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How can I legally operate if I work as Upwork freelancer?

You work as an Upwork freelancer. Or maybe you work on other marketplace platforms where you offer your services online. As you develop as a freelancer and your online business growths you start thinking about how to operate legally and whether you need to register as a company. So, what do you need to do to work as a freelancer and fully comply with the law?

How to start working on Upwork as a freelancer?

Upwork does not require freelancers to be registered as a company. This is your sole responsibility to pay taxes and you solely choose the most appropriate legal form of your business. As such you do not need to create a company to legally operate. You can opt other forms that we discuss in this article. Besides, you do not need to register in the country you reside in as you can obtain e-residency in other jurisdictions or establish a company in another country.

Do I need to register a company to work as a freelancer?

Perhaps your clients value your services because you provide high quality services at a reasonable price. To achieve that, you cut some operational expenses. You do not need to rent an office, as you can work from home. You do not need to pay for administrative staff and bear other expenses. However, you probably ask yourself whether it is necessary to incorporate a company as you want to be compliant with the law.

The good thing is that while you actually need to pay taxes, you do not necessarily need to incorporate a company. Establishing a company (e.g. in a form of an LLC) means that you will have additional operational expenses, for example, rental office expenses, maintaining official address, paying for accounting, etc. However, all countries provide legal solutions for freelancers enabling them to register as sole entrepreneurs. 

Can I create a team and hire employees if I am a freelancer?

Being a freelancer means that you may create online and remote team consisting of independent contractors or even your employees. 

It is not difficult to hire independent contractors, as you only need to sign a written agreement with them. Hiring an independent contractor means that you do not need to be responsible for paying medical insurance, medical leave, or vacation leave. He remains fully independent and solely liable for its own taxes and fees. 

In the meantime, employment relationships are usually more complex. In some jurisdictions you need to obtain an employer ID number to hire employees (e.g. as required in the UK). You also need to make contributions to medical and pension funds. You will need to pay for vacations. Evidently your expenses will grow. 

This is the reason why many freelancers prefer to work with independent contractors whose independent status is similar to you.

How can I become an Agency on Upwork?

With the team members you can become an Agency. Yes, it sounds more solid and professional. It helps attracting large clients. And there are numerous benefits for you and your team. Besides, Upwork does not require an agency to be registered as a company. So, you can keep your current legal status (as a sole entrepreneur, for instance) to create an agency profile on Upwork.

Shall I be responsible for my team members?

The other side of creating an agency is that you are no longer on your own. As we explained, you do not need to pay taxes for your contractors. Still, you are responsible for performance results of your team members. It means that you may not receive expected revenue if they failed. Your reputation as an agency may suffer and you should take care of it.

Do I need to pay taxes and keep accounting as a freelancer?

When operating a business online, you have to pay taxes and other fees related to your income. Accounting requirements differ from jurisdiction to jurisdiction. Besides, if you are a sole entrepreneur or registered as a small company, accounting should be simplified for you. Instead of hiring an accountant, you can use online accounting services.

Can I open a business bank account for my freelancing needs?

Any online business needs to maintain a bank account. Luckily, many banks offer an opportunity to open accounts online. These online payment solutions provide convenient ways to issue invoices, track payment status and receive payments online from your customers. You will definitely enjoy online payment accounts more than traditional banks as payments are processed quicker and you can get your remuneration in a few minutes.

Do I need to prepare any legal documents on Upwork?

Another requirement for online business is legal documentation. Upwork provides standard legal documents for both freelancers, agencies and clients. These documents made available on Upwork are binding upon you. That said, as a general requirement you do not need to execute separate agreements with your clients.

If you hire a team, you will need to sign contracts, like service agreements and non-disclosure agreements to make sure that your clients are protected against poor job results and proprietary information disclosure or illegal use.

Though you may not have a lawyer in your team, you can initially use free templates. 

But keep in mind that we highly recommend to invest in good contract templates for your internal needs with your team members and further with your customers.

4 thoughts on “How can I legally operate if I work as Upwork freelancer?

  1. This article has solved most of my problems. I have been wondering how to grow my freelance business to an agency, but I was not aware of how to go about it. I have been in UpWork for some time, and the volume of work has increased tremendously. I’m always torn between hiring independent freelancers, starting a company or an agency.
    By good luck, I come across this article and look at what I found. I now have full information on all the options I had and which is more lucrative. I guess hiring independent contractors will be a viable option for me. That is because I have reduced the number of expenses on my side drastically. Just a quick one though, I’m sceptical at times at what might make UpWork kick me out of the platform after I have grown my team? Please assist on what to avoid so that I remain on the platform for long.

    1. Thank you for your feedback. Much appreciated. You are guaranteed to stay on Upwork as long as you comply with their User agreement and other policies. If you want to avoid any bans, follow their rules. Make sure that your team also knows their policies and comply with them.

  2. Going the independent contractor’s way is far much cheaper and easier than creating a company. An online company will have you incur additional costs and expenses which you can easily avoid. I’d also recommend people reading this to pursue that route and save yourself some bucks.

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