Does a freelancer need Business License, Ins., Reg.?

So I’ve done some freelancing in the past under my name. I put my name, and my Social Security # on the W-9. You get a 1099 at tax time. Simple.

I met with a new client. They require all independent contractors to have a Business License, Business Liability Insurance, and be registered with the Secretary of State.

That all seems like a lot of work, and potentially a bit of $$. This also seems like it will complicate my taxes, costing even more $$.

Bottom line, I’m not sure how much work I’ll get from this client, so is it worth it? Moving forward, it could be beneficial to have all these business “things” setup, but I’m not really looking to start my own business right now.

I really just want to get to work, but they need all this paperwork before I move forward.

Has anyone else run into this?

I’m in Portland, Oregon.


If you are a full time freelancer it might not be a bad thing to look into. Perhaps some of the other fulltime freelancers on here can comment. Having done some freelance over the years, I’ve never done any of that. I did get a tax ID though which you use instead of you ss#.

Thanks for the reply.

I just viewed all those requirements as a bit much for the average freelancer. Good to hear you haven’t needed them in your experience.

Here in Oregon you can register with the Secretary of State online. Cost is somewhere in the $50-100 range. That gets you a tax #.

You may also want to reg as a LLC. and have a separate business bank account. It helps to show a clear separation between business assets and company assets.

Can you expound a bit on the difference between business and company asset?

I meant " business vs personal assets"

sorry about that.

Agreed, at the end of the day if a business is not incorporated, even a freelancer, the risk is there that a lawsuit would take all of the freelancer personal assets is very high. Hopefully all freelancers understand this risk.

I had some time on my hands this morning… .

Most counties (in the State of California) require that anyone operating a business obtain a “Business License” (also known as a “Business Tax Certificate”) if they are doing business outside of a city’s limits.

If you are doing business inside the city limits you apply at City Hall. In Pismo Beach it’s based on gross receipts ($0-25,000 = $20; $25,001-$50,000 = $30; $50,001 - 75,000 = $40; etc.). Your mileage may vary…

You may also be required to apply for a “Home Occupation Permit” if you are conducting business from your residence. In Pismo Beach it is $179. It pays for an inspection by city officials to determine that your business is suitable for the area (i.e. not formulating chemicals in the basement, heavy truck deliveries at night, noise, excessive parking requirements, etc.); basically creating a nuisance and risk for your neighbors. "“Designer” or not… you do any of this next to my house, and we’re gonna have a talk… .

Generally a “Fictitious Business Name Statement” (FBNS) is required; even if you are doing business as, for example, Lew Morris Industrial Design. You apply for it at the County Court House, and you would be required to “publish” it in (usually) two separate newspapers for two weeks.; $30 generally. The county does a name check to ensure that you haven’t named “your” business the same as another; it provides a legal entitlement to place your business name on checks, advertising, obtain a “business” telephone listing, etc.

The State of California also requires that anyone engaged in business apply for a Seller’s Permit. It creates an account into which you deposit the “sales tax” owed by your customer that you collect; said another way, it allows you to transfer the obligation of paying sales tax on materials used on clients’ projects, to the client via invoice. Note: this would only apply if you were transferring “tangible” property (products). If you do not, YOU will be required to pay the tax. Currently, in California, the sale of services where no tangible personal property is transferred, or where the transfer of property is incidental, are not subject to sales and use taxes. I’m sure Oregon has similar requirements.

Business Liability Insurance

A common misconception of a limited liability company (LLC) or an incorporated company is that a business owner is protected from personal liability and liability insurance is not necessary. By contrast, sole proprietors and partners in general partnerships are each liable for all the debts of the business (unlimited liability).

You can be personally liable if:
you have signed a personal guarantee for a loan,
you have personally injured someone,
you have acted in an irresponsible or illegal manner,
you do not operate your business as a separate entity.

Your client’s requirement that you have “Business Liability Insurance” is a bit vague in that BLI cover several areas; you should ask them which area, in particular, they mean… if they know.

General Liability; protect your business from: injury claims, property damages, and advertising claims. General liability insurance also known as Commercial General Liability (CGL) may be the only type of business liability insurance you need depending on your business situation.

What you DO need is Errors and Omissions Insurance: This coverage protects your business against malpractice, errors, negligence and omissions.

You should obtain Product Liability Insurance if you are manufacturing a product that might injure someone; i.e. bicycle parts, etc.

From my personal observation… you do NOT want anything to do with “incorporation” at this point in your “Consultancy”; it will create unnecessary and overwhelming expenses; initial, and on-going legal fees, and administrative expenses (tax reporting (state and federal)). And you will STILL need to have insurance.

Or not. … . are you a Type A personality?

By the way, I’m not a lawyer, nor did I stay at a Holiday Inn Express last night… . :wink:

It will be better if you register your business with some incorporating firms. Business incorporation will lead to enjoy all the benefits from the government that are for a registered business owner. But if you wish to continue as a freelancer, just only for part time. It will not be better to spend that much amount on registering your business.