Webinar questions Archives - Page 2 of 2 - Training for Translators

This is post #2 in my ongoing series of questions from the webinar on “Getting started as a freelance translator” that I presented for the American Translators Association earlier this month.

A participant asks: As a self-employed freelance translator, should I operate as an LLC, an S-corp or a sole proprietorship?
Short answer: If you freelance full-time, I think it’s worth incorporating. As long as you don’t mind the extra paperwork, incorporating has some significant tax and liability advantages.

Longer answer: First, I’m not an accountant or an attorney. Second, I have an S-corp so I’m more informed about S-corps than about LLCs and C-corps. Third, I can’t speak to tax issues in countries other than the U.S. That being said:

Running your freelance business as a sole proprietor is really simple; just report your freelance income on IRS Schedule C, pay self-employment tax on it and you’re pretty much set. Running a corporation is a little more complicated: you may have to file monthly or quarterly payroll taxes and a separate end-of-year corporate tax return. You will have to pay to register your corporation every year and the IRS may be less lenient with you than with a sole proprietor if you mess up your taxes. If you don’t want to be bothered with any extra paperwork or filing requirements, stick with sole proprietorship.
The hassle factor of incorporating depends on the state in which you live, since corporations are registered at the state level. Here in Colorado, incorporating is very simple and cheap but you do have to renew your corporate registration every year. Check your state’s Secretary of State website for the requirements where you live.
The tax advantages of incorporating can be significant. When you work as a sole proprietor, you pay self-employment tax (currently 15.30%) on everything you earn, minus your business expenses. This is in addition to the normal Federal rate that you would pay if you worked for an employer, so it’s a big hit. Some corporate structures allow you to take some of your earnings as “wages” which are subject to self-employment tax and some of your earnings as “profit” which is not subject to self-employment tax. My understanding is that this applies to S-corps and C-corps but not LLCs unless the LLC files taxes as an S-corp. So for example if you gross $70,000 and take $40,000 as wages and $30,000 as profit, you have the potential to save $4,590 in self-employment tax (15.3% x 30,000). Even if you do quarterly payroll taxes (mine take about an hour per quarter) and pay an accountant to file your corporate tax return, this is a big win.
Liability: I have never heard of a lawsuit against a freelance translator, but the U.S. is the most litigious country in the world so it’s certainly not out of the question. Incorporating separates your business and personal assets; if you’re sued, the plaintiff can only go after your business’ assets and not your house, car or personal bank accounts. If you’re a sole proprietor, your personal assets are theoretically fair game if you are sued for a business issue.
Incorporating seems to make you less likely to be audited by the IRS. It’s a bit hard to pin down the exact statistics, but articles such as this one by respected tax professional Barbara Weltman suggest that audit rates for S-corps are dramatically lower than those for sole proprietors. Weltman states that the total S-corp audit rate is 0.4% and the audit rate for Schedule C filers earning between $100,000 and $200,000 per year is 3.9%.

Yesterday I had the pleasure of presenting a webinar on Getting Started as a Freelance Translator as part of ATA’s ongoing series of online educational sessions. I think that it went well, with huge thanks to Lucy Brooks of eCPD Webinars and Mary David and Naomi Sutcliffe de Moraes of ATA. Lots of participants submitted questions, but we only got to a few of them before our time ran out. I’ve started a new blog category, “Webinar questions,” in order to answer some more of them here. Thanks to everyone who participated!

A participant asks: Can one be too old to begin a translation business (for example, as indicated by degree completion years) or do prospective employers generally not care?
Short answer: As a freelancer, I wouldn’t worry about age too much. If you’re up-to-date enough to participate in a webinar and even submit a question, I think you’re fine.

Longer answer: This worry applies to both ends of the spectrum: 22 year old new graduates and 68 year old retirees often ask “Will clients take me seriously?” In both cases, I think the answer is “yes,” if you keep a few important factors in mind:

As a group, freelance translators aren’t that young. Case in point: I’m 39 and have an 8 year old child, and I’m regularly referred to as a “girl” or “young lady” by elder members of the profession. The oldest freelancer I’ve heard of was in his early 90s and I know of numerous successful freelancers in the 70+ bracket.
Degree completion years? For a US resumé, I’d leave them off. After all, age discrimination is illegal and as long as you can do the job, your clients really don’t need to know how old you are. Likewise, I know several translators in their 60s and beyond who deliberately do not put their photo on their marketing materials.
Whether you’re on the young or old end of the freelance spectrum, keep the negative stereotypes of your age group in mind and defy them. For example, take the stereotype that older workers are set in their ways and resist new technologies. Beat this image by pointing out that you’ve recently participated in a webinar (or even more than one!) for freelance translators, that you use Skype to communicate with your clients and colleagues and that you’re really looking forward to getting to know your clients’ preferences and style guidelines. If you’re in your 20s, pay particular attention to being reliable, responsible and possibly more formal than you would be otherwise. For example, a conference interpreter training program director in the UK recently attributed the EU’s difficulty in finding new into-English interpreters to the candidates’ poor skills in their native language: Many of the young hopefuls cannot speak in the appropriate “register” for the event they would be interpreting. Their only modes of speech are informal, peppered with “like”, for instance, she says. They misuse words and don’t know the subtle differences between synonyms. So, brush up on your formal speaking skills before you go for the interview!
For better or worse, freelance translation is a real meritocracy. On the one hand I think that most clients, at least in the US, are largely concerned with your ability to do a good job and don’t really care if you’re older or younger than they expected. On the other hand, one flubbed assignment can get you kicked to the electronic curb, so make sure to keep your focus on outstanding work.

I’ll be answering more questions from the webinar soon!

Webinar question: Should I incorporate?

Webinar question: Does age matter?