Estimate your freelance project price based on hours, rate, expenses, overhead, and desired profit margin.
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A Texas-based freelance graphic designer earns $140,000 net profit/year from client work. She's evaluating whether to stay as a sole proprietor, form an LLC, or elect S-Corp status to reduce self-employment taxes.
Takeaway: S-Corp saves $8,300/year but adds ~$1,500-$3,000 in accounting fees (payroll, extra returns). Break-even is around $80-90K net profit. Below that, the overhead eats the savings. Texas has no state income tax, so the benefit is purely federal SE savings.
LLC annual fees range from $0 (Ohio) to $800 minimum (California, even for zero-revenue LLCs). Delaware C-Corp is standard for VC-backed companies but adds registered agent costs (~$300/yr) for out-of-state entities. The "best" structure is state-specific.
S-Corps cannot have more than 100 shareholders, cannot have non-US shareholders, and cannot have corporate shareholders. Violating these rules (e.g., adding a foreign investor) terminates S-Corp status retroactively, potentially creating a large unexpected tax event.
The IRS requires S-Corp owner-employees to pay themselves a "reasonable salary" before taking distributions. There is no fixed formula — the IRS looks at industry benchmarks, duties, and hours worked. Setting the salary too low is a common audit trigger for S-Corps.
Business break-even models track revenue vs. direct costs. They rarely factor in the owner's time as a cost. If you're working 60 hours/week at imputed $50/hour, your "profitable" business may be paying you $12/hour after the opportunity cost calculation.
Break-Even CalculatorA service business valued on EBITDA multiples (2-4×) gets a very different number than one valued on SDE (seller's discretionary earnings) or discounted cash flow. Buyers and sellers typically use different methods to argue their preferred price. This calculator uses a single method.
Business Valuation CalculatorBased on your inputs
Effective rate: $105.00/hr
| Labor Cost | $3000.00 |
|---|---|
| Overhead | $300.00 |
| Direct Expenses | $200.00 |
| Subtotal | $3500.00 |
| Profit Amount | $700.00 |
| Total Price | $4200.00 |
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Calculate your total hours × hourly rate + direct expenses, then add a profit/buffer margin (10–30%) and overhead allocation.
Most freelancers add 15–25% margin on top of costs to account for revisions, admin time, and profit.
Fixed pricing is preferred for well-defined projects. Hourly is better for open-ended or research-heavy work.
Include software, stock assets, subcontractors, travel, printing, hosting, or any direct cost tied to the project.
Define deliverables clearly upfront. Include a change order process in your contract specifying that additional work requires written approval and extra payment. Budget 10-20% contingency for minor adjustments.
A retainer is a recurring monthly fee for ongoing access to your services. Project pricing is a one-time fee for a defined deliverable. Retainers provide predictable income; project fees suit one-off work.
Break the project into small tasks, estimate each task separately, then add 25-50% buffer for unknowns. Research industry benchmarks and ask peers about similar projects for reference points.
Yes. Requiring 25-50% upfront protects against non-payment and demonstrates client commitment. Common structures: 50% upfront and 50% on completion, or 33%/33%/34% milestones.
Add subcontractor costs to your project estimate plus a 10-20% management markup. Communicate your billing rate to clients while paying subcontractors their agreed rate. Include subcontractor costs in your scope.
Define clear deliverables and acceptance criteria upfront. Use a change order process requiring written approval and revised pricing for any work outside the original scope. Track hours against estimates weekly to identify creep early.
Labor Cost = Hours × Hourly Rate
Subtotal = Labor + Overhead + Expenses
Total Price = Subtotal × (1 + Margin%)
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.