Treyton DeVore is a creative entrepreneur, freelancer, financial planner, and founder of Creatorbread, a blog and newsletter created to answer all of those questions the self-employed have about money and business. Subscribe to his newsletter if you’re ready to take your business game to the next level.

How do you recommend freelancers structure their business?

For those just starting out, it makes sense to keep it simple and operate as a sole proprietor (which means you’re acting as a business but you have no established entity). You can accept payments, write off expenses, and offer professional services all without an LLC. But if you plan to stick with it for a while, I recommend setting up a single-member LLC. It’s essentially the same thing as being a sole proprietor, but you get a few extra benefits:

• You can apply for an EIN, which is like a social security number for a business (so you can use that rather than your SSN when filling out W9s)
• You can apply for business bank accounts
• You can apply for business credit cards
• You have more legal protection

If you plan to grow into an agency or you’re consistently hitting $10k months, it may make sense to establish an S Corp to save money on self-employment tax. This is complex and rules vary by state so you need to speak with an attorney or accountant before doing so. This’ll help ensure the right steps are taken and that it makes sense for your situation.

Why is it important to have a separate business bank account?

Mixing personal and business transactions in one account would be like managing work for two separate clients in one folder that they both have access to. When you go to file taxes, you need to know what expenses are tied to the business and what income is subject to self-employed taxes – so I recommend having separate business accounts to make your financial life 1000x easier. Without separate accounts, you’d have to go transaction-by-transaction through your personal bank and keep track of the numbers in a spreadsheet to maintain proper records.

You’ll also have cleaner insights into your business when you have accurate numbers. By connecting your business account to accounting software, like Freshbooks, you get all sorts of financial data and reports. Understanding these will help you make better decisions and ideally, make more money.

At what point in the freelance journey do you recommend bringing on a bookkeeper and/or accountant? 

I recommend working with an account for tax filing from day one. It’ll cost a little bit of money ($200-1,000+), but even tools like TurboTax typically charge to file self-employed taxes. I like paying for peace of mind so the couple hundred dollars it costs to work with a CPA is beyond worth it. For bookkeeping, it typically makes sense once you’re doing more than $100,000 per year in business revenue. The monthly fees can be a little steep, which is why I recommend doing it yourself until you have extra money in the business to start outsourcing tasks & responsibilities.

What money management advice would you give to year 1 freelancers who want to plan appropriately for things like taxes and retirement?

Most importantly, make sure you’re setting aside something—anything—for taxes from every payment you receive. I recommend 25-30% as a general rule of thumb but the accurate percentage will depend on your unique situation. 

Get paid $2,000? Move $500 into a separate account. Some banks, like Found or Novo, will do this automatically. Then you can make the necessary quarterly tax payments (which is required if you expect to owe more than $1,000 throughout the year) and have the funds ready to go. 

For retirement, there are a few options available. The easiest way to get started is by opening a Roth or Traditional IRA. These can be opened at places like Vanguard or Fidelity and they’re almost like a bank account that lets you buy stocks. In 2023, you can only put $6,500 into either a Roth or Traditional IRA and there are also some income limits that start at $68,000. The limits change each year so be sure you’re staying up to date with new laws & numbers. 

Outside of those two accounts, the best options will depend on how your business is set up. I wrote a fairly in-depth post here about the following accounts:

• Solo 401k
• SEP IRA
• Taxable brokerage
• Roth and Traditional IRA

Contrary to what most financial advisors would recommend, I don’t think retirement should be a priority when you’re just getting started, especially if money’s tight. There’s massive upside to getting started early, but there’s also value in financial stability and peace of mind – even more so if you have variable income. Personally, I haven’t invested much in retirement since I started the business. Less than $500. I’ve put all the money back into the business to grow it, paid myself, or saved it in cash. When the business is more established and I have a solid financial foundation, I’ll have more income to ramp up retirement savings in the future.

What expenses should small business owners be keeping track of?

Anything that’s “ordinary or necessary” for your business. That’s how the IRS defines a legitimate business write-off. Need a computer to write? Keep track of the expense and you can probably deduct the full amount on your taxes. Pay for a course to learn a specific skill? Write it off. If you want to learn more about taxes, I wrote a full breakdown of how tax write-offs work here.

What are your go-to podcasts, blogs, or other resources you’d recommend to small biz owners interested in learning more about finances?

• Freelancer’s Union
• Keeper Tax YouTube
• Creatorbread
• Lorilyn Wilson
• Hell Yeah Bookkeeping