Freelancing Isn't Free: Protecting Yourself in a Gig Economy

Throwing off the chains of the traditional 9-5 in favor of freelancing freedom is a popular dream these days. And thanks to a modern connected economy, remote work and virtual meetings are the norm, making it easier for more people to find their stride as a free agent.

This independent career choice brings with it the freedom to make your mark as well as your living. But, as any seasoned freelancer will tell you—freelancing is far from free.

Freedom and independence as your own boss balances itself with challenge and risk.

While you trade structure for freedom, and reliance for independent choice, you also assume liability, and become vulnerable without the safety net of your employer’s insurance policies and legal accountability for your actions.

The trade isn’t always pretty for those who are not prepared to face the reality that their side hustle or paid passion project is truly a business—which comes with the responsibility of treating it like one.

If you want to keep enjoying your professional freedom...

Here are 3 simple ways to insulate yourself against liability as a freelancer, and protect your future as an independent business person.

1. Create a Legal Business Structure

Whether you realize it or not, your freelance work counts as a business. You’re a sole proprietor, by default, the moment you earn enough money to require reporting it to the IRS.

The problem with being a sole proprietor, is the liability. Your personal assets become fair game, should any unhappy client decide to sue you.

Creating a legal entity draws a clear line between your personal and business life on paper, protecting your personal assets in the event you’re sued for something work related.

Small business owners have many options when it comes to converting from a sometimes-1099 contract worker to a legit business owner with something to protect. LLCs, S-corps, C-corps, and more. Just a quick search online will provide lots of articles on how best to structure your freelance business, and the IRS website has details on the tax implications and registration requirements for each type of business. Of course, a chat with your tax accountant or attorney is always a safe place to start too.

2. Purchase Small Business Insurance

Now that you have a formal business, it’s time to protect it. Before you even consider taking on a client, or doing uninsured work that could come back to haunt you, take control of your risk and reduce your liability with an insurance policy.

Small business insurance isn’t typically expensive, and in most cases, you can get a policy in place quickly online by answering a few questions about your industry and business structure.

Depending on what sort of work you do, you’ll likely be considering a combination of the following coverages:

  • General Liability Insurance, which covers common accidents and defamation suits
  • Commercial Auto Insurance, which can be written to cover rideshare and other commercial driving
  • Commercial Property Insurance, which covers business-owned property
  • Professional Liability Insurance, which covers mistakes made in professional work


Often, a Business Owner Policy (BOP) is available for you to purchase, which packages all the coverage you need in a tidy package, minimizing the cost of buying each policy individually.

An insurance broker who specializes in freelancer insurance policies can help you determine what coverages are right given your situation, and they’ll know what the best way to procure those coverages is.

3. Always Use Contracts

Nobody likes lengthy, wordy, legalese contract jargon, but it’s the stuff of sweet dreams and comforting reassurance if you find yourself with a nightmare client on your hands.

Many veteran freelancers swear by contracts, and for good reason. They protect both you and the client/customer by outlining exactly what services will be provided and what will be paid.

A professionally written contract for your services not only makes you appear more professional, it is a deterrent to would-be problem clients, who will be less likely to cause trouble if they’ve entered into the relationship with clear terms in place.

Should you ever find yourself up against a project with a bad-apple client, you’ll have a written contract in hand to help you quickly resolve any issues. Typically, a problem client will back down from an argument quickly when they come face-to-face with the agreed upon terms written in black and white.

You might already be using contracts if you work on a third-party platform, such as Fiverr or Upwork, which automatically provide built-in guidelines and rules as part of their service fee. If not, you’ll need to devise your own from scratch. Legalzoom offers affordable contract solutions for freelancers who want extra assurance.

Freelancing is a great way to experience professional freedom, and make a great living while you’re at it.

But remember:

The more business success you experience, the more you’ll have to lose. Take a moment and consider what you’ve got at stake, then get to work putting these three steps into action so you can ensure your continued status as an independent and free agent.

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