Top Ways to Legally Protect Your Freelancer Business
That Works For Me are joining forces with independent lawyer Trusha Patel to bring you a series of legal articles. Trusha’s fascinating background and broad experience has brought her to where she is now, giving small businesses and freelancers peace of mind that they are legally protected and GDPR compliant. With her commercially pragmatic and easy to understand legal advice and contracts, we are delighted to be working with her. The first post with us is a general article on the top ways you can legally protect your freelancer business…
Being a one-man or one-woman band as a freelancer can often be both liberating and stressful. Liberation comes from being your own boss, but stress comes from having to think about all aspects of your business; and keeping on top of all the legalities and practical ways to protect your business too.
It can also be easy to get overwhelmed with all the ‘to do’ tasks, especially ones you have little or no familiarity with. So here is a short checklist to help you give your business a quick health-check for legal and compliance protection:
As a freelancer, your clients are your lifeline. So do you have contracts or terms and conditions in place? It sounds like an obvious point but often this is overlooked. It is the single most important step towards protecting your business from the most common pain points. If you don’t have anything in place, consider making this a priority. Many freelancers are bootstrapping (i.e. doing it themselves!) and resort to templates or a DIY approach. While this is understandable, and can be a good starting point, templates are exactly that – generic. They also don’t give you peace of mind they are updated for changes in key laws or if they are missing key provisions you should have in your terms. Budgeting for proper contracts at the start can save a lot of stress and issues later down the road.
The second most common issue freelancers face is late payment from clients. Tight payment terms within your contracts can protect you from this. Consider including the ability for you to suspend services if there is a late payment. Or if your client persistently pays late, consider changing your payment terms and include your statutory right by charging interest. Depending on your business model, you could also encourage super early payment by offering a small discount.
That Works For Me tip: The platform will include issuance of payment terms that can be tailored to your business. It also includes invoice reminders and payment notifications to help you keep on top of cashflow.
Cancellation and termination
It is a fact of life that not all client relationships go smoothly. Meaning it’s doubly important to protect against disputes over outstanding work or outstanding payments in the event one of you wants to terminate a contract or project. You should be entitled to recover payment for work completed up to the point of termination and reserve your rights for any other remedies you may wish to pursue. That last point means protecting your rights to pursue anything else that crops up in future!
Liability and Insurance
Whether you are operating as a sole trader or limited company, professional insurance is a must-have in case any claims are raised against you or your company. It could get very expensive, very quickly if you don’t have cover in place! You can limit your liability if your customer base is other businesses, if it’s made up of individuals then you cannot. Similarly there is little you can do to limit your liability for risks such as death or personal injury. The lesson here is to make sure your insurance covers these risks for you.
That Works For Me tip: Our platform includes a preferential arrangement with our specialist freelance insurance provider available to you as soon as you register. Subscribe now to be the first to claim it!
IR35 regulation is the anti-avoidance tax legislation related to the disguise of employment. And it is changing! Having multiple clients on retention for no more than 2 years; covering your own expenses; working or controlling where or how you work; taking care of your own tax contributions; and the ability to work for anyone else and substitute yourself if required; are all part of the assessment of keeping your business outside of IR35. It is important to get a professional to check over your terms for compliance with these regulations and even more important for you to operate your business in a compliant manner. If your clients are public companies, the rules differ again so my advice is always seek advice from a suitable professional.
If your business relies on a community of other freelancers to help you in areas you do not have expertise in or with work overflow, you should be vigilant in closing off gaps between your terms with your client and any terms with your subcontractors. Common areas of exposure include payment terms (if you have to pay your subcontractors before you get paid from your clients), liability for subcontractors’ work (ensuring they also have insurance in place in case of a problem as your client will have recourse to you and you should have recourse to your subcontractor) and protection of any personal data and confidential materials. Consider all of this before agreeing to anything!
We all know that GDPR is huge and can be a minefield to navigate. But it is possible! Did you know that anyone processing and/or controlling personal data is required to register with the ICO? There is a free self assessment on the ICO website. Make sure you put in place privacy notices you can send to your clients and take reasonable measures to protect any personal data you are processing or storing. If you can, do a data audit every 6 months. Check that neither your processes have changed and nor have suppliers, if you use external servers or management systems. Rules and guidances on this subject are constantly under review and changing all the time so a regular audit would hopefully catch anything you have missed.
These are my top ways to legally protect your business. Of course every business is different. There are many other areas to stay on top of as you work both in and on your business, but if your legal and compliance house is in order, then that means more time for your clients and cashflow – win, win!
Bio – Trusha Patel
Trusha is a consultant lawyer with an entrepreneurial background, she works to give small businesses and freelancers peace of mind that they are legally protected and GDPR compliant, with her commercially pragmatic and easy to understand legal advice and contracts.
With 11 years experience spent between a top 3 magic circle (aka leading!) London law firm and international investment banks, Trusha went on to become an entrepreneur for several years before bringing the wealth of insight and a solid business mind back to her legal practice. She founded an organic spice company in Canada where she was living at the time – and then brought it to the UK. Gaining real-world experience across multiple disciplines in international trade with her small business has enabled Trusha to bring a unique legal approach and perspective when helping her clients across a variety of industry sectors.
Contact: [email protected]