Legal Responsibilities of Freelancers.

Freelance work life has become a popular way of working thanks to the flexibility and freedom it offers. However, alongside these advantages, the legal responsibilities freelance workers may face are also important. In this article, we'll address the legal obligations freelance workers face and the fundamental questions in this area.

Is Freelance Work Legal?

Whether freelance work is legal is one of the most debated topics. The answer to this question is actually quite simple: Yes, freelance work is legal. However, this is possible provided that certain legal obligations are met. For example, responsibilities such as paying income tax, issuing invoices and complying with other legal regulations also apply to freelance workers.

Basic Legal Responsibilities for Freelance Workers

The legality of freelance work depends on the legal obligations being fulfilled. Here are the most frequently encountered questions and what you need to know about them:

1. Invoice Issuance Obligation

Freelance workers must legally document their income. This is usually done by issuing invoices. If you don't have a sole proprietorship, there are a few ways to address this. Having your client issue the invoice is legally possible, but it can raise some ethical issues.

2. Use of Expense Vouchers (Gider Pusulası)

As a freelancer, you can document your income even without a sole proprietorship. You can ask your client to issue an expense voucher (gider pusulası) on your behalf. With this method, a 10% withholding tax is paid on the service amount and the VAT obligation is eliminated. This is one of the most practical ways to legally document your income without the obligation to issue an invoice.

3. Income Tax

Freelance workers are obligated to pay tax on the income they earn. Income tax is declared and paid through a tax return. If you're below a certain income level, in some cases you may benefit from a tax exemption. However, to have clear information on this matter, it's important to consult a financial advisor.

4. Setting Up a Sole Proprietorship

If you're earning a continuous income as a freelancer, setting up a sole proprietorship may make sense. This helps you fulfill your legal responsibilities in a more orderly manner and allows you to issue invoices directly to clients.

5. The Importance of Having a Contract

It's very important to have a contract for the work you do with clients in order to provide legal assurance. For a contract to be valid, a written agreement must be made between the parties. This makes it easier for you to take legal action in the event of potential disputes.

Tax Obligations

Freelance workers have a tax obligation for every job from which they earn income. Those working as self-employed professionals are obliged to pay income tax on the income they earn. This tax is paid as withholding via the freelance receipt issued for the work done. At the end of the year, the tax owed is offset against the withholding amount. In addition, those operating as self-employed are also obligated to file VAT returns.

Invoice Issuance Obligation

Freelance workers are required to issue an invoice to the client for every job they do. If an invoice isn't issued, the income earned is considered unrecorded and is treated as unfair gain. Issuing invoices ensures that both the worker and the client are legally protected. The information on the invoice also directly affects the validity of contracts. If there is inconsistency between the contract and invoice information, the worker may have difficulty defending their rights in a possible legal dispute.

Use of Expense Vouchers

In some cases, having the client issue an expense voucher on your behalf can be a solution to avoid having to issue an invoice. However, this method also has limitations. If expense voucher issuance is requested regularly, the tax office may evaluate the situation as freelance professional activity and make you a taxpayer. For this reason, you should be careful with the use of expense vouchers and not make this method a permanent practice.

Legal Obligations of Working from a Home Office

Freelance workers must also fulfill their legal obligations when they prefer to work from a home office. The decision to set up a company, register with the tax office and file VAT returns also applies to home-office workers. In this context, you should be prepared for tax office audits and keep the necessary documents in order.

The Validity of Contracts

In freelance work relationships, contracts are one of the important documents that clarify the rights and obligations of the parties. For a contract to be valid, the identity information of the parties and the job description must be clearly stated. There must be no inconsistencies in the information on the invoice and contract, otherwise the contract may lose its validity and it may become difficult for the worker to defend their rights in legal proceedings.

Sole Proprietorship or Limited Liability Company?

Freelance workers generally think that setting up a sole proprietorship is more advantageous. A sole proprietorship is ideal for small-scale businesses and is simpler to set up. Setting up a sole proprietorship can be done with a single petition and closing it is just as quick. Since the startup costs for this type of company are also low, it's generally preferred by freelance workers in the early stages. By setting up a sole proprietorship, it's possible to operate as a self-employed professional. In this case, the year-end income tax can be offset against the withholding tax, and there is no corporate tax obligation. In addition, a sole proprietor encounters less bureaucracy compared to a limited liability company and doesn't have to deal with procedures like signage and licenses.

Advantages of Setting Up a Limited Liability Company

If your business is growing and you want to have more enforcement power, setting up a limited liability company may make more sense. Limited liability companies can increase the company's prestige and credibility on larger and longer-term projects. However, setting up and closing a limited liability company is more cumbersome and a longer process compared to a sole proprietorship. Especially when the company's closure requires a court ruling, this process can take up to two years.

Insurance and Retirement

One of the reasons freelance workers set up companies is to obtain social security. However, you can also pay your insurance premiums and retire as a voluntary Bağ-Kur member without setting up a company. Voluntary Bağ-Kur also provides access to healthcare services. Freelance workers who consider this option can secure themselves on retirement and health insurance.

The Decision-Making Process

When choosing the type of company, freelance workers need to make a decision considering the scale of the work, long-term plans and financial situation. While a sole proprietorship offers a flexible and economical solution in the early stages, a limited liability company may be suitable for larger business volumes and prestigious projects. Considering the pluses and minuses of both options, the most appropriate decision can be made with the support of a financial advisor. In light of this information, you should be careful when choosing the type of company and consider the long-term effects. In freelance work life, the right type of company will both ease your work and allow you to fulfill your legal obligations more comfortably.

The Risks and Legal Status of Issuing Invoices Through Another Company

The route freelance workers commonly take when a client requests an invoice is to issue an invoice through another company. This practice has become so widespread that many people use it without questioning whether the situation is legal. However, this approach has some important legal risks. Legal Issues and Risks Although using another company during invoice issuance may not look like tax evasion, it can create some important legal issues. According to the law, the name on the invoice is recognized as the person or institution legally providing the product or service. If the invoice is issued through another company, this can affect the validity of the contract between you and your client. The signature on your contract does not include the authority to legally represent the company that issues the invoice. In a dispute, this can make it difficult for the client to defend their legal rights and may negatively affect you. It can also cause the company named on the invoice to find itself in a difficult position. Alternative and Legal Routes To avoid these kinds of risks, you should especially avoid issuing invoices through another company in contracted work. Instead, choosing the expense voucher (gider pusulası), which is a valid and legal document, is a safer and more legitimate option in every respect. The Importance of Having a Contract Freelance work is generally based on trust. For this reason, disputes in projects are mostly related to "time" and "money." Both parties want documents they can use as evidence when they are right. For this reason, having a contract when you take on work is the most valid way to protect both your rights and your client's rights. What to Pay Attention to When Preparing a Contract For contracts prepared for freelance work to be valid, the following main headings are important:

1. Subject of the Contract and Definition of the Parties: Defines the scope of the work and the identities of the parties.
2. Worker's Obligations: Describes how the worker should perform their work.
3. Client's Obligations: Includes the client's payments and other responsibilities.
4. Service Period and Payment Terms: Specifies how long the work will take to complete and the payment terms.
5. Termination of the Contract: Regulates how and under what conditions the contract can be terminated.
6. Approval of the Contract: Includes the necessary approvals for the validity of the contract.
7. Signatures of the Parties: Ensures that the contract is signed by both parties.

The content of these headings can vary by type of work. For example, you can expand the heading "Termination of the Contract" to "Renewal and Termination of the Contract." It's also important to include legal elements such as labor laws, competent courts and enforcement offices in the contract approval section. Getting support from a lawyer on this matter will increase the legal validity of your contract.

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