Can I Invoice Without a Company? Full Freelancer's Guide

As a fresh freelancer or an independent contractor, you’re probably asking yourself, “Can I invoice without a company or a registered business?” The simple answer is yes, you can, but there are important legal and tax implications to be aware of.

This article explores the legality of sending invoices to clients while not having a registered business. We’ll show you what to consider, how to create these invoices, the tax implications, and the pros and cons of doing this without a company. Without further ado, let’s get started!

Key Takeaways

• It is legal to invoice without a company (e.g., as a freelancer or sole proprietor).
• When creating an invoice, you should include your name and contact information, the client’s details, the invoice number and date, payment terms and methods, a description of goods or services, and the total amount due.
• When you issue an invoice without a company, the IRS recognizes you as self-employed for tax purposes, so you must file and pay taxes accordingly.
• The benefits of invoicing without a company include simplicity and low cost, while the drawbacks are increased liability and lower credibility.

Is It Legal to Invoice Without a Company?

Yes, it is legal to invoice without a company in the U.S. You don’t have to have a registered business structure, like an LLC, an S-corp, or a C-corp. When you do this, you are usually working as a sole proprietor or a freelancer. These are simple entities that allow professionals to work without any formal registration or too much administrative activity.

Sole proprietorship and freelancing share many similarities. Both are types of self-employment and are not legally separate from their business. As a result, there are no legal or regulatory differences between freelancers and sole proprietors.

The distinction is mainly in the market’s perception of these professionals. Freelancers are usually highly skilled professionals within their sphere, and their work is service-oriented. They are known for working with multiple clients, typically on smaller-scale, short-term projects.

On the other hand, sole proprietors are considered more versatile than freelancers, and they can sell various goods and products in addition to providing services.

Ultimately, both types of professionals invoice clients without having a registered company. Not only that, but occasional gig workers and even side hustlers send invoices without a company. This allows them to get paid without a business account initially, though that’s recommended for financial management when the enterprise takes off.

How to Create an Invoice Without a Company

Creating a self-employed invoice without a company involves clearly and accurately adding all the relevant information. We’re going to outline all the details you should include, regardless of the type of invoice.

However, if you’ve never created one before and don’t know how to do it from scratch, you should use our invoice generator to ensure a professional and accurate outcome.

#1. Full Name and Contact Information

You should always include your full name and contact information at the top of your invoice. This includes your mailing address, phone number, and email address.

Since you don’t have a registered company, you represent your enterprise, which is critical when considering your personal name vs. business name on an invoice.

Accurate naming is essential for the client to verify the validity of your invoice and be sure that they are paying the right person. Plus, it’s essential for potential audits or when using invoices as proof of income.

#2. Client’s Name and Contact Information

Accurately naming the client is just as important as adding your name to the invoice. You should include the client’s full name and contact information. If you’re sending an invoice to a larger company, you should specify the department within it or even a specific person.

That way you’ll make sure your invoice reaches the team or individual in charge of the payment. This helps your outstanding invoices get resolved faster and significantly reduces the instances of unpaid invoices becoming problems or disputes.

#3. Invoice Number and Date

Each invoice you send should have a unique number and a date.

Numbering is essential for invoice management. It helps you organize and store your invoices so you can find the ones you want when needed. You should have a system in place (e.g., 001, 002, etc.) that is simple and easy to understand.

Dating an invoice helps with management, but it also ‘starts the clock’ and communicates how much time the client has to pay. This is especially important when using net terms.

#4. Payment Terms and Methods

Invoice payment terms and methods should be precisely and transparently outlined to avoid confusion and ensure a smooth transaction. At a minimum, you want to specify an invoice due date, whether directly or with a net term (e.g., Net 30), and accepted payment methods, like a wire transfer, cash, or one of the online payment platforms.

On top of that, you can include your late fee policy (as a reminder, even if you’ve added it to the contract) or mention discounts for specific cases (e.g., early payment).

#5. Description of Services/Products Provided

An invoice should present a detailed description of services provided or goods sold. You should create an itemized list with a transparent breakdown that includes every detail, the names of the goods or services, the hours worked or items sold, rates, etc.

The more detailed the description, the fewer potential questions the client might have about the invoice. It also represents the justification of the charges for you and the client. All of this will help expedite the payment process and prevent any issues from arising.

#6. Total Amount Due

Finally, you should sum up all the items you’re charging the client for and present them with a total amount due. The number should be clearly marked and visible, and you should double-check your writing and calculations to ensure no mistakes.

You should always add the currency next to the total amount (e.g., USD). Additionally, if any taxes apply, you should add them to the subtotal before emphasizing the final amount.

Tax Implications of Invoicing Without a Company

When you’re invoicing without a company, the IRS recognizes you as asole proprietor. This has several important tax implications for freelance invoices.

For starters, you must report all income you earn as self-employed. This includes freelance work, side hustles, gigs, and so on. Following that, you’re obligated to pay self-employment tax if you earned more than $400 in a fiscal year.

The tax rate is 15.3%, split across Social Security (12.4%) and Medicare tax (2.9%). In some instances, you can be eligible for self-employment tax deduction and health insurance tax deduction. For example, by filing Form 1040, Form 1040-SR, and Schedule SE, you can find out if you’re eligible to claim the Earned Income Tax Credit (EITC).

To help you calculate and file taxes, you should receive Form 1099-NEC (Nonemployee Compensation) from every client who paid you $600 or more in one year. You should use the information in this form, along with other documents that detail your income, to report your earnings on Schedule C (Form 1040, Profit or Loss From Business).

On top of that, if you have a regular job unrelated to your freelance activities, you will likely receive Form W-2, which you have to file separately to pay taxes on your employee income.

Lastly, it’s critical to keep all your records of received income and deductible expenses (e.g., invoices, receipts, bank statements), even if you paid your taxes on them. The IRS states to keep records of income for at least three years. Doing so will help you avoid issues during potential audits.

Benefits and Risks of Invoicing Without a Company

Invoicing clients without an LLC or other type of registered company offers some benefits but also comes with drawbacks. Let’s explore the most prominent ones.

#1. Advantages of Invoicing Without a Company

Here are some of the biggest advantages of legal invoicing without a business:

• Simplicity. As a sole proprietor, there’s not a lot of administration to worry about. Tax filing is straightforward, invoicing is simple, and there’s no excessive paperwork to deal with.

• Low cost. Formally registering a business is typically not free, and the cost can significantly increase if you need specific licenses and permits.

• Control. You’re in full control of your enterprise, which includes making decisions and dealing with finances. All the profits are yours to keep after paying your taxes, and there are no corporate-related formalities to consider.

#2. Risks of Invoicing Without a Company

Now, let’s explore some of the most significant risks of freelance invoicing without business registration:

• Liability. As a freelancer, you’re legally tied to your business, meaning there’s a hidden cost of sole proprietorship in unlimited personal liability. Because of that, aspects like debt and lawsuits affect you personally, resulting in potential loss of private assets, like your home or car.

• Credibility. Clients generally prefer to work with registered businesses over freelancers and sole proprietors. Having a company demonstrates commitment and stability, which is particularly important to larger clients.

• Tax burden. Tax rates and burden grow with earnings. While the initial rates aren’t substantial, they can quickly become prohibitively high. This poses a significant challenge, as there aren’t as many tax planning options and advantages that formal business structures offer.

When You Should Consider Registering Your Business

Here are some of the key indicators based on which you should consider registering your business:

• Increased income. As your revenue starts to grow and your efforts turn from a side hustle into a real business, your tax liability will increase as well. At this point, registering a business gives you additional opportunities to manage your finances and leverage tax benefits.

• Working with larger clients. Big clients who hire professionals for high-value, large-scale projects usually want to work with registered businesses.

• Legal protection. The more your sole proprietorship business expands, the more you’re personally susceptible to risk. Forming a business structure can separate you from it and protect your personal assets.

Which business structure you should go with depends on your specific goals and circumstances. An LLC offers liability protection and is a good starting point. Corporations (S-corp or C-corp) are suitable for raising money through stocks but are much more complex.

How to Keep Track of Payments and Income Without a Registered Business

Keeping track of payments and income without registering a business requires meticulous management of relevant documentation. Accurate records can help your business grow and maintain financial health. Plus, they are mandatory for tax filing and audits.

When starting out, you can use simple pay stubs to track your income as a freelance professional and stay organized. Our pay stub generator allows you to quickly and effortlessly create these documents with all the necessary information. You simply pick a template, input the details in pre-designated spots, review your pay stub, and download the document.

You can use our invoice generator in the same way to design and issue clean, accurate, and professional invoices. Alternatively, you can look up 1099 contractor invoice examples online and create a template to reuse. However, you won’t have advanced features like our automatic calculator or ensured legal compliance.

As your income and number of invoices grow, you should look into specialized accounting software or platforms (e.g., Xero, QuickBooks, FreshBooks).

Final Thoughts

The bottom line is that you can invoice without a company, whether for freelance photography work, a writing gig, or a more serious sole proprietorship endeavor. The benefits are a low barrier to entry and less paperwork to deal with than if you had a company.

However, as your revenue grows and you connect with bigger clients for larger projects, you should look into registering your business. This will give you much-needed legal protection, safeguarding your personal assets. Moreover, you’ll gain additional tax-related benefits and opportunities to leverage.

Can I Invoice Without a Company FAQ

#1. Can I issue an invoice as a freelancer?

Yes, you can issue an invoice as a freelancer. You don’t have to have a registered company, and you’ll operate as a sole proprietor. You will use your name and personal contact information on an invoice, and you’ll still have to report income for tax purposes.

#2. Can I write off business expenses without a registered business?

Yes, you can write off certain business expenses without a registered business. This is done on the Schedule C (Form 1040), Profit and Loss From Business, and applies whether you have a registered business entity or not. However, you must keep detailed records of these expenses as proof.

#3. What if a client requests a business name or tax ID?

If a client requests a business name, you can use your own name instead. If they ask for a tax ID, you can use your SSN (Social Security Number). If you want to shield your SSN, you can obtain and use an EIN (Employee Identification Number).

#4. Can I issue an invoice without VAT?

Yes, you can issue an invoice without VAT (Value Added Tax), as it is not a U.S. tax. VAT is levied in more than 170 countries on the planet, including the European Union, but not in the U.S., which, instead, has a sales tax.

#5. Can I invoice someone without a contract?

Yes, you can invoice someone without a contract. This is especially common with small-scale projects. However, having a detailed and robust written contract that outlines the terms, scope, payment methods, etc., can help you protect yourself and prevent misunderstandings or disputes.