Set Your Pricing
2-4 hoursCalculate hourly and project rates that cover taxes, benefits, overhead, and desired profit margin above employee equivalents.
Field context
This workflow is part of 10 niche fields
Freelance business setup guide covering LLC formation, tax registration, invoicing, contracts, insurance, accounting systems, and client acquisition basics.
Calculate hourly and project rates that cover taxes, benefits, overhead, and desired profit margin above employee equivalents.
Choose sole proprietorship, LLC, or S-Corp based on liability, tax efficiency, and expected revenue level.
Estimate quarterly estimated tax payments including self-employment tax (15.3%) and set aside 25-30% of gross income.
Obtain health insurance, professional liability (E&O) coverage, and build an emergency fund to replace employer benefits.
Set up invoicing, contracts, accounting software, and client acquisition channels with clear payment terms.
Calculate minimum hourly rate covering taxes, benefits, and overhead.
Benchmark freelance rates against equivalent employee salary.
Estimate SE tax on projected freelance income. · Calculate quarterly estimated tax payment amounts.
Model profit margins under different business structures.
Estimate total federal and state tax liability.
Compare marketplace health plan costs and subsidies.
Set target emergency fund to replace employer safety net.
Project net profit after all business expenses.
Plan monthly operating budget for software and marketing.
Minimum hourly rate components for US freelancers.
| Component | Typical % of Rate | Example ($100/hr target) |
|---|---|---|
| Desired take-home | 50-60% | $50-$60 |
| Self-employment tax | 15.3% of net | ~$8 |
| Health insurance | 10-15% | $10-$15 |
| Business expenses | 5-10% | $5-$10 |
| Unbillable time (admin) | 20-30% | Bill 28-32 hrs for 40 worked |
Underpricing attracts difficult clients and leads to burnout. Raise rates 10-20% with each new client until demand softens.
Mixing personal and business accounts complicates taxes and eliminates liability protection — use dedicated accounts from day one.
Once net profit exceeds $60,000-$80,000, S-Corp election can save $5,000-$15,000/year in self-employment tax.
Use FreshBooks, Wave, or similar to send invoices immediately upon delivery — faster invoicing cuts average payment time by 7 days.