How do I handle my taxes if I have my own business?

This post is in response to a request to talk about handling taxes when you have your own business.

People from over 104 countries read the Subconcious Tonic blog. I can't answer this in one way to apply to all people. But regardless of where you are, and as I've mentioned before, if you're doing business, do it legitimately. In the United States, that means, get a Tax ID.

A Tax ID allows you, as a service/product provider to sell goods or services legally. You can get a Tax ID from your local state comptroller's office. But you must register a business name in the Assumed Name office first. They are also a great resource to answer any other tax related questions.

TO CHARGE OR NOT TO CHARGE TAXES
Once you have your Tax ID, you are then able to use other vendors, such as printers, tax free! You're allowed to do this because you're going to turn around and sell that item to your client, and by law, you're supposed to charge sales tax.

For example. I am going to order 3000 brochures for a client. I've selected a printer, and once they are complete, I will pay for them. But if I show the printer I have a Tax ID, they will not charge me tax.

The idea is not to pay tax twice.

The sales tax you charge your customer will have to be paid to the state comptroller at the end of each fiscal year. Depending on how much money you make, you may have to pay taxes quarterly.

DO I HAVE TO PAY MORE TAXES DURING INCOME TAX TIME?
Yes. Because the money you are receiving is considered an additional source of income. So you are required, by law, to report any income and pay taxes on them.

WHAT ELSE IS A TAX ID USED FOR?
You're only allowed to use it when you're buying products that you will resell to a customer. I just made 15 hats for a client that had custom embroidery. I could buy those hats tax free from one vendor, and the vendor who did the embroidery could do it tax free as well. Get it?

Please post any questions you may have about your business below. Good luck! -Kelada

How much should you charge for freelance?

There really is no standard number you should charge. It depends on many factors.

Competition - do some research and find out what your competition is charging.

The Client - you'll find that you can charge more if you're doing work for corporations (not creative agencies). Corporations, from my experience, have a harder time finding designers. Not to mention, the person who is hiring you will be passing on your invoice to the billing department and won't think twice to sign your contract. Downside is, the work is very inconsistent and often very small.

If you find yourself freelancing for a design company, chances are, they are hiring you to do work that they don't have time for -- project overflow. At this point, you're third party, which means they will pay you less, and charge the client more to make profit. The upside to this, is that there is a lot of work from agencies that need to be outsourced.

If you're looking for more money without all the hottie tottie brands, work for a non-design company, i.e. oil and gas, law firms, etc.

Your Experience - Your experience provides clout to what you charge. Meaning, if you charge $75 per hour, that means you have been around and have samples to backup your claim. $35 an hour, I think, is a good start for entry-level designers who are freelancing. (Talk to me about your project, and I can help you. Sometimes I will charge different rates for different projects.) So it's not just about how good you are, but people with several years design experience are more efficient, and produce the work faster and with better execution and strategy.

Judge The Book By The Cover - Charge how much you think you can get away with. Small start-up companies don't pay anything, so you can't expect too much pay. If it's a huge, international company, charge em' up baby. Don't be too ridiculous. Be fair so you get return business.

Charge For Research & Prep Time - many designers only charge based on the actual design time, but rarely consider the research, meetings and travel expenses (time) for meeting with clients. Keep a detailed log for each client's project. I usually create a page with 4 columns. 1) Date 2) hours I logged 3)description of the task 4) mileage. If you're outsourcing to a printer, give the client two separate bills. One for your design services and one for printing.

What have been your experiences (challenges and/or advice) on quoting for a project? What are your best practices? Select the "comments" link below to post your response.

Here are some documents you can use to get your business started:
>> Design Brief Sheet
>> Client Job Log
>> Project Calendar
>> Freelance Legal Forms/Contracts/Agreements
>> Sample Creative Strategy
>> Client Art Approval Form
>> Web Site Marketing Price Guide

How much should you get paid working at an agency?

Want to know what you're worth? Find out what others are getting paid in the creative industry here in Houston. Visit the AIGA|Aquent Design Salary Survey to find out.

What positions are in the survey?
owner, partner, principal
These people are responsible for running the business and managing the employee and business model.

creative/design director
This is the creative head in the agency, whether in-house or agency. Responsibilities include developing graphic design, advertising and publications.

art director
This person comes up with the concept and stylistic direction for the design staff including production artists, photographers, illustrators, vendors, printers or anyone else involved in the project's development. The art director generally selects the vendors, and if there isn't a creative director on staff, has final creative authority.

senior designer
The senior designer is responsible for conceptualizing and providing solutions from concept to completion and in some cases, may direct junior designers who generate the comps, create layouts and final art to present to the client.

designer
A designer is responsible for the concept and design of graphic media including collateral, corporate identity, publications, large format graphics and multimedia interfaces.

entry-level designer
If you're an entry-level designer, you have 1 to 2 years experience out of school and requiring mentoring in all aspects of design conception to creation.

print production artist
This person understands layout, typography, color theory and is able to take instructions from a designer to create a complete layout. These people work well in InDesign, Quark, Photoshop and Illustrator.

web designer
A Web (Web is a proper noun) designer determines and develops the look and feel for Web sites and is responsible for the navigation ad visual execution.

copywriter
A copywriter (not copyrighter) is someone who writes, edits and proof material. Many copywriters are responsible for thinking and developing strategic messages or stories. Direction is often given from the creative director for the tone.

Source: AIGA.org

What do you do at an agency, and how do you interact with the creative team? Select the "comments" link below to post your response.