The global freelance marketplace is booming, thanks to high-speed internet and a variety of valuable collaboration tools. Today, freelancers can show off their skills in what seems to be an infinite number of markets — allowing them to work with clients all over the world. If you’re thinking about adding an international client into the fold, here are a few things to consider.
Foreign Companies and the Tax Dance
When Ellyn Hooper, a freelance accountant, started working remotely with an overseas company, it was a big decision. “It’s not just that I had to get up for 6:00 a.m. conference calls,” says the Massachusetts-based finance professional. “I also had to figure out the tax implications.”
According to the IRS, employees of foreign organizations have to pay their own self-employment taxes if the company isn’t subject to filing U.S. taxes. For freelancers who are used to receiving 1099s throughout the month of January, it could be a big change. If the foreign company you worked with isn’t subject to U.S. income taxes, you won’t receive a 1099. At that point, it’s important to have a plan in place.
“You absolutely still have to report all that income,” explains Hooper. “For foreign clients, I created a separate line item in my payments tracking so I could pull it out easily at the end of the year. Each quarter, I paid my tax percentage on what I had been paid, and then made sure it lined up at the end of the year.”
Always remember: With foreign clients, you still need to pay taxes — but don’t count on receiving a 1099.
Receiving Payments: Know Your Fees
Not all foreign companies you work with will have a U.S. bank account. Before you start working, determine how you’ll get paid. Receiving funds from an overseas account can be expensive: There are often wire or PayPal fees, and you may experience exchange rate issues and holdups. Explore different options for getting paid and outline the fees ahead of time. That way, you can factor those into your quotes for projects and hourly rates.
Don’t forget to check in with your bank as to whether you’re allowed to receive foreign payments in the first place. Initially, my business bank account was with a local bank, and I was shocked to learn it didn’t allow foreign payments at all. But the remedy was easy: I just opened an account with a larger bank. If you’re going down the foreign client path, check in with your bank right away to ensure you’re not scrambling to be payment-ready.
Is That Contract Even Enforceable?
As an experienced freelancer, you’re making a contract and checking it twice for every assignment. Right? What happens when you’re dealing with an overseas client? It’s important to remember that your current contracts may not always be enforceable in another country, so take the time to connect with an attorney before signing an agreement with a company operating overseas. It’s helpful to understand your specific obligations under foreign law, and what options you have to follow up on issues related to contract breach, payment or future work.
A note on payment: If your contract isn’t enforceable and a default payment would be hard to recoup, reconsider how you structure your payments. To minimize the risk you’re absorbing, you can ask for milestone payments or payment up front.
Manage Those Time Zones
My professional life has never been busier than when I was managing a client load that included companies in Europe, Asia, Australia and coastal California. If you find yourself in a similar scenario, it’s crucial that you stay on top of your various time zones when you’re scheduling meetings. Personally, I stay organized with the Time Zone Converter.
It’s also useful to look holistically at how different time zones can affect your workflow. If you have clients around the world, you may be constantly interrupted by phone calls, and your free time may be impacted by last-minute client requests that come through in the middle of the night. Be strategic about the time zones you work in, especially concurrently, and make sure you’ve thought about how they can impact your work/life balance.
A Note About Culture and Language
Working with clients around the world can give you a new perspective and introduce you to wonderful global colleagues. At the same time, it’s important to keep in mind that you’ll be dealing with a range of different cultural norms and linguistic dynamics. Take some time to learn about the business culture where you’re working — before you begin a relationship with a new client.
For example, when I worked with large clients in the Caribbean, I quickly learned that their office culture is more formal than we typically see in the United States. The opposite was true with smaller clients, where the culture was more relaxed. These nuances can make all the difference between ideal client engagement and an awkward gaffe. Invest a little time up front to make sure you know how to interact with colleagues all over the world.
From Calistoga to Cannes, the world is full of amazing global freelance clients who can help you tackle exciting projects, expand your business and even see the world along the way. Ensuring that you have the necessary business practices in place beforehand can help you eliminate some of the risks that come with working with foreign client, and make it easier for you to keep your business moving forward.