Some freelancers and their clients choose to work together informally. Everything they have discussed in terms of the relationship has been casually shared verbally or in an instant message or email thread. That can generally work well—until it doesn’t work at all.
Changes or disagreements happen. Sometimes, a professional divorce ensues. For both parties, the lack of a written agreement can exacerbate otherwise manageable disputes and ultimately compromise the relationship itself. Worse still, not working from a framework can cost any small-business owner (such as a freelancer) well-deserved earnings. Moreover, a client risks losing valuable proprietary information when the freelancer goes to the competition with this data.
In reality, it can be important to formalize arrangements that protect both the client and freelancer. Doing so can help both parties focus on building a mutually beneficial long-term relationship.
Here are some ways to start the thinking around creating documents that keep it above board for both the client and the freelancer:
1. Clarify working arrangements.
Everyone has expectations about what the other person in a working relationship should do. However, we don’t typically communicate those expectations until they aren’t being met. That’s when a freelancer or a client may discover what the other really wanted.
However, by that point, the damage has been done. Those with the expectations begin to doubt that the other will deliver, while those not meeting those unspoken expectations are confused and perhaps even resentful.
To avoid this disintegration in a working relationship, take the time to discuss and share each other’s expectations, preferably at the beginning of the relationship. If you’re already working together, suggest that the parties clarify their expectations before continuing.
Consider drafting agreements that define roles, responsibilities and other expectations, as well as who “owns” the work created as part of the relationship. These documents can include a non-compete agreement, a non-disclosure agreement and a non-solicitation agreement.
The general purpose of a non-compete agreement or clause is to stop an employee or contractor from taking information with them and from accepting a position with a competitor where the information can be used against the previous employer. This agreement may help protect the client when they share proprietary information with a freelancer.
The general purpose of a non-disclosure agreement is to protect confidential information so that a freelancer or employee cannot share that information with others. This helps bolster the protection of the produced “work” as the intellectual property of the client. Some freelancers who create ghostwritten content are asked to sign this type of document so they don’t share privileged information with others.
The general purpose of a non-solicitation agreement is to prevent a freelancer from directly soliciting a client’s clients in a way that would diminish the client’s business. For example, if a freelancer works for a marketing agency, the freelancer who leaves the agency cannot contact the agency clients and offer their own services, perhaps at a lower price than the agency.
2. Change your business structure.
Freelancers often conduct business as sole proprietors. Yet, this may not adequately protect you from liability as other corporate forms may do. Consider forming an LLC, S-corp or C-corp to better protect your personal assets.
Draft and sign legally-binding documents that define roles, responsibilities and other expectations, as well as who “owns” the work created as part of the relationship.
An LLC may be the best option for some freelancers because it provides a corporate framework yet isn’t as administratively burdensome as other corporate structures can be. LLCs are generally easy to set up and offer some tax benefits that may make the effort worth the expense. However, as always, consult with a licensed attorney in your area before making any decisions about your company’s business structure.
3. Protect with insurance.
Insurance has always been one of those costs that no one wants to pay—that is, until a situation arises when it’s needed. You are paying to insure against the chance that something might happen and to gain access to protection if that event occurs.
All business owners (clients and freelancers alike) should consider buying a range of insurance policies. These include general, professional liability, premises and business interruption insurance. All of these policies provide some measure of protection against the unexpected, from a lawsuit due to an accident to a natural disaster to hackers and data theft.
4. Put the details in writing.
Protecting clients and freelancers involves putting other details into a contract. It can be important to get a signed agreement about payment terms, such as pricing, rate increases, payment timing and payment form. The agreement should also define the scope of services as well as what would be done in terms of the termination of a project or the working relationship. This helps avoid confusion and negotiation later on in the process.
You can find templates of these types of agreements online or in certain software. These templates often provide the language necessary to make these contracts valid. You can also use language within this type of agreement to specify how disagreements will be handled to avoid costly litigation.
5. Get professional legal advice.
Both freelancers and clients should confer with their own attorneys to better understand the ramifications of working together. It’s always good to seek out professional advice to protect yourself and your business.
Photo: Getty Images
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