Many graphic designers choose to work as freelancers because of the freedom that self-employment offers. But the legalities of this can be tricky to navigate. For this reason, many people wonder: do freelance graphic designers need a business license?
Generally, freelance graphic designers do not need a business license to work. However, there are a few exceptions to this rule. For example, you will usually need a business license if you operate under a name other than your own, or if you have clients visit a home office.
Below, we’ll dive into the specifics of when exactly freelance graphic designers need a business license. Keep reading to learn everything you need to know!
The majority of freelancers can operate legally without a business license. So, as a freelance graphic designer, it’s very unlikely that you will need to obtain a business license. However, laws vary based on the city or state you live in, so it’s always best to consult a local business attorney if you’re unsure.
Although you probably will not need a license, you’ll still be responsible for reporting your income and paying taxes to the IRS. Since self-employed individuals typically do not collect or pay taxes regularly throughout the year, it’s always a good idea to set some extra money aside each month to save for tax season.
While it isn’t always the case, there are some times when you will need to obtain a business license before selling your designs to clients. Some of these situations include:
- If you want to collect sales tax
- If you have one or more employees
- If you have a home office or design studio
- If you’ll be seeing clients in-person for consultations
- If you want to register as an LLC, partnership, or sole proprietorship
- If you operate under a name other than your own (ie., “John Smith Designs” rather than “John Smith”)
These are the most common situations in which a business license will be required. However, local laws and regulations on this can vary. Some areas even require a local business license for single-person, home-based operations! Before you start your graphic design business, it’s always a good idea to check on the regulations.
A business license, sometimes called a business permit, is required in certain states in order for businesses to operate legally. They’re typically very easy to apply for and only cost a small fee. Depending on where you live, you may need to renew your business license annually to continue operations.
Any business that conducts commercial activity on its premises, collects sales tax, or provides services that require an industry-specific license should register for a business license. Since there is no license or permit required to become a graphic designer, they mainly work online, and they often do not collect sales tax, freelance graphic designers are rarely required to hold a business license.
If you have a home office, one or more employees, or just want some kind of protection for your work and services, there are a couple of other legalities to consider. Below, we’ll discuss some of these aspects.
1. Home Occupation Permits
Most freelance graphic designers work out of a home office. While you won’t need any special permits or licenses if you conduct the majority of your business online, you may need a home occupation permit if you have clients visit your home for in-person consultations.
Home occupation permits are required in some states. They may dictate:
- How many employees can work in your home
- How many clients you can have visit each day
- How much space in your home is used for your business
2. Variances and Conditional-Use Permits
In addition to a home occupation permit, you may also have to file for a variance or conditional-use permit if you work from your home. This depends on the zoning laws in your area, as some neighborhoods are not zoned for commercial activity. Variances and conditional use permits allow you to legally operate a commercial business in a residential area.
3. Registering as an LLC, Partnership, or Sole Proprietorship
Registering your graphic design business as an LLC, sole proprietorship, or partnership (if you work with another graphic designer) is often advantageous for freelancers. You will need a business license to do so, as you will now be operating as a legitimate business. However, registering limits your liability in case of any legal issues that arise from your products or services. It may give you a break on your taxes, as well.
Registering is often simple and inexpensive. But, before you do so, make sure to decide on a solid name for your business. You’ll need to register and obtain a federal and state tax ID under this name, and any name changes later on will require an additional fee.
If any of the above points apply for you, or if local laws require you to have a business license, you will need to apply for one. The exact steps vary based on where you live, but the general process is as follows:
- Choose the name you’ll register your business with. Make sure to put careful thought into this, as it may be expensive to change in the future.
- Next, you will need to apply for an EIN, or employer identification number through the IRS website. Any business that is not a sole proprietorship will need this identification number.
- Consult a local business attorney or your area’s small business administration office to find out what other licenses you may need to ensure you’re operating legally.
- After completing the above steps, you can apply for your business license. Some cities allow you to apply online, while others require you to apply in person. Make sure to apply as soon as possible to ensure the quickest approval process possible.
Most graphic design work is done entirely online, so many designers choose to work as freelancers. If you have a freelance graphic design business, you probably will not need to register as a business and obtain a business license.
However, laws can vary based on where you live, and certain types of freelance businesses will require a business license. Make sure you know the regulations in your area before you proceed with operations.