Can I freelance or start a side business?
Setting up as a freelancer in the US is cheap and quick. Whether you’re allowed to is a separate question, and it depends on your visa, so check that first.
In 30 seconds
- Green card holders and citizens can freelance freely. On an H-1B or L-1 you can only work for your sponsoring employer, so a side business would breach your status
- Self-employed people pay self-employment tax of 15.3% on most of their profit, on top of income tax, and usually pay tax four times a year
- An LLC costs from about $50 to $500 to set up, depending on the state. Some states also charge yearly fees, such as California’s $800 minimum tax
Self-employment tax15.3%Up to $184,500 of earnings in 2026
Estimated tax4 times a yearIf you’ll owe $1,000 or more
1099-NEC$2,000+From a client in a year, from 2026
California LLC$800 a yearMinimum franchise tax
Check your visa first
Your right to work for yourself comes from your immigration status, not from registering a business.
- Green card holders and US citizens can freelance or run any business
- H-1B and L-1 holders can only work for the employer that sponsored them. Freelancing on the side, even online for UK clients while you’re in the US, can put your status at risk. Owning shares passively is usually fine, but get advice
- E-2 investors work only in the business their E-2 is based on. Starting a different business needs advice and usually a new filing
- Spouses: L-2 and E-2 spouses can work, including for themselves. H-4 spouses need an H-4 EAD (work permit), which only some can get. See The partner at home
- Read your employment contract too: many US employers restrict outside work or claim ownership of what you create
Sole proprietor or LLC?
| Sole proprietor | LLC (limited liability company) | |
|---|---|---|
| Set-up | Nothing to file: you just start trading under your own name. You may need a local business licence and a “doing business as” (DBA) name | Register with your state and pay a fee. You need an operating agreement and a registered agent |
| Tax | Profit goes on Schedule C of your personal return | By default a one-owner LLC is taxed exactly like a sole proprietor. It can elect to be taxed as an S corporation once profits are higher |
| Liability | You’re personally liable for business debts | Limits personal liability in most cases, though not for your own professional mistakes |
| Good for | Testing an idea, small side income | Client work with real risk, or a growing business |
LLC fees vary by state:
| State | LLC filing fee | Ongoing |
|---|---|---|
| California | $70 | $800 minimum franchise tax a year, plus a statement of information |
| Massachusetts | $500 | $500 annual report |
| New York | $200 | Must publish notice in two newspapers within 120 days, which can cost hundreds of dollars more in New York City |
| Illinois | $150 | Annual report |
| Texas | $300 | Franchise tax report, usually no tax below the threshold |
| Florida | $125 | Annual report, about $138.75 |
| Washington DC | $99 | Biennial report |
Check fees with your state’s Secretary of State before you file. Fees change Since March 2025, US-formed companies don’t have to file beneficial ownership (BOI) reports with FinCEN.
Tax: set money aside
- Self-employment tax is Social Security and Medicare for the self-employed: 15.3% of 92.35% of your net profit, if that’s $400 or more. The 12.4% Social Security part stops at $184,500 of earnings in 2026 (about £136,700), counting any salary too. Half of it is deductible
- Income tax: federal, plus state and sometimes city tax, on your profit. See Social Security numbers and US tax
- Estimated tax: nobody withholds tax for you, so if you expect to owe $1,000 or more for the year, you pay four instalments. For 2026 they’re due 15 April, 15 June, 15 September and 15 January 2027. Most states have their own instalments
- Clients who pay you $2,000 or more in a year send you a Form 1099-NEC (the threshold was $600 before 2026). Declare all your income, with or without a 1099
- Keep receipts and a separate business bank account. A US tax preparer or enrolled agent can help
UK companies and US LLCs. Running your freelance work through a UK limited company, or a US LLC owned from abroad, has extra US filings, such as Form 5472, with penalties starting at $25,000 if missed. Talk to a US–UK cross-border tax adviser before you set either up.
Retirement and health insurance
- There’s no employer 401(k) match, but you can open a SEP IRA or a solo 401(k) and save much more than in an ordinary IRA. See 401(k) and retirement accounts
- You’ll need your own health insurance, usually from the ACA marketplace. Self-employed people can usually deduct the premiums. See health insurance at renewal
Contractor or employee?
If one client sets your hours, gives you the tools and treats you like staff, you may legally be an employee, which affects tax, overtime and benefits. The IRS and the Department of Labor each have tests, and some states are stricter: California’s “ABC test” treats most workers as employees unless the work is outside the client’s usual business.
Licences and insurance
- Many cities and counties need a general business licence, and some work, such as building, real estate, beauty and childcare, needs a state licence
- General liability insurance covers injury or damage you cause. Professional liability (errors and omissions) covers claims about your work
- If you work from home, tell your home or renters insurer, and check your lease
What to do next
- Check your visa: on an H-1B or L-1, don’t take freelance work
- Decide sole proprietor or LLC, and check your state’s fees
- Open a separate account and set aside money for quarterly estimated tax
Keep going
Sources
- USCIS: H-1B specialty occupations
- LLC.org: LLC cost by state, full breakdown of fees (2026)
- Thompson Coburn: FinCEN exempts domestic entities and US persons from Corporate Transparency Act reporting (Mar 2025)
- Social Security Administration: Contribution and benefit base
- Social Security Administration: 2026 cost-of-living adjustment fact sheet
- IRS: Estimated tax FAQs
- IRS: 2026 Form 1040-ES, Estimated tax for individuals
- IRS: Form 1099-NEC and independent contractors
- SDO CPA: Form 5472 for foreign-owned businesses
- HealthCare.gov: Getting health coverage outside Open Enrollment