp. And an s corp is my personal favorite because after you earn a certain amount, like I Paid, about 40 to $50,000 it can make a lot more financial sense to operate as as this.
Heidi [00:06:32]:
It does get a little bit confusing, but the high level is basically you are running a company, and you yourself are an employee of that company. You pay yourself as a w two employee. You get a regular paycheck where all your taxes are taken out. This does mean you need to set up some payroll off, option. I use Gusto. I'm not an affiliate for them, but I really, really love Gusto. And you'll ultimately save a lot more money on taxes than it's actually going to cost you to operate as an s corp. On a $100,000 a year freelance salary, you can save up to about $6,000 a year by filing as an s corp.
Heidi [00:07:09]:
Yes. A lot of benefits to this. So those are the 2 big options. There are some other ones out there, but those are the 2 big ones that people typically go for. As far as what's the best for you as a freelance fashion designer, I would tell you that a sole proprietor is actually fine. I genuinely feel in my heart of hearts. Again, I'm not a legal professional. I'm just here giving you my opinion when you first get started, and you're maybe doing a few small projects for a 100 couple $100 here and there.
Heidi [00:07:37]:
As soon as you start to build and you're like, oh, I'm bringing in a 1000 or 2,000 a month or, you know, I'm doing projects that are a little bit bigger, I would definitely recommend you operate either as an LLC or as an s corp Paid just do some googling to see what is gonna be better for your setup. Here's what I don't wanna see, and this is what I see with students inside my program and other people that I chat with. Getting stuck on this and letting it be the reason you don't actually get started. So my best advice is to keep it simple, pick something, and just move forward. Again, that might just be keeping it simple and just saying, you know, I'm just gonna kick off as a sole proprietor, or I'm just gonna form an LLC. Quick Google, make your decision, and move on. Arguably, if you're making 40 to $50,000 a year or more, an s corp could make sense. Do some googling to figure out who can help you set that that up.
Heidi [00:08:27]:
Alright. That is the quick dirty version of it. Again, I am not a legal or accounting professional. This is not legal advice, solely my opinion. But I do appreciate you tuning in and and listening to some of my thoughts. Don't let this decision keep you stuck. Get out there, get moving, make a decision, and move on. You're doing great.